Basic Methodology and Main Results
This Report provides unique information for each of the OECD countries on the income taxes paid by workers, their social security contributions, the family benefits they receive in the form of cash transfers as well as the social security contributions and payroll taxes paid by their employers. Results reported include the marginal and average tax burden for one- and two-earner families, and the implied total labour costs for employers. These data are widely used in academic research and in the formulation and evaluation of social and economic policies. The taxpayer specific detail in this Report enables it to complement the information provided annually in the Revenue Statistics, a publication providing internationally comparative data on tax levels and tax structures in its the thirty member countries. The methodology followed in this Report is set out briefly in Section 1 and described in more detail in Part V of this Report. The present edition provides estimates of tax burdens and of the tax "wedge" between labour costs and net take-home pay for 2004, summarised in Section 2 below. The Report also presents definitive results for 2003 and discusses the changes between 2003 and 2004 (see Section 3). Section 4 reviews historical changes in tax burdens.
Presently the tax calculations in Taxing Wages are based on the average earnings of manual employees working full-time in the manufacturing sector (average production worker; APW). However, the number of people employed as manual workers in the manufacturing sector as a share of total employment has been decreasing steadily over time in most OECD countries. As a result of this it might be questioned whether average earnings of a manual production worker is still a sufficiently representative measure of average earnings of a "typical taxpayer". This question was addressed in a special feature in the 1994 publication, The Tax/Benefit Position of Production Workers – Annual Report 1990-1993, and the results from that special feature indicated that the present definition did not provide the best basis for comparable results across countries...
Part II - Comparative Tables and Charts
1. Tax Burdens, 2004 (Tables) 2. Tax Burdens, 2003 (Tables) 3. Tax Burdens, 2003 (Charts)
Part III - Historical Trends, 1979-2004
Australia (2004-2005 Income Tax Year)
This part of the publication provides the individual country details for 2004 that lie behind the comparative analysis. For each country, a table of detailed country results is followed by a description of the tax/benefit system. All thirty country tables in this part of the Report have a similar format. The left hand page of each table specifies the tax-benefit position of single persons in four cases, which differ by wage level and the presence of children (0/2). The right hand page of the table specifies the tax-benefit position of married couples, again discerning between four cases, which now differ by wage level, the presence of children (0/2) and one-/two-earner situations. All tables start with gross wage earnings (line 1) and derive taxable income for the personal income tax levied by central government (line 4), taking into account a number of standard tax allowances (line 2) and taxable cash transfers (line 3). Taxable income allows one to determine central government income tax paid (line 7); including reductions in the form of tax credits (line 6). Total payments to general government (line 10) also include state and local income taxes (line 8) and employees’ compulsory social security contributions (line 9). Take-home pay (line 12) is calculated as gross wage earnings less all payments to general government, plus universal cash transfers received from general government (line 11). Line 13 reports employers’ compulsory social security contributions (including payroll taxes). Average tax rates (line 14) are then calculated as: - the share of income tax in gross wage earnings; - the share of employees’ social security contributions in gross wage earnings; - the share of income tax and employees’ social security contributions minus benefits in gross wage earnings; and - the share of income tax and all social security contributions minus benefits in gross labour costs. Marginal tax rates (line 15) are calculated similarly as: - the increase in income tax and employees’ contributions minus benefits as a share of the related increase in gross wage earnings (both for the principal earner and the spouse); and - the increase in tax and all social security contributions minus benefits as a share of the related increase in gross labour costs (both for the principal earner and the spouse).
New Zealand (2004-2005 Income Tax Year)
United Kingdom (2004-2005 Income Tax Year)
Part V - Methodology and Limitations
Add to Marked List