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OECD Releases Taxing Wages 2020 Report

by Ulrika Lomas,, Brussels

15 May 2020

The OECD has released its Taxing Wages 2020 report, which highlights that taxes on labor across the OECD countries fell for the sixth consecutive year in 2019.

Taxing Wages 2020 shows that the "tax wedge" – the total taxes on labor costs paid by employees and employers, minus family benefits, as a percentage of the labor cost to the employer – was 36 percent in 2019, a fall of 0.11 percentage points from 2018.

In releasing the report, the OECD said the indicators presented in Taxing Wages 2020 will provide an important baseline on labor taxation in 2019, against which the impact of the COVID-19 pandemic can be measured. In responding to the COVID-19 pandemic, many countries have introduced a range of concessions that will contribute to a further decrease in labor taxes in many countries, the report highlights.

The decline in the average tax wedge between 2018 and 2019 was due to decreasing tax wedges in 17 countries. While the decrease in most of these countries was small, the tax wedge in Lithuania fell from 40.7 percent to 37.2 percent, due to a strong decrease in employer social security contributions (SSCs) following a major tax reform.

In a further 19 OECD countries, the tax wedge increased between 2018 and 2019. This increase was less than 0.5 percentage points in all countries except Estonia, where there was an increase of 1.08 percentage points due to a reduction in the income tax allowance.

Across countries, the tax wedge on the average worker in 2019 ranged from over 45 percent in France (46.7 percent), Austria (47.9 percent), Italy (48.0 percent), Germany (49.4 percent), and Belgium (52.2 percent) to under 20 percent in New Zealand (18.8 percent) and Chile (seven percent).

Taxing Wages 2020 also considers the net personal average tax rate (NPATR), which measures the income tax and SSCs paid by employees, minus any family benefits received, as a share of gross wages.

In 2019, the OECD average rate was 25.9 percent for a single person with no children earning the average wage. This rate is 0.4 percentage points higher than in 2018. The NPATR for the average worker varies considerably among countries: ranging from below 15 percent in Mexico and Chile to over 35 percent in Denmark, Lithuania, Belgium, and Germany.

TAGS: tax | Belgium | Chile | Denmark | employees | Estonia | Mexico | Austria | France | Germany | Italy | New Zealand | tax reform | Lithuania | Tax

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