Analyse des politiques fiscales

Taxing Wages: tax burden on labour income in 2015 and recent trends

 

A. The tax wedge overview for an average single worker in the OECD in 2015

Tax wedge components as a % of labour costs1,2 in 2015

Tax wedge 2015 chart (2016 publication)

The tax wedge between total labour costs to the employer and the corresponding net take-home pay for average single workers without children in OECD countries varied between Belgium (55.3%) and Chile (7.0%) in 2015. The tax wedge was around 50% in Austria (49.5%), Germany (49.4%), Hungary (49.0%), Italy (49.0%) and France (48.7%), and less than 20% in Mexico (19.7%) and New Zealand (17.6%).

 

The OECD average tax wedge was 35.9% of total labour cost in 2015.

 

  • The percentage of labour costs paid in income tax varies considerably within OECD countries. The lowest figures are in Chile (zero) and Korea (4.9%). The highest values are in Denmark (35.8%), with Australia, Belgium and Iceland all over 20%.
  • The percentage of labour costs paid in employee social security contributions also varies widely ranging from zero in Australia, Denmark and New Zealand to 17.2% in Germany and 19.0% in Slovenia.
  • Employers in France pay 27.5% of total labour costs in social security contributions, the highest amongst OECD countries. The corresponding figures are also more than 20% in nine other countries - Austria, Belgium, the Czech Republic, Estonia, Hungary, Italy, the Slovak Republic, Spain and Sweden.
  • As a percentage of labour costs, the total of employee and employer social security contributions exceeds 20% in more than half of the OECD countries. It also represents one-third of total labour costs or more in eight OECD countries: Austria, Belgium, the Czech Republic, France, Germany, Hungary, the Slovak Republic and Slovenia.

1.Single individual without children at the income level of the average worker.
2. Includes payroll taxes where applicable.

Sources: country submissions, OECD Economic Outlook Volume 2015 (No. 98).

 

B. THE OECD AVERAGE TAX BURDENS ON LABOUR INCOME STABILISED IN 2015

Changes in OECD tax wedge components between 2014 and 20151

‌‌Changes in the tax wedge between 2014-2015 (2016 publication)

Note: Single individual without children at the average wage level.
1. Includes payroll taxes.
Sources: country submissions, OECD Economic Outlook Volume 2015 (No. 98).

The OECD average tax wedge remained at 35.9% for a second consecutive year in 2015. This followed a rise totalling 0.9 percentage points between 2010 and 2014. 

Although the OECD average tax wedge remained unchanged, there were some changes in the tax burden components: “Annual change of tax wedge components between 2014 and 2015”.

  • Personal income tax increased by 0.11 percentage points.
  • Employee social security contributions decreased by 0.04 percentage points.
  • Employer social security contributions decreased by 0.03 percentage points.

 

  • The average personal income tax as percentage of total labour costs increased in 23 countries (Australia, Austria, Canada, the Czech Republic, Denmark, France, Germany, Iceland, Israel, Italy, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Poland, Portugal, the Slovak Republic, Slovenia, Sweden, Switzerland, Turkey and the United States). The Netherlands is the only country with an increase of more than on percentage points; i.e. 1.23.
  • The average employee social security contributions as percentage of total labour costs decreased in 5 countries: Canada, Estonia, Greece, Iceland and the Netherlands. In the latter it declined by more than one percentage point; i.e. -1.71.
  • The average employer social security contributions as percentage of total labour costs decreased in 8 countries (Austria, Belgium, Denmark, Estonia, Greece, Iceland, the Netherlands and the United States). The highest decrease was in Greece (-0.92 percentage points).

C. Tax wedge trends for the average single worker since 2007

Changes in OECD tax wedge components between 2007 and 2015

‌‌‌Tax Wedge 2007 2015 chart (2016 publication)

Note:Single individual without children at the average wage level.                
1. Includes payroll taxes.
Sources: country submissions, OECD Economic Outlook Volume 2015 (No. 98).

The OECD average tax wedge as percentage of total labour cost for those earning the average wage.

  • increased by 0.9 percentage points from 35.0 to 35.9% between 2010 and 2015,
  • previously declined by 1 percentage point from 36.0 to 35.0% between 2007 and 2010.

Between 2007 and 2010, the tax wedge decreased in 23 OECD countries and increased in 10. The largest decreases were in Hungary (-7.9 percentage points), Turkey (-5.4 percentage points), Israel (-4.2 percentage points) and New Zealand (-4.1 percentage points)."Tax wedge annual change between 2007 and 2010".

 

The tax wedge decline was mostly due to lowered PIT burden:

  • Reduced statutory tax rates in 5 countries (Israel, Finland, Canada, Austria and Norway).

 

  • Tax schedules were extended with additional lower income brackets and tax rates in Greece, New Zealand and Mexico. The medium tax bracket was suspended in Denmark. In Australia, income thresholds were increased and consequently income bracket scales broadened.
  • Tax allowances and credits increased relative to earnings in 9 countries (Hungary, Sweden, Israel, Finland, the Slovak Republic, Switzerland, the United Kingdom, Germany and Portugal) due to tax relief reformed schemes or increased basic amounts.
  • The average worker tax burden was also alleviated by tax credits or universal cash transfers that were introduced during that period in Denmark (“Green Check”), Luxembourg (“wage earner refundable tax credit”) and Turkey (“Minimum Living Relief”).

 

Between 2010 and 2015, the tax wedge rose in 24 OECD countries and fell in 9, almost totally reversing the reductions between 2007 and 2010: "Tax wedge annual change between 2010 and 2015".

PIT was the main factor in the OECD tax wedge increase between 2010 and 2015. PIT burdens rose in 25 out of 34 countries between 2010 and 2015, largely because a higher proportion of earnings was subject to tax as the value of tax free allowances and tax credits fell relative to earnings. Only 7 countries (Australia, Denmark, Greece, Luxembourg, the Netherlands, Norway and Portugal) increased their statutory income tax rates for workers on average earnings. Surtaxes introduced during that period were still in place at the end of 2015 in 2 countries:

  • In Japan, taxpayers have been required to file tax returns and make tax payments for additional 2.1% of the base income taxes from 2013 through 2037 annually together with the regular income tax of respective years.
  • In Portugal, a surtax was introduced in 2011 and re-introduced in 2013 for taxable income above the annual national minimum wage, with a tax credit for dependents.

D. Tax wedge for families with children

In 2015, the OECD average tax wedge for a one earner couple with two children was 26.7% of the total labour cost.  This figure was 9.2 percentage points lower than the one observed for the individual without children: "Comparison of total tax wedge by family type". In fact, many OECD countries provide a fiscal benefit to the former through advantageous tax treatment and/or cash transfers.

Tax wedge by family type in 2015

‌‌Tax wedge by family type for 2015 (2016 publication)

Notes:
Countries ranked by decreasing tax wedge of the one earner couple with two children.
The households are at the average wage level.
Sources: country submissions, OECD Economic Outlook Volume 2015 (No. 98).

 

In 2015, the highest tax wedges for one earner couples with two children at the average wage were in France (40.5%) and in Belgium (40.4%). The lowest were in New Zealand (4.9%), followed by Chile (7%), Ireland (9.5%) and Switzerland (9.8%).

The savings realised by a one earner married couple compared to a single worker were greater than 20% of labour costs in Luxembourg, and greater than 15% of labour costs in four other countries – the Czech Republic, Germany, Ireland and Slovenia.

At the other end of the scale, the tax burdens were the same in Chile and Mexico and different by less than three percentage points in Greece, Israel, Korea and Turkey.

In 2015, the tax wedge of a one earner married couple with two children increased in 22 and fell in 11 OECD countries: "Comparison of  total tax wedge by family type".

  • In 28 out of the 34 OECD countries the change did not exceed plus or minus one percentage point.
  • There were increases of greater than 1 percentage point in two countries - Iceland (+1.5) and New Zealand (+1.2).
  • The tax wedge fell by 4.4 percentage points in Estonia; it also decreased by more than 1 percentage point in Greece (-1.3) and Spain (-1.1) and by smaller amounts in seven other countries: Belgium, Canada, Ireland, the Netherlands, Norway, Poland and the United Kingdom.

The fiscal preference for families compared with singles increased in 8 OECD countries: Australia, Canada, the Czech Republic, Estonia, France, Greece, Israel and Poland. Additionally, the effects of changes in the tax system on the tax wedge were independent of the family type in Mexico.

Downloadable tables/figures

Tax wedge 2015

Annual change of tax wedge components between 2014 and 2015

Changes in OECD Tax wedge components between 2007 and 2015

Annual change of tax wedge components between 2007 and 2010

Annual change of tax wedge components between 2010 and 2015

Comparison of total tax wedge by family type

Tax wedge definitions

Back to the home page

 

Documents connexes