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Canada is among the OECD countries with a relatively low tax and social security burden on labour income. Between 2000 and 2011, the average tax wedge (income taxes plus employee and employer social security contributions minus cash transfers as a percentage of total labour costs) was lower than the OECD average for every family type in the Taxing Wages Report, and the differences widened over the period. In 2011 single parents with low earnings faced a negative tax wedge, meaning that they received more government transfers than the taxes they paid. Their tax wedge was more than 22 percentage points below the OECD average and the third lowest among OECD countries.
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Tax Wedge in % of labour costs for different wage levels
and household types, 2000 and 2011
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The tax wedge decreased for all family types over the 11 years. Single parents with low earnings have benefited the most, with a drop of almost 7 percentage points.
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download the above graph and data for all OECD countries (xls/729kB)
Compared to 2010, the tax burden on labour income increased in 2011 for all types of households analysed in the Taxing Wages Report. The tax wedge changed the most for single parents earning 67% of the average wage; it increased by 0.9 percentage points but remained negative at -6.3% of total labour costs. Average one-earner couples with 2 children had the second highest increase with 0.8 percentage points; their tax wedge rose to 18.9% of total labour costs. The single tax payers without children faced smaller increases that ranged between 0.2 and 0.3 percentage points.
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 Canada was CAD 46 163 (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 Canada: 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 Canada 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
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