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15/04/2002 - The tax burden for workers on average earnings fell in a number of OECD countries in 2001. Provisional figures show that income tax and social security contributions paid by a single worker on average wages were cut by more than one percentage point in nine OECD countries, and in two of them (Ireland and the Netherlands) the reduction was more than three percentage points. Increases of more than one percentage point in these levies only occurred in two OECD countries, Hungary and Turkey.
According to the latest edition of the OECD's annual publication, Taxing Wages, this continues a general trend of labour tax reduction that was identified in 2000 ( see table). Some of the countries - such as Finland, Germany, the Netherlands and Sweden - have cut these taxes from comparatively high rates of over 30%. Others - such as Ireland and Portugal - have reduced already low rates of less than 20%, while Canada, Luxembourg, and Italy have cut taxes that are in the region of 25%.
The taxes that workers pay depend on both their wage levels and their family circumstances. Taxing Wages reports taxes paid and family benefits received by eight types of family, differing in income and household composition. As one would expect, households with higher incomes generally pay a higher proportion of their income in tax, while households with children typically pay less than those without. The chart shows that in some countries households with children receive a net payment from the government as their social benefits exceed their taxes. Single workers with children are generally best treated by the tax and family benefit systems. Benefits exceeded taxes in 12 of the OECD's 30 countries in the case of a single worker earning two-thirds of the average wage of a production worker.
Taxing Wages also reports on social security contributions paid by employers and presents a measure of the tax wedge on labour, i.e. the difference between the amount employers pay out in wages and social security charges and the amount employees take home after tax and social security deductions. For the single worker on average earnings, this varies from 16% for Mexico to 56% in Belgium. The pattern of change in this wedge between 2000 and 2001 was similar to the changes in the tax bite, described above.
In most OECD countries people above retirement age generally pay lower personal income tax than workers. In addition, older people pay no, or less, social security contributions. Taxing Wages includes a special feature on the taxation of older people in nine OECD countries. It shows that the average tax rate ofpensioners is typically 10-15 percentage points lower than the tax rate on workers with the same income. These lower rates of tax thus represent a significant form of government support for older people. The detailed results show that the value of this support and its relationship to income varies substantially between countries.
Journalists may obtain this report from the OECD's Media Relations Division . The publication is also available on the Online Bookshop .
For further information, journalists are invited to contact Christopher Heady, Head of the OECD's Tax Policy and Statistics Dvision (tel: [33] 1 45 24 93 22) or the OECD's Media Relations Division (tel: [33] 1 45 24 97 00).
see tables
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"Taxing Wages 2000/2001"
350 pages, OECD, Paris 2002
Available in electronic format (pdf)
Euros 28;68; US$61
ISBN 92-64-09603-5 (23 02 02 3)
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