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Taxing Wages Earlier editions were published under the title The Tax/Benefit Position of Employees (1996 – 1998 editions) and The Tax/Benefit Position of Production Workers (editions published before 1996). is an annual publication that provides details of taxes paid on wages in the 38 member countries of the OECD. The information contained in the Report covers the personal income tax and social security contributions paid by employees, the social security contributions and payroll taxes paid by their employers and cash benefits received by families. The objective of the Report is to illustrate how personal income taxes, social security contributions and payroll taxes are calculated and to examine how these levies and family benefits impact on net household incomes. The results also allow quantitative cross-country comparisons of labour costs and of the overall tax and benefit position of different household types.
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Effective tax rates on labour income increased across the OECD in 2022 at the same time as high inflation caused real wages to decline. The tax wedge The tax wedge, the primary indicator presented in this Report, measures the difference between the labour costs to the employer and the corresponding net take-home pay of the employee. It is calculated as the sum of the total personal income tax and social security contributions paid by employees and employers, minus cash benefits received, as a proportion of the total labour costs for employers. for all eight household types covered in this Report increased in a majority of OECD countries between 2021 and 2022, with the largest increases seen for households with children, particularly at lower income levels. The results underline the importance of policies to mitigate fiscal drag, the phenomenon by which tax burdens increase due to incomplete adaptation of tax system parameters to inflation.
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