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The average tax and social security burdens on employment incomes rose in most countries in 2010, reversing a trend toward declining tax burdens seen in previous years, reveals a new OECD report. However, in most cases, any rise reported was small.
The OECD’s annual Taxing Wages shows that tax burdens rose in 22 of the 34 OECD countries. The Netherlands, Spain and Iceland were among the countries experiencing significant increases, while Denmark, Greece, Germany and Hungary were among those showing the biggest drops.
In 2010, Taxing Wages indicates that:
- France, Belgium and Italy were the highest-tax countries for one-earner married couples with two children earning the average wage, with tax wedges of 42.1% in France, 39.6% in Belgium and 37.2% in Italy.
- At the bottom end of the scale, New Zealand had the smallest tax wedge for one-earner married couples with 2 children earning the average wage (-1.1%), followed by Chile (6.2%), Switzerland (8.3%) and Luxembourg (11.2%). The average for OECD countries was 24.8%.
- Belgium, France and Germany had the highest tax wedges for single workers without children on average wages, at 55.4%, 49.3% and 49.1% respectively, though the tax wedge decreased by nearly 2 percentage points in Germany in 2010.
- In the Netherlands, increased employee social security charges led to a 1.2 percentage point increase in the tax wedge. Higher income taxes resulted in a 1.4 percentage point increase in the tax wedge for single taxpayers at average earnings in Spain, while an increase in employer social security charges and income taxes in Iceland resulted in a 3.3 percentage point increase in the tax wedge.
- Ireland increased income taxes and the health levy while it decreased child benefits. The impact of these reforms on the tax wedge has been partly offset by the decrease in the average wage. Because of the progressivity of tax regimes, lower earnings mean that a smaller share is taken in tax. This was also the case in Greece, where the strong decrease in the average wage resulted in a decrease in the tax wedge for all families, despite of the increase in marginal income tax rates at higher income levels.
Click here to read the full report and analysis by country.