TAXES on
wages have risen by about 1 percentage point for the average worker in OECD
countries between 2010 and 2014 even though the majority of governments did
not increase statutory income tax rates, according to a new OECD report.
Taxing Wages 2015 says the tax burden has increased in 23 OECD countries and
fallen in 10 during this period.
Most of the increased tax resulted from wages has resulted from wages rising
faster than tax allowances and credits. In 2014, only seven countries had higher
statutory income tax rates for workers on average earnings than in 2010, and
in six countries they were lower.
In 2014, the tax burden on the average worker across the OECD increased by
0.1 of a percentage point to 36.0%, even though no OECD country increased its
statutory income tax rates on the average worker. The tax burden increased
in 23 of the 34 OECD countries, fell in nine and remained unchanged in two.
Taxing Wages 2015, provides cross-country comparative data on income tax paid
by employees as well as the associated social security contributions made by
employees and employers; both are key factors when individuals consider their
employment options and businesses make hiring decisions.
The tax and social security contribution burden is measured by the ‘tax wedge’
- or the total taxes paid by employees and employers, minus family benefits
received as a percentage of the total labour costs of the employer.
This year’s report contains a special chapter on labour income in five major
non-OECD economies: Brazil, China, India, Indonesia and South Africa. The analysis
shows that there is significant variation between these countries. In 2013,
tax wedges in Brazil and China for the average single worker were similar to
those observed in many OECD countries. In 2013, tax wedges in Brazil and China
for the average single worker were similar to those observed in many OECD countries.
In contrast, employees in India, Indonesia and South Africa faced tax wedges
that were much lower than in the vast majority of OECD economies.
The mix of labour taxes also varies across these non-OECD countries with social
security contributions comprising the bulk of the tax burden measures for the
model households that are covered in four of the five countries, with South
Africa being the exception.
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