Challenges for Young People in Greece to Reach Financial Independence

Annex A. The OECD Tax-Benefit Model

The OECD Tax-Benefit Model (TaxBEN) (OECD, 2022[1]) is a cross-country tax and benefit simulation model. It is used to explore the detailed mechanics of tax-benefit policies and reforms on working age individuals and their families across countries and over time. It incorporates rules on taxes, social contributions paid by employees and employers, as well as cash and near-cash benefit programmes, such as unemployment benefits, family and childcare benefits or guaranteed minimum-income benefits (OECD TaxBEN, 2024[2]). The TaxBEN web calculator (OECD TaxBEN, 2025[3]) allows users to explore and customise tax liabilities and benefit entitlements.

Income Adequacy Indicator

This indicator measures the adequacy of the benefit package available to a household by comparing it to the median disposable income in the country. It is calculated as the ratio of the household net income (Y) and the median disposable income, calculated before housing costs or other types of “committed” expenditure, in each country ${(Y}_{median}).$

Equation 1.

$\mathit{I}\mathit{A}=\mathit{ }\frac{\mathit{Y}}{{\mathit{Y}}_{\mathit{m}\mathit{e}\mathit{d}\mathit{i}\mathit{a}\mathit{n}}}$

The use of the median disposable income allows for standardised comparisons across countries and with the OECD poverty line, set at 50% of it.

Work Incentives Indicator – Participation Tax Rates

This indicator measures the fraction of gross earnings that a family loses to higher taxes and/or lower benefits when transitioning from out-of-work to in-work. The Participation Tax Rate (PTR) is calculated as 1 minus the change in the net family income (N) relative to the change in the gross family employment income (𝐺) before (b) and after (a) the employment transition:

Equation 2.

$\mathit{P}\mathit{T}\mathit{R}=1-\mathrm{ }\frac{{\mathit{N}}_{\mathit{a}-\mathrm{ }}{\mathit{N}}_{\mathit{b}}}{{\mathit{G}}_{\mathit{a}-\mathrm{ }}{\mathit{G}}_{\mathit{b}}}$

The PTR equals zero when the increase in gross earnings after the employment transition equals to the increase in their gross income. This implies that the household retains 100% of the additional income earned, as there are no offsetting tax increases or benefit reductions. Conversely, the PTR equals one when the family loses 100% of any additional earnings due to higher taxes or reduced benefits. Higher PTR values indicate stronger financial disincentives for individuals to enter the workforce. The indicator can be further decomposed to analyse how changes in different taxes or policy benefits individually contribute to the overall level of the PTR in the context of the employment transition.

Family Indicator – Assessing the Impact of Children on Household Tax Liabilities and Benefit Entitlements

The Family Indicator quantifies the relative impact of children on household net income within a specific country’s tax-benefit system. It compares the net income of a hypothetical household with children to a household with the same characteristics but with no children. The indicator can be interpreted as the change in net income explained by the presence of N children relative to the no-child scenario (0). It is calculated as follows:

Equation 3.

${\mathit{F}\mathit{a}\mathit{m}\mathit{i}\mathit{l}\mathit{y}\mathrm{ }\mathit{i}\mathit{n}\mathit{d}\mathit{i}\mathit{c}\mathit{a}\mathit{t}\mathit{o}\mathit{r}}_{\mathit{N}\mathrm{ }}=\mathrm{ }\frac{{\mathit{N}\mathit{e}\mathit{t}\mathrm{ }\mathit{i}\mathit{n}\mathit{c}\mathit{o}\mathit{m}\mathit{e}}_{\mathit{N}\mathrm{ }}-\mathrm{ }\mathit{N}{\mathit{e}\mathit{t}\mathrm{ }\mathit{i}\mathit{n}\mathit{c}\mathit{o}\mathit{m}\mathit{e}}_{0\mathrm{ }}}{\mathit{N}{\mathit{e}\mathit{t}\mathrm{ }\mathit{i}\mathit{n}\mathit{c}\mathit{o}\mathit{m}\mathit{e}}_{0\mathrm{ }}\mathrm{ }}$

Higher values indicate that children have a more significant positive impact on household net income. This can result from generous child benefits, tax credits, or housing support for families with children. The indicator can be broken down to identify specific tax and benefit components driving changes in household net income. For consistency across families with varying numbers of children, it assumes constant parental employment, working hours, and earnings. This standardisation isolates the financial impact of the tax-benefit system, excluding income changes tied to parental employment decisions related to childcare.

References

[1] OECD (2022), OECD Tax-Benefit Model (TaxBEN): purpose, scope and sources, https://www.oecd.org/content/dam/oecd/en/topics/policy-sub-issues/income-support-redistribution-and-work-incentives/oecd-tax-benefit-model-overview.pdf.

[3] OECD TaxBEN (2025), Calculator of taxes and benefits, https://www.oecd.org/en/data/tools/oecd-calculator-of-taxes-and-benefits.html.

[2] OECD TaxBEN (2024), The OECD tax-benefit simulation model: Methodology, user guide and policy applications, https://www.oecd.org/content/dam/oecd/en/topics/policy-sub-issues/income-support-redistribution-and-work-incentives/OECD-TaxBEN-methodology-and-manual.pdf.