D. Tax wedge for families with children
The OECD average tax wedge for a one earner couple with two children was 26.1% of the total labour cost in 2012. This figure was 9.5 percentage points lower than the one observed for the individual without children (please click on the link "Comparison of total tax wedge by family type"). In fact, many OECD countries provide a fiscal benefit to the former through advantageous tax treatment and/or cash transfers.
Tax wedge by family type in 20121,2
As a % of labour costs
1. Countries ranked by decreasing tax wedge of the one earner couple with two children.
2. The households are at the average wage level.
Sources: country submissions, OECD Economic Outlook Volume 2012 (No. 92).
In 2012, the highest tax wedges for one earner couples with two children at the average wage were in France (43.1%), Greece (43.0%), Belgium (41.4%) and Italy (38.3%). New Zealand had the smallest tax wedge for these families (0.6%), followed by Ireland (6.4%), Chile (7%), and Switzerland (9.5%).
The savings realised by a one earner married couple compared to a single worker were greater than 20 per cent of labour costs in the Czech Republic and Luxembourg and greater than 15 per cent of labour costs in five other countries - Germany, Hungary, Ireland, New Zealand and Slovenia.
At the other end of the scale, the tax burdens were the same in Chile and Mexico and different by less than three percentage points in Greece, Korea and Turkey.
In 2012, the tax wedge of a one earner married couple with two children increased in 22 and fell in 10 OECD countries (please click on the link "Comparison of total tax wedge by family type")
- In 70% of countries the change did not exceed plus or minus one percentage point.
- There were increases of greater than 1 percentage point in eight countries - Japan (+2.4), New Zealand (+1.6), Iceland (+1.4), Australia (+1.3), Poland and the United Kingdom (+1.2) and the Netherlands and Spain (+1.1). The family tax burden increase in Japan was due to the abolition of tax allowances for dependent children.
- The tax wedge fell by 1.6 percentage points in the Czech Republic and by 1.2 percentage points in Portugal; and by lower amounts in eight other countries: Canada, Greece, Israel, Italy, Luxembourg, Slovenia, Switzerland and Turkey.
The fiscal preference for families compared with singles increased in 7 OECD countries: Canada, the Czech Republic, France, Israel, Italy, Slovenia and Spain. Additionally, the effects of changes in the tax system on the tax wedge were independent of the family type in Belgium, Finland, Greece, Korea, Mexico, Poland, Switzerland and Turkey.