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 the thirty member countries. The methodology followed in this Report is set out briefly in Section 1 and described in more detail in Part IV of this Report.
Special Feature: Tax Reforms and Tax Burdens 2000-2006
The tax burden on labour and its evolution over time are issues that feature prominently in the political debate. Averaged across the OECD, personal income taxes, social security contributions and payroll taxes together account for 51% of total government revenues in 2005 (OECD, 2007a). With tax burdens differentiated by earnings level and family situation, they serve a central role as redistribution policies. Importantly, by shaping both work incentives and the cost of labour, the level and structure of these taxes are major influences on the functioning of labour markets.
Tax Burdens, 2007 estimates
This Section continues by commenting on Tables I.1-I.11 and Figures I.1-I.6, which can be found at the end of this Section. All these summary tables show results for eight familytypes, characterised by different family status (single/married, 0-2 children), economic status (one-/two-earner household) and wage level (33 per cent, 67 per cent, 100 per cent and 167 per cent of annual gross wage earnings of an average worker).
Tax Burdens, 2006 definitive results
This section briefly reviews the definitive results for 2006 reported in Tables I.12-I.22 which can be found at the end of this Section and what they show about changes between 2006 and 2007. The format of Tables I.12-I.22 is identical to that of Tables I.1-I.11 reviewed above. Thus, changes between 2006 and 2007 for the various cases considered can be traced by comparing the same columns in Tables I.12-I.22, to those in Tables I.1-I.11. The following commentary on Tables I.12-I.22 focuses on changes in tax burdens and marginal tax rates for single employees without children at the average wage level (column 2 of the tables) and for married one-earner families with two children at the average wage level (column 5 of the tables). Comparing the columns 1, 3-4 and 6-8 of the tables would give the results for the remaining six family-types distinguished in this Report. Generally, only changes exceeding 1 percentage point for average effective rates and 5 percentage points for marginal effective rates are flagged.
Tax Burden Trends 2000-2007
This Part 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. This Part provides detailed results of the evolution of the tax burden for 2000-2007.
Country Details, 2007
This part of the publication provides the individual country details for 2007 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 rate (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).
The personal circumstances of taxpayers vary greatly. To identify representative taxpayers and to calculate the amount of their taxes, this Report uses a specific methodology. The focus is on employees. It is assumed that their annual income from employment is equal to a given fraction of the average gross wage earnings of adult, fulltime workers in a broad range of industry sectors of each OECD economy. Additional assumptions are made regarding other relevant personal circumstances of these wage earners to enable their tax/benefit position to be determined. Table IV.1 sets out the terminology used in this Report, while Table IV.2 provides information on the industry sectors covered.
The simple approach of comparing the tax/benefit position of example families avoids many of the conceptual and definitional problems involved in more complex international comparisons of tax burdens and transfer programmes. However, a drawback of this methodology is that the earnings of an average worker will usually occupy a different position in the overall income distribution in different economies, although the earnings relate to workers in similar jobs in various OECD member countries.
A note on the tax equations
Each country chapter contains a section that describes the of equations in a standard format which show the calculations required to derive the amounts of income tax, social security contributions and cash transfers. These algorithms represent in algebraic form the legal provisions described in the chapter and are consistent with the figures shown in the country and comparative tables. This section describes the conventions used in the definition of the equations and how they could be used by those wishing to implement the equations for their own research.
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