OECD Taxation Working Papers
Working papers from the Centre for Tax Policy and Administration of the OECD that cover the full range of the Centre’s work on taxation with the main focus on tax policy related issues.
- ISSN: 22235558 (online)
- https://doi.org/10.1787/22235558
Non-Tax Compulsory Payments as an Additional Burden on Labour Income
In 23 of the 34 OECD member countries, it is compulsory for employers and/ or employees to make additional payments, in addition to taxes and social security contributions, which increase the overall burden on labour income. These non-tax compulsory payments, which are typically paid to privatelymanaged funds, will either increase the employer’s labour costs or reduce the employee’s net take-home pay in a similar way to taxes, although they do not necessarily have the same behavioural impact. This paper discusses the different non-tax compulsory payments levied in OECD member countries and calculates “compulsory payment indicators”, which combine non-tax compulsory payments and taxes into an overall indicator of the burden of compulsory government regulation on labour income. The analysis shows that especially employers have to pay non-tax compulsory payments and that they have a considerable impact on the “tax wedge” rankings that are published in the OECD’s Taxing Wages Report.
Keywords: taxes, labour income, effective tax rates, non-tax compulsory payments
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