Taxing Wages: Country note for Mexico

Mexico is one of the OECD countries with the lowest tax burden on labour income, despite increases in the tax burden for all family types analysed in the Taxing Wages Report between 2000 and 2011. In 2011, for single taxpayers with high earnings the tax burden was lower only in Chile; they took home 78% of what they cost to their employer (“total labour costs”). The average tax wedge (income taxes plus employee and employer social security contributions minus cash transfers as a percentage of total labour costs) faced by single people without children was more than 18 percentage points below the OECD average regardless of their earnings level. The tax wedge of couples with 2 children where one spouse earns the average wage and the other spouse earns 67% of it was 15.4 percentage points below average.

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. The tax wedge increased the most for single people (with or without children) earning 67% of the average wage by 0.9 percentage points to 13.2% of total labour costs. It also increased by 0.8 percentage points to 15.0% of labour costs for two-earner couples with 2 children where one spouse earns the average wage and the other spouse 67% of it. Single taxpayers with average earnings and average one-earner couples with 2 children saw their tax wedge increase by 0.7 percentage points to 16.2% of labour costs. The smallest increase was observed for single taxpayers earning 167% of the average wage; their tax wedge rose by 0.3 percentage points to 21.6% of total labour costs.

Employees and employers in Mexico have to make discharge and old age insurance contributions to a privately-managed fund; employers are also required to make retirement pension contributions to a privately-managed fund and to the INFONAVIT housing fund. 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 24.1% compared with the corresponding tax wedge of 16.2%. More information on these NTCPs in Mexico and other OECD countries is included in the OECD Tax Database at www.oecd.org/ctp/taxdatabase.

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 Mexico was MXN 89 944.

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 Mexico: 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 Mexico 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.

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