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Personal Tax Burden Creeps Higher In OECD Countries

by Ulrika Lomas, Tax-News.com, Brussels

17 April 2014


Personal income tax rose in 25 out of the 34 Organisation for Economic Co-operation and Development (OECD) countries over the past three years, according to the organization's annual Taxing Wages publication.

The increasing tax burden is largely because these countries have been reducing the value of tax-free allowances and tax credits, and thereby subjecting higher proportions of earnings to tax.

Taxing Wages 2014 provides cross-country comparative data on income tax paid by employees, and social security contributions made by employees and employers. The report finds that increases in tax burdens on labor income in 2013 were largest in Portugal (due to higher statutory rates), the Slovak Republic (due to higher employer social security contributions), and the United States (due to expiry of previous reductions in employee social security contributions). The tax burden is measured by taking the total taxes and social security contributions paid by employees and their employers minus family benefits received as a proportion of the total labor costs for employers.

The average tax burden on employment incomes across the OECD increased by 0.2 percent in 2013 to 35.9 percent. It increased in 21 out of 34 countries, fell in 12, and remained unchanged in 1. The 2013 rise follows a substantial increase in 2011, and a smaller hike in 2012. Since 2010, the tax burden has increased in 21 OECD countries and fallen in 9, partially reversing reductions seen between 2007 and 2010.

The report shows that in all OECD countries except Mexico and Chile the tax burden for families with children is lower than that for single individuals without children.

In 2013, the highest average tax burdens for childless single workers earning the average national wage were in Belgium (55.8 percent), Germany (49.3 percent), Austria (49.1 percent), and Hungary (49 percent). The lowest were in Chile (7 percent), New Zealand (16.9 percent), Mexico (19.2 percent) and Israel (20.7 percent).

Meanwhile, the highest tax burdens for one-earner, two children families at the average wage were in Greece (44.5 percent), France (41.6 percent), Belgium (41 percent), and Austria (38.4 percent). The lowest tax burdens for such families were in New Zealand (2.4 percent), Ireland (6.8 percent), Chile (7 percent), and Switzerland (9.5 percent).

The report also assesses how progressive tax systems are in OECD countries. On average, tax progression for low-income families with children has grown significantly among OECD countries. On the other hand, there has been little change for single workers without children and for those on higher income levels generally, although there are considerable differences in the structure of personal income tax regimes between countries.

TAGS: individuals | tax | Belgium | Chile | Hungary | Ireland | Portugal | employees | Organisation for Economic Co-operation and Development (OECD) | Israel | Mexico | tax credits | social security | Austria | France | Germany | Greece | New Zealand | Switzerland | United States | individual income tax

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