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Chile is among the OECD countries that levy the lowest tax and social security burden on labour income. Between 2000 and 2011, single employees without children with average and low earnings took home 93% 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) was actually the lowest among OECD countries for single employees without children and for couples with 2 children where one spouse earns the average wage and the other 67% of it. For these family types the tax wedge was between 24 and 32 percentage points lower than the OECD average in 2011. The tax wedge for average one-earner couples with 2 children which was 18 percentage points below the OECD average was lower only in New Zealand.
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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 remained fairly constant over the 11 years, except for the single parents with low earnings; their tax wedge doubled due to reductions in cash transfer payments.
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download the above graph and data for all OECD countries (xls/729kB)
From 2010 to 2011, the overall tax burden remained fairly constant for all types of households analysed in the Taxing Wages Report. For single employees with average and low earnings the tax wedge remained at 7.0% of total labour costs. It also remained at 6.0% of total labour costs for single parents earning 67% of the average wage. In contrast, for single taxpayers earning 167% of the average wage the tax wedge slightly increased by 0.2 percentage points to 7.8% of total labour costs. It also increased for average one-earner couples with 2 children by 0.7 percentage points to 7.0% of total labour costs.
Employees and employers in Chile are required to make contributions to privately-managed pension and insurance funds. 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 22.3% compared with the corresponding tax wedge of 7.0%. More information on these NTCPs in Chile 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 Chile was CLP 5 907 326 (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 Chile: 2000-2009
Chile, which is a new member of the OECD, is not included within the Special Feature of the 2010 edition of Taxing Wages as no fully finalized Taxing Wages models were available when the Special Feature was written.
More Information
A detailed description of the tax system in Chile 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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