Taxing Wages in Latin America and the Caribbean 2016

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Author(s):
OECD, IDB, CIAT
26 Sep 2016
Pages:
284
ISBN:
9789264262607 (PDF) ; 9789264265042 (EPUB) ;9789264262560(print)
DOI: 
10.1787/9789264262607-en

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This new high profile report provides details of taxes paid on wages in twenty economies in Latin America and the Caribbean.  It covers: personal income taxes and social security contributions paid by employees; social security contributions and payroll taxes paid by employers; 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 on 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 the amounts of taxes and social security contributions levied and cash benefits received for eight different family types which vary by a combination of household composition and household type.  It also presents the resulting average and marginal tax rates (i.e. the tax burden). Average tax rates show that part of gross wage earnings or total labour costs which is taken in tax and social security contributions (both before and after cash benefits). Marginal tax rates show the part of a small increase of gross earnings or total labour costs that is paid in these levies.

The data presented can be used in academic research and to analyse tax, social and economic policies in Latin America and the Caribbean.

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  • Foreword

    This new publication is jointly undertaken by the OECD Development Centre and the OECD Centre for Tax Policy and Administration, the Inter-American Center of Tax Administrations (CIAT) and the Inter-American Development Bank (IDB). It provides details of taxes paid on wages in 20 economies in Latin America and the Caribbean. 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

    The estimated amounts of tax and social security contributions (SSCs) paid on labour income by the average worker in Latin American and Caribbean (LAC) countries in 2013 was 21.7%. These payments are measured by the tax wedge which takes the total taxes and compulsory SSCs paid by employees and employers, less family benefits received as a proportion of the total labour costs for employers. This measure provides an analysis of the combined impact of these levies on net household income.

  • Overview

    This chapter presents the main results of the analysis of the taxation of labour income for twenty economies in Latin America and the Caribbean in 2013. 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 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 percentage income tax and employee social security contributions net of cash benefits are expressed as a percentage of gross wage earnings. In this Report, the methodology used to estimate the tax wedges is based on the compulsory payments methodology;The deductions from labour income (referred to in this Report as taxes) are defined as personal income tax, employee and employer social security contributions (paid either to general government or privately managed funds) and payroll taxes less cash transfers.Labour costs are defined as the sum of gross wage earnings, employers social security contributions (paid either to general government or privately managed funds) and payroll taxes.A more detailed description of the methodology is set out in the Annex. The key results focus on the single worker with no children on average earnings and include a comparison with the single married couple earner with two children. The analysis includes a review of how tax wedges vary across the income distribution.

  • A view on taxes, social protection and informality in Latin America using Taxing Wages modelling

    The authors of the special feature are Veronica Alaimo, Juan Carlos Benítez, Angel Melguizo and René Orozco. The authors thank Maurice Nettley, Bert Brys and Dominique Paturot for their contributions to this special feature and Melany Gualavisi and Maria Laura Oliveri for providing the data that enabled the analysis. The opinions expressed and arguments employed herein are the views of the authors and do not necessarily represent the official views of the Inter-American Development Bank (IDB), the Inter-American Centre of Tax Administrations (CIAT), the Organisation for Economic Co-operation and Development (OECD) and the OECD Development Centre or the governments of its member countries.

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  • Expand / Collapse Hide / Show all Abstracts International Comparisons

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    • 2013 tax burdens

      The 2013 tax burden estimates are presented in Tables 3.1 to 3.10 and Figures 3.1 to 3.8. There are eight model family types varying by marital status, number of children and level of earnings: 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 one earner couple at the AW level with two children; two-earner couples with two children at 133% and 167% of the AW and a two-earner couple without children at 133% of the AW. The results are also presented for a single worker without children and a married couple with two children for each decile of the income distribution. There is a third set of results for these two family types earning an annual gross wage equivalent to USD 10 000, USD 48 000 and USD 60 000.The chapter presents different measures for the average tax burdens (tax wedge, 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 2013 tax burden

      This chapter presents a graphical exposition of the tax burdens on labour income in 2013 by income decile. These are illustrated in separate graphs for each of two family types in each Latin American and Caribbean country. The family types are single taxpayers without children and one-earner married couples with two children.The graphs are divided into two sets showing the average and the marginal tax wedge components as percentage of total labour costs (income taxes; employee and employer social security contributions and family benefits). The graphs also show the net personal average and marginal tax rates.

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  • Expand / Collapse Hide / Show all Abstracts Country details

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    • Argentina

      The country profile 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 the employers. Results reported include the average and marginal tax burdens for eight different family types.It also describes the personal income tax systems, all compulsory social security contribution schemes and universal cash transfers as well as recent changes in the tax/benefit system.

    • Bolivia

      The country profile 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 the employers. Results reported include the average and marginal tax burdens for eight different family types.It also describes the personal income tax systems, all compulsory social security contribution schemes and universal cash transfers as well as recent changes in the tax/benefit system.

    • Brazil

      The country profile 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 the employers. Results reported include the average and marginal tax burdens for eight different family types.It also describes the personal income tax systems, all compulsory social security contribution schemes and universal cash transfers as well as recent changes in the tax/benefit system.

    • Chile

      The country profile 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 the employers. Results reported include the average and marginal tax burdens for eight different family types.It also describes the personal income tax systems, all compulsory social security contribution schemes and universal cash transfers as well as recent changes in the tax/benefit system.

    • Colombia

      The country profile 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 the employers. Results reported include the average and marginal tax burdens for eight different family types.It also describes the personal income tax systems, all compulsory social security contribution schemes and universal cash transfers as well as recent changes in the tax/benefit system.

    • Costa Rica

      The country profile 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 the employers. Results reported include the average and marginal tax burdens for eight different family types.It also describes the personal income tax systems, all compulsory social security contribution schemes and universal cash transfers as well as recent changes in the tax/benefit system.

    • Dominican Republic

      The country profile 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 the employers. Results reported include the average and marginal tax burdens for eight different family types.It also describes the personal income tax systems, all compulsory social security contribution schemes and universal cash transfers as well as recent changes in the tax/benefit system.

    • Ecuador

      The country profile 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 the employers. Results reported include the average and marginal tax burdens for eight different family types.It also describes the personal income tax systems, all compulsory social security contribution schemes and universal cash transfers as well as recent changes in the tax/benefit system.

    • El Salvador

      The country profile 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 the employers. Results reported include the average and marginal tax burdens for eight different family types.It also describes the personal income tax systems, all compulsory social security contribution schemes and universal cash transfers as well as recent changes in the tax/benefit system.

    • Guatemala

      The country profile 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 the employers. Results reported include the average and marginal tax burdens for eight different family types.It also describes the personal income tax systems, all compulsory social security contribution schemes and universal cash transfers as well as recent changes in the tax/benefit system.

    • Honduras

      The country profile 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 the employers. Results reported include the average and marginal tax burdens for eight different family types.It also describes the personal income tax systems, all compulsory social security contribution schemes and universal cash transfers as well as recent changes in the tax/benefit system.

    • Jamaica

      The country profile 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 the employers. Results reported include the average and marginal tax burdens for eight different family types.It also describes the personal income tax systems, all compulsory social security contribution schemes and universal cash transfers as well as recent changes in the tax/benefit system.

    • Mexico

      The country profile 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 the employers. Results reported include the average and marginal tax burdens for eight different family types.It also describes the personal income tax systems, all compulsory social security contribution schemes and universal cash transfers as well as recent changes in the tax/benefit system.

    • Nicaragua

      The country profile 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 the employers. Results reported include the average and marginal tax burdens for eight different family types.It also describes the personal income tax systems, all compulsory social security contribution schemes and universal cash transfers as well as recent changes in the tax/benefit system.

    • Panama

      The country profile 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 the employers. Results reported include the average and marginal tax burdens for eight different family types.It also describes the personal income tax systems, all compulsory social security contribution schemes and universal cash transfers as well as recent changes in the tax/benefit system.

    • Paraguay

      The country profile 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 the employers. Results reported include the average and marginal tax burdens for eight different family types.It also describes the personal income tax systems, all compulsory social security contribution schemes and universal cash transfers as well as recent changes in the tax/benefit system.

    • Peru

      The country profile 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 the employers. Results reported include the average and marginal tax burdens for eight different family types.It also describes the personal income tax systems, all compulsory social security contribution schemes and universal cash transfers as well as recent changes in the tax/benefit system.

    • Trinidad and Tobago

      The country profile 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 the employers. Results reported include the average and marginal tax burdens for eight different family types.It also describes the personal income tax systems, all compulsory social security contribution schemes and universal cash transfers as well as recent changes in the tax/benefit system.

    • Uruguay

      The country profile 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 the employers. Results reported include the average and marginal tax burdens for eight different family types.It also describes the personal income tax systems, all compulsory social security contribution schemes and universal cash transfers as well as recent changes in the tax/benefit system.

    • Venezuela

      The country profile 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 the employers. Results reported include the average and marginal tax burdens for eight different family types.It also describes the personal income tax systems, all compulsory social security contribution schemes and universal cash transfers as well as recent changes in the tax/benefit system.

    • Methodology and limitations

      The personal circumstances of taxpayers vary greatly throughout the countries covered in the Report. A specific methodology has been adopted to produce comparative statistics covering taxes, benefits and labour costs across Latin American and Caribbean countries which is based on the compulsory payments methodology for OECD economies.

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