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Taxing Wages 2005

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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. This year's issue includes a Special feature entitled "Part-time Work and Taxing Wages".

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Basic Methodology and Main Results

This section briefly introduces the methodology employed for this Report, which focuses 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, full-time both manual and non-manual workers covering industry Sectors C-K inclusive with reference to the International Standard Industrial Classification of All Economic Activities, Revision 3 (ISIC Rev. 3)1 of each OECD economy, also referred to as the average wage. Additional assumptions are made regarding other relevant personal circumstances of these wage earners to enable their tax/benefit position to be determined. The taxes included in the present Report are confined to personal income tax, social security contributions and payroll taxes (which, in this Report, are aggregated with employers’ social contributions in the calculation of tax rates), payable on gross wage earnings. Consequently, any income tax that might be due on non-wage income, as well as all other kinds of taxes – e.g. corporate income tax, net wealth tax and consumption taxes – are not taken into account in this Report. The benefits included are those paid by general government as cash transfers, usually in respect of dependent children.

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