Taxing Wages: Country note for Italy

Italy is among the OECD countries that levy a relatively high tax and social security burden on labour income. However, the tax burden moderately declined between 2000 and 2011 for those families with children analysed in the Taxing Wages Report. In 2000, the average tax wedge (income taxes plus employee and employer social security contributions minus cash transfers as a percentage of total labour costs) was at least 10 percentage points higher than the OECD average for every family type, and the differences widened over the 11 years. Single taxpayers with high income, one-earner and two-earner couples with children faced the third highest tax burden among OECD countries in 2011. Single taxpayers with average earnings took home less than 53% of what they cost to their employer (“total labour costs”). Single taxpayers with high earnings took home 47% of total labour costs.

download the above graph and data for all OECD countries (xls/729kB)

From 2010 to 2011, the overall tax burden increased for all types of households analysed in the Taxing Wages Report mainly due to the combined effect of the frozen income tax schedule and tax credits. The increases were more significant for families with children. The tax wedge increased the most for the single parents earning 67% of the average wage by 1.1 percentage points to 29.0% of total labour costs. For average one-earner couples with 2 children, it rose by 0.8 percentage points to 38.6% of total labour costs. For two-earner couples with 2 children where one spouse earns the average wage and the other spouse 67% of it, the tax wedge increased by 0.7 percentage points to 43.1% of total labour costs. For other family types, it increased at most by 0.5 percentage points.

Employers in Italy are required to make contributions for the Trattamento di Fine Rapporte (TFR) on behalf of their employees. These “non-tax compulsory payments (NTCPs)” represent a strong increase over and above the overall tax burden. E.g., in 2011, the compulsory payment wedge for the average single worker was 50.4% compared with the corresponding tax wedge of 47.6%. More information on these NTCPs in Italy and other OECD countries is included in the OECD Tax Database at www.oecd.org/ctp/taxdabase.

The tax wedge in Taxing Wages is calculated on the basis of the average gross wage earnings of full-time employees in the private sector (including employees at management level). The corresponding 2011 annual average gross wage for Italy was EUR 29 030 (Secretariat estimate).

Graphical Exposition of the 2011 Estimated Tax Burden

The graphs in this section show the estimated tax burden on labour income in 2011 for gross wage earnings between 50 per cent and 250 per cent of the average wage (AW). They cover four family types with the average and marginal tax wedge presented in a separate graph for each:

• single taxpayers without children,
• single parents with 2 children,
• one-earner married couples without children, and
• one-earner married couples with 2 children

There are two graphs for each family type – one showing the average tax wedge as a percentage of total labour costs (TLC) and the corresponding net personal average tax rate as a percentage of gross earnings; the other showing the marginal tax wedge and the net personal marginal tax rate. Each graph presents a breakdown of the tax wedge into five separate components as a percentage of TLC:

• central income taxes,
• local income taxes,
• employee social security contributions,
• employer social security contributions, and
• family benefits.

Download the AVERAGE graphical expositon file, 2011 (XLS/609kB)

Download the MARGINAL graphical expositon file, 2011 (XLS/644kB)

Observations from the OECD concerning the data for 2011 can be found within the publication.

Special Feature: Wage Income Tax Reforms and Changes in Tax Burdens in Italy: 2000-2009

The Special Feature of the 2010 edition of the Taxing Wages report calculates the changes over time in the tax burden on wage income ranging from 50% to 250% of the average wage by comparing the tax burden in 2009 with the tax burden in 2000 and calculates the respective contributions of changes in income taxes, employee social security contributions, employer social security contributions and cash benefits. The analysis focuses on changes in the average and marginal tax wedge as well as changes in the net personal average and marginal tax rate.

Change in the average tax wedge (2000 - 2009) (xls/1.5Mb)

Change in the marginal tax wedge (2000 - 2009) (xls/1.2Mb)

Change in net personal average tax rate (2000 - 2009) (xls/1.5Mb)

Change in net personal marginal tax rate (2000 - 2009) (xls/1.2Mb)

A guide for interpreting the attached special feature country charts (doc/350kB)

More Information

A detailed description of the tax system in Italy and the associated calculations for the tax wedge are included in Taxing Wages 2010.

Comparative analyses comparing country data can be found on our free online database OECD.StatExtracts, under: Public Sector, Taxation and Market Regulation > Taxation > Taxing wages.

Access to the complete dataset shown in the Taxing Wages report, including detailed country information, is through subscription. For details on how to subscribe please visit our "Getting Online Access" page at the OECD Library website.

Back to the Taxing Wages home page