By TIOL News Service

PARIS, APR 11, 2017: ACCORDING to the latest OECD Report, taxes on labour income for the average worker across the OECD continued to decrease for the third consecutive year during 2016, dropping to 36% of labour costs.

Taxing Wages 2017 measures the level of personal income tax and social security contributions in each OECD country by calculating the ‘tax wedge’ - the total taxes on labour income paid by employees and employers, minus family benefits received, as a percentage of the labour costs of the employer. The tax wedge is calculated for a range of different family types and at different income levels.

The tax wedge on the income of the average worker decreased slightly, to 36%, in 2016. Last year’s decline follows a multi-year trend, partially reversing tax wedge increases reported in the years immediately following the global economic crisis.

The decrease in the average tax wedge seen since 2013 is partly explained by reforms in some countries to reduce taxes on labour income. For example, in 2016 Belgium and Austria both experienced significant reductions in their tax wedges as a result of labour tax reforms.

Although the OECD average tax wedge decreased slightly in 2016 relative to 2015, the tax wedge actually increased slightly in 20 OECD countries, while it declined in 14 others. Most of the changes were driven by changes in personal income tax.

Taxing Wages 2017 also finds that taxes on families with children are lower than taxes on single earners without children in all but two countries (Chile and Mexico), where they are the same.. In 2016, the OECD average tax wedge for one-earner families with children was 26.6%, nearly 10 percentage points lower than the tax wedge on the average single worker. On average across OECD countries the gap between the tax wedges of families and single earners increased slightly between 2015 and 2016.