Chapter 1. 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.

  

1. Introduction

This Report provides unique information for each of twenty Latin American and Caribbean (LAC) 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.

The Report focuses on full-time employees in the formal sector assuming that their only source of income is derived from wage earnings. Additional assumptions are made regarding the personal circumstances of individuals to estimate their tax/benefit position. The results focus solely on taxes applied to wage earnings. Other forms of taxation due on non-wage income as well as taxes on consumption or net wealth are not taken into account. The cash benefits included are paid by general government as cash transfers, usually in respect of children in the household.

The Report presents several measures of taxation on labour. Most emphasis is given to the tax wedge – a measure of the difference between the total labour cost to the employer and the corresponding take-home-pay of the employee. The tax wedge is calculated by expressing the sum of personal income taxes, all compulsory social security contributions paid by employee and employers – both to the public and private sector – and payroll taxes, minus cash benefits as a percentage of the total labour cost. Employer social security contributions and – in some cases – payroll taxes are added to the wage earnings1 to determine the amount of the total labour cost. The average tax wedge identifies the percentage of the labour cost which encompasses all compulsory taxes and social security contributions, net of cash benefits. Similarly, the marginal tax wedge measure identifies the share of these levies on an additional unit of labour cost.

The Report models the resulting tax wedge on different percentages of the average wage earnings, income distributions ordered by decile and annual fixed sums expressed in USD of full-time employed adults. The estimated earnings figures, which cover all industries within the productive sectors of Latin American and Caribbean economies, are derived from responses to representative national household income surveys. It should be recognised that the associated measures of total labour cost may, in some cases, be less that the actual labour costs incurred by employers as they can also willingly provide other monetary incentives and in-kind benefits to their employees.

The analysis also focuses on net personal average tax rates. This is the term used when the personal income tax and employee social security contributions net of cash benefits is expressed as a percentage of the annual gross wage earnings. The net personal marginal tax rate shows the share of an additional unit of income that is paid on taxes and employee social security contributions net of cash benefits.

The tax data and tax calculations relate to the calendar year of 2013. In Chile, the model is based on the Budget Law 2014 (voted in December 2013 and applied on income earned in 2013).

2. Review of results for 2013

2.1. Tax wedge

Table 1.1 describes the composition of the tax wedge between the total labour costs to the employer and the corresponding net take-home pay for a single individual without children earning the average wage. It also shows the estimated labour costs in both USD and dollars with equivalent purchasing power.

Argentina has the highest tax wedge at 34.6% of labour costs. Brazil, Uruguay and Colombia also have figures of 30% or more. Honduras had the lowest tax wedge at 10% with Guatemala and Trinidad and Tobago also having figures below 15%. The average tax wedge in the LAC countries was 21.7%. Mexico was the only country where workers pay personal income tax at the average wage level.

Compulsory social security contributions paid by the employee as a percentage of labour costs were highest in Chile at 18.2% followed by Uruguay (15.3%) and Argentina (13.4%). The lowest percentages were in Mexico (2.0%) and Honduras (3.4%).

Table 1.1. Composition of the total tax wedge, 2013
As % of labour costs

Country1

Total Tax Wedge2

Income Tax

Social Security Contributions

Labour Costs

Employee

Employer

USD

PPP3

Argentina

34.6

0.0

13.4

21.2

26 155

40 380

Brazil

32.2

0.0

6.7

25.5

14 125

18 992

Uruguay

30.5

0.0

15.3

15.2

14 877

17 188

Colombia

30.0

0.0

5.3

24.7

9 915

15 774

Costa Rica

28.0

0.0

7.3

20.7

14 419

19 468

Mexico

26.9

7.0

2.0

17.9

9 438

15 477

Panama

22.9

0.0

9.9

13.0

10 573

18 615

Chile

22.6

0.0

18.2

4.4

13 949

20 009

Bolivia

21.6

0.0

9.3

12.3

6 599

14 257

Paraguay

20.9

0.0

7.8

13.0

9 322

17 943

El Salvador

20.5

0.0

7.7

12.8

6 084

12 341

Nicaragua

19.2

0.0

4.9

14.3

3 739

9 613

Dominican Republic

19.2

0.0

5.1

14.1

6 291

13 049

Ecuador

18.5

0.0

8.5

10.0

8 893

16 169

Peru

17.5

0.0

10.1

7.4

6 771

12 085

Venezuela

17.4

0.0

4.8

12.6

9 925

15 682

Jamaica

16.6

0.0

6.0

10.7

4 088

6 639

Guatemala

13.2

0.0

3.6

9.6

6 552

13 761

Trinidad and Tobago

11.0

0.0

4.2

6.8

8 283

12 778

Honduras

10.0

0.0

3.4

6.6

6 264

12 290

Unweighted averages

LAC

21.7

0.3

7.7

13.6

9 848

16 125

OECD4

35.9

13.3

8.3

14.3

50 616

47 082

Note: Single individual without children at the income level of the average worker.

1. Countries ranked by decreasing total tax wedge.

2. Includes payroll taxes where applicable.

3. Expressed in dollars with equal purchasing power.

4. The OECD averages are based on results published in OECD (2014) Taxing Wages – Table 0.2. The OECD figures shown for social security contributions are not directly comparable with the LAC country figures as they exclude contributions paid to privately managed funds.

 http://dx.doi.org/10.1787/888933410070

Figure 1.1. Income tax plus employee and employer social security contributions, 2013
As % of labour costs
picture

Notes: Single individual without children at the income level of the average worker.

Payroll taxes are included with employer SSCs where applicable.

 http://dx.doi.org/10.1787/888933407321

The percentage of labour costs paid in employer social security contributions also varies widely across the countries in the Report. The highest levels were in Brazil (25.5%) and Colombia (24.7%). The lowest levels were in Chile (4.4%), Honduras (6.6%), Trinidad and Tobago (6.8%) and Peru (7.4%).

2.1.1. Personal average tax rates

The personal average rate is defined as income tax plus mandatory social security contributions paid by workers to both general government and privately managed funds as a share of gross wage earnings. Table 1.2 and Figure 1.2 show the personal average tax rates in 2013 for a single individual without children at the average earnings level decomposed into income tax and employee social security contributions. Table 1.2 also shows the gross annual average wages expressed in both in USD and in dollars with equivalent purchasing power.

Table 1.2. Income tax plus employee social security contributions, 2013
As % of gross wage earnings

Country1

Total payments

Income Tax

Social Security Contributions

Average wage

USD

PPP2

Chile

19.1

0.0

19.1

13 334

19 127

Uruguay

18.0

0.0

18.0

12 616

14 576

Argentina

17.0

0.0

17.0

21 155

31 808

Panama

11.4

0.0

11.4

9 202

16 202

Mexico

11.0

8.5

2.5

7 748

12 705

Peru

10.9

0.0

10.9

6 267

11 185

Bolivia

10.6

0.0

10.6

5 791

12 510

Ecuador

9.5

0.0

9.5

8 007

14 559

Costa Rica

9.2

0.0

9.2

11 428

15 430

Brazil

9.0

0.0

9.0

10 525

14 152

Paraguay

9.0

0.0

9.0

8 106

15 602

El Salvador

8.9

0.0

8.9

5 308

10 766

Colombia

7.0

0.0

7.0

7 466

11 878

Jamaica

6.7

0.0

6.7

3 653

5 932

Dominican Republic

6.0

0.0

6.0

5 405

11 212

Nicaragua

5.7

0.0

5.7

3 205

8 239

Venezuela

5.5

0.0

5.5

8 671

13 701

Trinidad and Tobago

4.5

0.0

4.5

7 718

11 906

Guatemala

4.0

0.0

4.0

5 925

12 443

Honduras

3.6

0.0

3.6

5 851

11 480

Unweighted averages

LAC

9.3

0.4

8.9

8 369

13 771

OECD3

25.4

15.5

9.9

43 631

40 292

Note: Single individual without children at the level of income of the average worker.

1. Countries ranked by decreasing total payments.

2. Expressed in dollars with equal purchasing power.

3. The OECD averages are based on results published in OECD (2014) Taxing Wages, Table 0.3. The OECD figures shown for social security contributions are not directly comparable with the LAC country figures as they exclude social security contributions paid to privately managed funds.

 http://dx.doi.org/10.1787/888933410080

Figure 1.2. Percentage of gross wage earnings paid in income tax and employee social security contributions, 2013
picture

Notes: Countries ranked by decreasing tax burden.

Single worker without children at income level of the average wage.

 http://dx.doi.org/10.1787/888933407331

Chile (19.1% of gross wage earnings) had the highest personal average tax rate in the region followed by Uruguay (18.0%) and Argentina (17.0%). The lowest rates were in Honduras (3.6%), Guatemala (4.0%) and Trinidad and Tobago (4.5%). The average amongst the LAC countries was 9.3%.

Table 1.2 and Figure 1.2 show that, with the exception of Mexico, workers in Latin America and the Caribbean countries do not pay any personal income tax at the average wage level. This is a very different situation to the OECD average in which the share of the income tax is higher than that of the employee social security contributions. This illustrates the weakness of the personal income tax as an instrument for collecting revenue from wages in Latin America and the Caribbean.2 High levels of exempt income, prevalent informality and high levels of tax expenditures arising from personal deductions and basic reliefs are important contributory factors. It should be noted that this analysis only takes account of standard deductions and reliefs. There can be other non-standard deductions dependent on specific behaviours by taxpayers that serve to further reduce the average personal income tax rate.

Conversely, in all the Latin American and Caribbean countries, the share of employee payments to social security systems is highly important. These payments are contributions made to old age, disability, sickness, maternity, work injury, and unemployment schemes that are mandated by legislation.3 Each country in the analysis requires their workforce to contribute to some kind of social security program. In Table 1.2 and Figure 1.2, the payments have been aggregated to calculate a single rate covering all the social security contributions paid by the employee. In some cases, countries have established lower thresholds and upper ceilings to the payments. In the region, the lower thresholds are generally set at the national minimum wage. In practice, given that an individual working in the formal sector should not earn less than the minimum wage, no worker is exempt from contributing to these schemes. If individuals were to earn less than the minimum wage, then they would be exempt.

2.1.2. Family tax rates

Table 1.3 and Figure 1.3 compare the tax wedges of a single worker with no children and a one-earner married couple with two children, both at the average wage level. The tax wedges of the married couple are either the same or lower than the corresponding figure for the single worker. Any differences between the two figures represent savings for the family compared with the single worker.

Table 1.3. Comparison of total tax wedge by family type, 2013
As % of labour costs

Country

Single worker1

Married couple tax2

Difference

Argentina

34.6

33.0

1.6

Bolivia

21.6

21.6

0.0

Brazil

32.2

32.2

0.0

Chile

22.6

22.6

0.0

Colombia

30.0

27.0

3.0

Costa Rica

28.0

27.2

0.8

Dominican Republic

19.2

19.2

0.0

Ecuador

18.5

18.5

0.0

El Salvador

20.5

20.5

0.0

Guatemala

13.2

13.2

0.0

Honduras

10.0

10.0

0.0

Jamaica

16.6

16.6

0.0

Mexico

26.9

26.9

0.0

Nicaragua

19.2

19.2

0.0

Panama

22.9

22.9

0.0

Paraguay

20.9

20.9

0.0

Peru

17.5

17.5

0.0

Trinidad and Tobago

11.0

11.0

0.0

Uruguay

30.5

29.8

0.6

Venezuela

17.4

17.4

0.0

Unweighted averages

LAC

21.7

21.4

0.3

OECD3

35.9

26.4

9.5

1. Single individual without children and earnings at the income level of the average wage.

2. One-earner married couple with two children at the income level of the average wage.

3. The OECD averages are based on results from OECD (2014) Taxing Wages, Table I.3. The OECD figures shown for social security contributions are not directly comparable with the LAC country figures as they exclude contributions paid to privately managed funds.

 http://dx.doi.org/10.1787/888933410093

Figure 1.3. Income tax plus employee and employer social security contributions less cash benefits, 2013
As % of labour costs, by family-type
picture

Notes: Countries are ranked by decreasing tax wedge of the single worker.

Family types: Single individual without children at the average wage level and a one-earner married couple with two children at the average wage level.

 http://dx.doi.org/10.1787/888933407340

In the LAC region, these savings are small. The average tax wedge for the one-earner married couple with two children is only 0.3 percentage points lower than that for the single worker. In contrast, the corresponding comparison for OECD countries shows that the average saving for the family reduces the tax wedge by 9.5 percentage points of the total labour costs.

Table 1.3 and Figure 1.3 show that only 4 countries in the LAC region; Argentina, Colombia, Costa Rica and Uruguay have differences in the tax wedge due to family benefits at the average earnings level. In Argentina, Colombia and Uruguay, the differences are attributed to cash transfers and in Costa Rica they arise from full payment of the non-wastable tax credit for the head of the family and child tax credits. The size of these differences range from 1.6 percentage points of labour costs in Argentina to 0.6 percentage points in Uruguay.

This contrast between Latin American and Caribbean countries and their OECD counterparts in this respect is because the former do not offer generous fiscal benefits or cash transfers for households with children whereas these are commonplace in the OECD. In fact, only 5 of the 20 countries: Argentina, Brazil, Chile, Colombia and Uruguay offer family allowance schemes and only those in Brazil and Chile impact on earners below the average wage. In the same way, several Latin American and Caribbean countries offer special tax deductions in respect of the spouse and children, which do not have any impact at the average wage level.

2.1.3. Tax wedges by income deciles

Tables 1.4 and 1.5 describe how average tax wedges vary across the income distribution for a single worker and a one-earner married couple with two children. On average, the trends are progressive. Table 1.4 shows that while single workers without children in the first decile of earnings have a tax wedge of 10.8% of total labour costs, this percentage increases as incomes rise to reach 25.9% of total labour costs in the tenth decile. In Table 1.5, the corresponding figures for the one-earner married couple with two children have a tax wedge of 7.1% of total labour costs in the first decile of income and 25.7% in the tenth decile.

Table 1.4. Tax wedges for a single earner without children by income decile, 2013
As % of labour costs

Country

Decile 1

Decile 2

Decile 3

Decile 4

Decile 5

Decile 6

Decile 7

Decile 8

Decile 9

Decile 10

Argentina

36.4

36.4

36.4

36.4

36.4

36.4

36.4

36.4

36.4

36.4

Bolivia

0.0

21.6

21.6

21.6

21.6

21.6

21.6

21.6

21.6

24.0

Brazil

31.4

31.4

31.4

31.4

31.4

31.4

32.2

32.2

34.5

32.1

Chile

22.6

22.6

22.6

22.6

22.6

22.6

22.6

22.6

22.6

24.6

Colombia

0.0

30.0

30.0

30.0

30.0

30.0

30.2

30.2

30.2

31.1

Costa Rica

0.0

0.0

0.0

0.0

28.0

28.0

28.0

28.0

28.0

32.0

Dominican Republic

1.2

1.2

1.2

19.2

19.2

19.2

19.2

19.2

19.2

25.6

Ecuador

0.0

18.1

18.1

18.5

18.5

18.5

18.5

18.5

18.5

20.7

El Salvador

0.9

20.5

20.5

20.5

20.5

20.5

20.5

23.5

24.5

26.3

Guatemala

4.8

4.8

4.8

13.2

13.2

13.2

13.2

13.2

13.3

14.9

Honduras

0.0

0.0

0.0

0.0

0.0

0.0

10.2

8.4

6.7

9.1

Jamaica

16.6

16.6

16.6

16.6

16.6

16.6

16.6

16.6

21.5

30.9

Mexico

16.7

18.8

19.8

20.9

22.4

23.5

26.8

27.8

29.6

33.1

Nicaragua

0.0

0.0

2.0

19.2

19.2

19.2

19.2

19.2

20.8

25.6

Panama

22.9

22.9

22.9

22.9

22.9

22.9

22.9

22.9

24.8

31.0

Paraguay

1.0

1.0

20.9

20.9

20.9

20.9

20.9

20.9

20.9

20.9

Peru

0.0

0.0

0.0

17.5

17.5

17.5

17.5

17.5

17.5

23.9

Trinidad & Tobago

16.1

14.0

13.2

12.8

12.6

12.4

12.0

11.3

15.9

20.7

Uruguay

29.3

30.5

30.5

30.5

30.5

30.5

30.5

31.3

33.4

37.2

Venezuela

17.4

17.4

17.4

17.4

17.4

17.4

17.4

17.4

17.4

18.7

Unweighted average

LAC

10.8

15.3

16.4

19.5

21.0

21.1

21.7

21.8

22.8

25.9

 http://dx.doi.org/10.1787/888933410109

Table 1.5. Tax wedges for a one-earner married couple with two children by income decile, 2013
As % of labour costs

Country

Decile 1

Decile 2

Decile 3

Decile 4

Decile 5

Decile 6

Decile 7

Decile 8

Decile 9

Decile 10

Argentina

1.6

14.8

18.6

20.6

25.6

26.9

30.5

32.6

32.9

33.6

Bolivia

0.0

21.6

21.6

21.6

21.6

21.6

21.6

21.6

21.6

24.0

Brazil

26.1

26.5

27.0

27.6

31.4

31.4

32.2

32.2

33.9

32.1

Chile

11.5

15.1

17.9

18.3

18.8

19.3

21.8

22.0

22.6

24.6

Colombia

(8.2)

24.9

25.2

25.5

26.0

26.6

27.4

27.9

28.6

31.1

Costa Rica

(4.1)

(2.4)

(2.0)

(1.8)

26.8

27.0

27.1

27.3

27.5

31.7

Dominican Republic

1.2

1.2

1.2

19.2

19.2

19.2

19.2

19.2

19.2

25.6

Ecuador

0.0

18.1

18.1

18.5

18.5

18.5

18.5

18.5

18.5

20.7

El Salvador

0.9

20.5

20.5

20.5

20.5

20.5

20.5

23.5

24.5

26.3

Guatemala

4.8

4.8

4.8

13.2

13.2

13.2

13.2

13.2

13.3

14.9

Honduras

0.0

0.0

0.0

0.0

0.0

0.0

10.2

8.4

6.7

9.1

Jamaica

16.6

16.6

16.6

16.6

16.6

16.6

16.6

16.6

21.5

30.9

Mexico

16.7

18.8

19.8

20.9

22.4

23.5

26.8

27.8

29.6

33.1

Nicaragua

0.0

0.0

2.0

19.2

19.2

19.2

19.2

19.2

20.8

25.6

Panama

22.9

22.9

22.9

22.9

22.9

22.9

22.9

22.9

24.0

30.7

Paraguay

1.0

1.0

20.9

20.9

20.9

20.9

20.9

20.9

20.9

20.9

Peru

0.0

0.0

0.0

17.5

17.5

17.5

17.5

17.5

17.5

23.9

Trinidad & Tobago

16.1

14.0

13.2

12.8

12.6

12.4

12.0

11.3

15.9

20.7

Uruguay

16.7

23.5

25.0

25.9

26.6

29.5

29.8

30.1

32.5

37.0

Venezuela

17.4

17.4

17.4

17.4

17.4

17.4

17.4

17.4

17.4

17.4

Unweighted average

LAC

7.1

13.0

14.5

17.9

19.9

20.2

21.3

21.5

22.5

25.7

 http://dx.doi.org/10.1787/888933410111

Figures 1.4 and 1.5 present the decompositions of the total tax wedges over the income distributions for each of the two family types. These graphs show that couples with children have relatively lower tax wedges at the lowest levels of income. The gap between the average tax wedges for the average single worker and the one-earner married couple with children is 3.7 percentage points at the first income decile. This gap diminishes as income increases until it is only around 0.2 to 0.4 percentage points at income deciles 7 to 10. It is also noticeable that social security contributions paid by both employees and employers start to diminish as a percentage of total labour costs at income deciles 9 and 10.

Figure 1.4. Average LAC country wedge decomposition for a single earner with no children
As a % of total labour costs
picture

 http://dx.doi.org/10.1787/888933407353

Figure 1.5. Average LAC country tax wedge decomposition for one-earner married couple with two children
As % of total labour costs
picture

 http://dx.doi.org/10.1787/888933407366

2.1.4. Tax wedges for earned income in USD.

Tables 1.6 and 1.7 compare tax wedges in the region for earnings in USD equivalents showing results for workers earning an annual gross wage of USD 10 000, USD 48 000 and USD 60 000.

Table 1.6. Total tax wedges for a single worker without children
As % for labour costs

Country

USD 10 000

USD 48 000

USD 60 000

Argentina

34.6

43.7

46.2

Bolivia

21.6

28.6

31.8

Brazil

32.2

31.0

30.4

Chile

22.6

22.4

20.5

Colombia

30.2

35.7

37.5

Costa Rica

28.0

33.9

34.9

Dominican Republic

19.4

30.5

29.6

Ecuador

18.5

24.6

25.8

El Salvador

25.1

32.8

34.0

Guatemala

14.1

16.2

16.5

Honduras

7.1

15.9

17.3

Jamaica

26.9

33.9

34.2

Mexico

28.1

36.6

35.5

Nicaragua

26.2

27.4

26.9

Panama

22.9

32.9

35.0

Paraguay

20.9

21.2

22.7

Peru

18.2

28.8

30.4

Trinidad and Tobago

11.5

23.0

23.4

Uruguay

30.5

36.7

36.4

Venezuela

17.4

26.5

33.9

Unweighted average

LAC

22.8

29.1

30.1

Note: Results are based on 2013 average exchange rates.

 http://dx.doi.org/10.1787/888933410128

Table 1.7. Total tax wedges for a one-earner married couple with two children, 2013
As % of labour costs

Country

USD 10 000

USD 48 000

USD 60 000

Argentina

20.9

39.6

42.8

Bolivia

21.6

28.6

31.8

Brazil

32.2

31.0

30.4

Chile

21.9

22.4

20.5

Colombia

27.9

35.7

37.5

Costa Rica

27.1

33.7

34.7

Dominican Republic

19.4

30.5

29.6

Ecuador

18.5

24.6

25.8

El Salvador

25.1

32.8

34.0

Guatemala

14.1

16.2

16.5

Honduras

7.1

15.9

17.3

Jamaica

26.9

33.9

34.2

Mexico

28.1

36.6

35.5

Nicaragua

26.2

27.4

26.9

Panama

22.9

32.7

34.7

Paraguay

20.9

21.2

22.7

Peru

18.2

28.8

30.4

Trinidad and Tobago

11.5

23.0

23.4

Uruguay

27.0

36.8

36.7

Venezuela

17.4

25.5

33.1

Unweighted average

LAC

21.7

28.9

29.9

Note: Results are based on 2013 average exchange rates.

 http://dx.doi.org/10.1787/888933410136

Table 1.6 shows that at the level of annual income of USD 10 000, the average tax wedge for the single worker without children in the 20 Latin American and Caribbean countries was 22.8% of the total labour costs. The average tax wedge rose with increasing income to 29.0% of labour costs for an income of USD 48 000 and to 30.1% for workers whose wages are USD 60 000.

The results show that Honduras had the lowest tax wedge at 7.1% and 15.9% of total labour costs at the annual income level of USD 10 000 and USD 48 000 respectively, while Guatemala had the lowest rate (16.5%) at an income of USD 60 000. Conversely, Argentina had the highest tax wedges (34.6%, 43.7% and 46.2% of total labour costs) at all three income levels.

Table 1.7 shows the corresponding results for the one-earner married couple with two children. Compared with the single worker, the average tax wedges were reduced by 1.1 percentage points at an income of USD 10 000 and 0.2 percentage points at USD 48 000 and USD 60 000.

Brazil had the highest tax wedge of 32.2% of total labour costs at an income of USD 10 000. At the income levels of USD 48 000 and USD 60 000, Argentina had the highest tax wedges at 39.6% and 42.8% respectively. The lowest tax wedges at the three income levels were at identical levels in the same countries as for the single worker without children.

2.1.5. Wages

Table 1.8 presents a comparison of the average wages in 2013 in local currency, their equivalent value in USD (at 2013 average annual exchange rates), their equivalent in dollars with equal purchasing power and the number of minimum wage levels contained in the average wage. The figures represent the average incomes reported by workers within the formal economy in each country’s income survey. The exceptions were Argentina, Brazil, Chile, Colombia and Mexico where estimates of the average wage are available from the Ministry of Labour. For Bolivia, the results from the 2011 national survey were adjusted to 2013 using the national real wage index.4 The average income distribution by deciles was calculated by first ordering from lowest to highest the reported income for each worker in the formal economy, dividing them into ten equal groups and calculating an average wage for each group.

Table 1.8. Comparison of average wage levels

Country

Value in local currency

Value in USD1

Value in PPP2

AW3 ratio to the minimum wage

Argentina

116 352

21 155

31 808

3.3

Bolivia

40 420

5 791

12 510

2.8

Brazil

22 686

10 525

14 152

2.8

Chile

6 604 419

13 334

19 127

2.8

Colombia

13 954 218

7 466

11 878

2.0

Costa Rica

5 607 303

11 428

15 430

1.6

Dominican Republic

225 961

5 405

11 212

2.2

Ecuador

8 007

8 007

14 559

2.1

El Salvador

5 308

5 308

10 766

2.3

Guatemala

46 563

5 925

12 443

1.6

Honduras

115 465

5 851

11 480

1.4

Jamaica

358 993

3 653

5 932

1.3

Mexico

98 922

7 748

12 705

4.2

Nicaragua

79 231

3 205

8 239

1.7

Panama

9 202

9 202

16 202

1.7

Paraguay

35 322 396

8 106

15 602

1.8

Peru

17 034

6 267

11 185

1.9

Trinidad and Tobago

49 305

7 718

11 906

1.9

Uruguay

252 060

12 616

14 576

2.7

Venezuela

54 490

8 671

13 701

1.7

Unweighted averages

LAC

-

8 369

13 771

2.2

OECD3

-

43 631

40 292

-

1. Exchange rate data was attained from central banks of each country. The average exchange rate is for the entire year 2013.

2. Exchange rates of dollars per local currency is an average for the year 2013. The implied conversion rate for international dollars in parity of purchasing power was obtained from the IMF World Economic Outlook dataset (2015).

3. Minimum wages for the year 2013 according to the legislation of each country.

4. The source for OECD averages is OECD (2014) Taxing Wages, Table 0.3. It should be noted that averages are not directly comparable since OECD average of the tax wedge are those estimated under the compulsory tax payments model.

 http://dx.doi.org/10.1787/888933410140

References

OECD/ECLAC/CIAT/IDB (2016), Revenue Statistics in Latin America and the Caribbean 2016, OECD Publishing, Paris. http://dx.doi.org/10.1787/rev_lat_car-2016-en-fr

OECD (2015), Taxing Wages 2015, OECD Publishing, Paris. http://dx.doi.org/10.1787/tax_wages-2015-en

OECD (2014), Taxing Wages 2014, OECD Publishing. http://dx.doi.org/10.1787/tax_wages-2014-en

OECD/IDB/The World Bank (2014), Pensions at a Glance: Latin America and the Caribbean, OECD Publishing. http://dx.doi.org/10.1787/pension_glance-2014-en

Notes

← 1. Payroll taxes are aggregated with employer social security contributions in the calculation of the tax rates.

← 2. Further analysis on tax revenue collection is provided in OECD/ECLAC/CIAT/IDB (2016).

← 3. Details of the programs available for each country are provided in Part II Country details.

← 4. Labour statistics published by the central bank.