Taxing Wages

Continues
Taxing Wages
English
Frequency
Annual
ISSN: 
2072-5124 (online)
ISSN: 
1995-3844 (print)
http://dx.doi.org/10.1787/20725124
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Taxing Wages provides unique information on income tax paid by workers and social security contributions levied on employees and their employers in OECD countries. In addition, this annual publication specifies family benefits paid as cash transfers. Amounts of taxes and benefits are detailed program by program, for eight household types which differ by income level and household composition. Results reported include the marginal and effective tax burden for one- and two-earner families, and total labour costs of employers.

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Taxing Wages 2017

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Author(s):
OECD
11 Apr 2017
Pages:
584
ISBN:
9789264270817 (EPUB) ; 9789264270800 (PDF) ;9789264270763(print)
http://dx.doi.org/10.1787/tax_wages-2017-en

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This annual flagship publication provides details of taxes paid on wages in OECD countries. It covers personal income taxes and social security contributions paid by employees, social security contributions and payroll taxes paid by employers, and cash benefits received by in-work families. It illustrates how these taxes and benefits are calculated in each member country and examines how they impact household incomes. The results also enable quantitative cross-country comparisons of labour cost levels and the overall tax and benefit position of single persons and families on different levels of earnings. The publication shows average and marginal effective tax rates on labour costs for eight different household types, which vary by income level and household composition (single persons, single parents, one or two earner couples with or without children). The average tax rates measure the part of gross wage earnings or labour costs taken in tax and social security contributions, both before and after cash benefits, and the marginal tax rates the part of a small increase of gross earnings or labour costs that is paid in these levies.

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  • Foreword

    This annual publication provides details of taxes paid on wages in all 35 member countries of the OECD.Previous editions were published under the title The Tax/Benefit Position of Employees (1996-98 editions) and The Tax/Benefit Position of Production Workers (editions published before 1996). 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 cash family benefits impact on net household incomes. The results also allow quantitative cross-country comparisons of labour cost levels and of the overall tax and benefit position of single persons and families.

  • Executive summary

    After falling during the financial crisis, the effective tax rate on the labour costs of the average worker increased by 1 percentage point between 2009 and 2013 before decreasing slightly over the last few years and reaching 36.0% on average in OECD countries in 2016. The effective tax rate, or tax wedge, as a percentage of labour costs, is measured by taking the total taxes and social security contributions (SSCs) paid by employees and employers, minus family benefits received as a proportion of the total labour costs for employers.

  • Overview

    This chapter presents the main results of the analysis of the taxation of labour income across OECD member countries in 2016. Most emphasis is given to the tax wedge – a measure of the difference between labour costs to the employer and the corresponding net take-home pay of the employee – which is calculated by expressing the sum of personal income tax, employee plus employer social security contributions together with any payroll tax, minus benefits as a percentage of labour costs. The calculations also focus on the net personal average tax rate. This is the term used when the personal income tax and employee social security contributions net of cash benefits are expressed as a percentage of gross wage earnings. The analysis focuses on the single worker, with no children, at average earnings and makes a comparison with the single earner married couple with two children.

  • Special feature: Taxation and skills

    This special feature examines how the labour income tax system can provide incentives or disincentives for workers to invest in human capital and skills. It provides effective tax rates on skills investments incorporating personal income taxes and employees’ social security contributions for the sample case of a 32-year-old single worker undertaking a short course of training. Social security contributions increase the tax burden on skills compared to a scenario where only personal income taxes are considered. The tax burden on skills is also progressive; those on higher incomes and those who earn a higher return on skills investments are taxed at higher effective rates. Analysing the impact of labour taxation on skills investments should be borne in mind by policymakers when considering the taxation of labour.

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  • Expand / Collapse Hide / Show all Abstracts International comparisons

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    • 2016 Tax burdens

      The 2016 tax burden results based on the eight model family types are presented in to 3.11 and . The model family types vary by marital status, number of children and economic status: single taxpayers, without children, earning 67%, 100% and 167% of the average wage (AW); a single parent, with two children, earning 67% of the AW; a single earner couple at the AW level with two children; two-earner couples at 133% and 167% of the AW with two children; and a two-earner couple, without children, at 133% of the AW.The chapter presents different measures for the average tax burdens (tax wedge, personal tax rate, net personal tax rate, personal income tax rate and employee social security contribution rate) and marginal rates (tax wedge and net personal tax rate). The results for two measures of tax progressivity are also considered: tax elasticity on gross earnings and labour costs.

    • Graphical exposition of the 2016 tax burden

      The chapter presents a graphical exposition of the tax burdens on labour income in 2016 for gross wage earnings ranging from 50% to 250% of the average wage. These are illustrated in separate graphs for each of four family types and for each OECD member country. The family types are single taxpayers without children; single parents with two children; one-earner married couples without children and one-earner married couples with two children.The graphs are divided in two sets showing the average and the marginal tax wedge components as percentage of total labour costs (central and local income taxes; employee and employer social security contributions and family benefits). The graphs also show the net personal average and marginal tax rates.

    • 2015 Tax burdens (and changes to 2016)

      The chapter presents the results of tax burden measures on labour income for the eight model family types for 2015. The chapter includes to 5.11 that show a number of measures of the average tax burdens (tax wedge, personal tax rate, net personal tax rate, personal income tax rate and employee social security contribution rate) and the marginal rates (tax wedge and net personal tax rate). The results for two measures of tax progressivity are also considered: tax elasticity on gross earnings and labour costs.The table formats are identical to to 3.11 which are discussed in on tax burden results on labour income for 2016. This chapter compares the two sets of tables and analyses the changes in tax burden between 2015 and 2016.

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  • Expand / Collapse Hide / Show all Abstracts Tax burden trends 2000-16

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    • Evolution of the tax burden (2000-16)

      The chapter presents the evolution of the tax burdens on labour income between 2000 and 2016. The chapter contains Tables 6.1 to 6.8, each corresponding to a particular model family type and divided into three parts: part a.-tables containing the (average) tax wedge comprising income taxes plus employee and employer social security contributions (including any applicable payroll taxes) less cash benefits; part b.-tables providing the (average) burden of personal income taxes; and the part c.-tables depicting the (average) burden of income taxes plus employee social security contributions less cash benefits (net personal average tax rates).

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  • Expand / Collapse Hide / Show all Abstracts Country details, 2016

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    • Australia (2015-16 Income tax year)

      This chapter includes data 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 eight different family types.Methodological information is available for Personal income tax systems, compulsory social security contributions to schemes operated within the public sector, Universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

    • Austria

      This chapter includes data 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 eight different family types.Methodological information is available for Personal income tax systems, Compulsory social security contributions to schemes operated within the government sector, Universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

    • Belgium

      This chapter includes data 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 eight different family types.Methodological information is available for Personal income tax systems, Compulsory social security contributions to schemes operated within the government sector, Universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

    • Canada

      This chapter includes data 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 eight different family types.Methodological information is available for Personal income tax systems, Compulsory social security contributions to schemes operated within the government sector, Universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

    • Chile

      This chapter includes data 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 eight different family types.Methodological information is available for Personal income tax systems, Compulsory social security contributions to schemes operated within the government sector, Universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

    • Czech Republic

      This chapter includes data 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 eight different family types.Methodological information is available for Personal income tax systems, Compulsory social security contributions to schemes operated within the government sector, Universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

    • Denmark

      This chapter includes data 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 eight different family types.Methodological information is available for Personal income tax systems, Compulsory social security contributions to schemes operated within the government sector, Universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

    • Estonia

      This chapter includes data 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 eight different family types.Methodological information is available for Personal income tax systems, Compulsory social security contributions to schemes operated within the government sector, Universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

    • Finland

      This chapter includes data 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 eight different family types.Methodological information is available for Personal income tax systems, Compulsory social security contributions to schemes operated within the government sector, Universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

    • France

      This chapter includes data 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 eight different family types.Methodological information is available for Personal income tax systems, Compulsory social security contributions to schemes operated within the government sector, Universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

    • Germany

      This chapter includes data 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 eight different family types.Methodological information is available for Personal income tax systems, Compulsory social security contributions to schemes operated within the government sector, Universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

    • Greece

      This chapter includes data 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 eight different family types.Methodological information is available for Personal income tax systems, Compulsory social security contributions to schemes operated within the government sector, Universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

    • Hungary

      This chapter includes data 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 eight different family types.Methodological information is available for Personal income tax systems, Compulsory social security contributions to schemes operated within the government sector, Universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

    • Iceland

      This chapter includes data 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 eight different family types.Methodological information is available for Personal income tax systems, Compulsory social security contributions to schemes operated within the government sector, Universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

    • Ireland

      This chapter includes data 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 eight different family types.Methodological information is available for Personal income tax systems, Compulsory social security contributions to schemes operated within the government sector, Universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

    • Israel

      This chapter includes data 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 eight different family types.Methodological information is available for Personal income tax systems, Compulsory social security contributions to schemes operated within the government sector, Universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

    • Italy

      This chapter includes data 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 eight different family types.Methodological information is available for Personal income tax systems, Compulsory social security contributions to schemes operated within the government sector, Universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

    • Japan

      This chapter includes data 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 eight different family types.Methodological information is available for Personal income tax systems, Compulsory social security contributions to schemes operated within the government sector, Universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

    • Korea

      This chapter includes data 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 eight different family types.Methodological information is available for Personal income tax systems, Compulsory social security contributions to schemes operated within the government sector, Universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

    • Latvia

      This chapter includes data 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. Results reported include the marginal and average tax burden for eight different family types.Methodological information is available for Personal income tax systems, Compulsory social security contributions to schemes operated within the government sector, Universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

    • Luxembourg

      This chapter includes data 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 eight different family types.Methodological information is available for Personal income tax systems, Compulsory social security contributions to schemes operated within the government sector, Universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

    • Mexico

      This chapter includes data 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 eight different family types.Methodological information is available for Personal income tax systems, Compulsory social security contributions to schemes operated within the government sector, Universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations.

    • Netherlands

      This chapter includes data 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 eight different family types.Methodological information is available for Personal income tax systems, Compulsory social security contributions to schemes operated within the government sector, Universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations.

    • New Zealand (2016-17 income tax year)

      This chapter includes data 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 eight different family types.Methodological information is available for Personal income tax systems, Compulsory social security contributions to schemes operated within the government sector, Universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

    • Norway

      This chapter includes data 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 eight different family types.Methodological information is available for Personal income tax systems, Compulsory social security contributions to schemes operated within the government sector, Universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

    • Poland

      This chapter includes data on the income tax 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 eight different family types.Methodological information is available for Personal income tax systems, Compulsory social security contributions to schemes operated within the government sector, Universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

    • Portugal

      This chapter includes data 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 eight different family types.Methodological information is available for Personal income tax systems, Compulsory social security contributions to schemes operated within the government sector, Universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

    • Slovak Republic

      This chapter includes data 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 eight different family types.Methodological information is available for Personal income tax systems, Compulsory social security contributions to schemes operated within the government sector, Universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

    • Slovenia

      This chapter includes data 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 eight different family types.Methodological information is available for Personal income tax systems, Compulsory social security contributions to schemes operated within the government sector, Universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

    • Spain

      This chapter includes data on the income taxes paid by workers, their social security contributions, the family benefits they receive in t-he 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 eight different family types.Methodological information is available for Personal income tax systems, Compulsory social security contributions to schemes operated within the government sector, Universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

    • Sweden

      This chapter includes data 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 eight different family types.Methodological information is available for Personal income tax systems, Compulsory social security contributions to schemes operated within the government sector, Universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

    • Switzerland

      This chapter includes data 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 eight different family types.Methodological information is available for Personal income tax systems, Compulsory social security contributions to schemes operated within the government sector, Universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

    • Turkey

      This chapter includes data 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 eight different family types.Methodological information is available for Personal income tax systems, Compulsory social security contributions to schemes operated within the government sector, Universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

    • United Kingdom (2016-17 Income tax year)

      This chapter includes data 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 eight different family types.Methodological information is available for Personal income tax systems, Compulsory social security contributions to schemes operated within the government sector, Universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

    • United States

      This chapter includes data 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 eight different family types.Methodological information is available for Personal income tax systems, Compulsory social security contributions to schemes operated within the government sector, Universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

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  • Methodology and limitations

    The personal circumstances of taxpayers vary greatly. This Report therefore adopts a specific methodology to produce comparative statistics covering taxes, benefits and labour costs across OECD member countries.The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. The framework of the methodology is as follows:

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