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Reforms lead to decline in average OECD labour taxes
By TII News Service
Apr 12, 2019 , Paris

    

THE latest OECD Report has stated that income tax and social security contributions declined slightly for the average worker across the OECD in 2018, driven by major reforms in a handful of countries.

Taxing Wages 2019 shows that the “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 – was 36.1% in 2018. This represents a fall of 0.16 percentage points from 2017, and is the fourth consecutive annual decrease in the tax wedge on the average OECD worker.

The decline between 2017 and 2018 was caused by large decreases in four countries: Estonia (2.54 percentage points), the United States (2.19 percentage points), Hungary (1.11 percentage points) and Belgium (1.09 percentage points). Even though the tax wedge on the average worker across the OECD declined between 2017 and 2018, small increases in the tax wedge were actually observed in 22 countries, or nearly two-thirds of the OECD. At the same time, small decreases in the tax wedge were observed in the remaining 10 OECD countries.

In the four countries where the largest decreases in the average tax wedge were observed, these reductions resulted from major reforms. In Estonia and the United States, the decreases were due to income tax reforms, whereas in Hungary and Belgium they resulted from reductions in employer social security contributions.

 
 
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