How Does You Tax Rate With Workers In Other Leading Economies?

Paying tax is more taxing in some leading economies than others, according to data released by the Organisation of Economic Development and Co-operation.

The OECD is a talking shop for the world’s 35 leading economies, including the UK.

The group’s 2018 Taxing Wages reportshows the OECD tax rate for a single worker with no children earning an average wage is 25.5% of gross wages.

But the figure varies considerably between countries – from 15% in South Korea, Chile and Mexico to more than 35% in Belgium, Denmark and Germany.

In the UK, the rate is 18.1% for a couple with one partner earning and two children and 23.4% for a single worker.

Income tax rates

On average, a one-earner married couple on an average wage with two children pays 14% of gross wages in taxes, due to reduced personal income taxes and cash benefits.

Across the OECD, average tax rates dropped in 13 countries, stayed the same in two and went up in the rest.

The biggest increases were in the Czech Republic (0.5%), Turkey (0.5%) and Mexico (0.4%). The largest falls were in Luxembourg (-2.0%), Finland (-0.6%) and Iceland (-0.5%).

Pascal Saint-Amans, director of the OECD’s Centre for Tax Policy and Administration, said: “This easing of the income tax burden on families with children, especially on single parents, is encouraging. Setting tax policy in a way that maintains work incentives, particularly for low and middle-income earners, is vital to spur inclusive growth.”

Tax wedge

This so-called ‘tax wedge’ – total taxes on labour costs paid by employees and employers, minus family benefits, as a percentage of the labour cost to the employer – fell by 0.13% to stand at 35.9% of labour costs for the OECD.

The decline is largely due to big reductions in Finland, Hungary and Luxembourg, and continues a decreasing trend since 2012 that partially reverses the increases that had been observed in the years immediately after the global economic crisis.

NOTE: The tax calculations focus on the net personal average tax rate. This is when the personal income tax and employee social security contributions net of cash benefits are expressed as a percentage of gross wage earnings.

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