Taxes rise in industrialised nations as governments fix finances

Income taxes rose across most of the industrialised world in 2014 for the fourth year running as governments continued to rebuild public finances, according to OECD figures published on Tuesday.

The average tax and social security bill rose by about one percentage point to 36 per cent between 2010 and 2014, reversing the decline of the previous three years, according to the Paris-based organisation.

But there were big variations between countries, with the tax "wedge" - the sum of income tax, social security contributions and payroll taxes, minus benefits, as a percentage of labour costs - for a single childless worker on an average wage ranging from 55.6 per cent in Belgium to 7 per cent in Chile.

After Belgium, Austria, France, Germany, Hungary and Italy had the highest taxes on such workers, who took home about half of what it cost to employ them.

Greece imposed the highest tax wedge on a single-earner family with two children at the average wage, totalling 43.4 per cent compared with an average for OECD countries of 26.9 per cent. Ireland saw the biggest increase in the tax wedge for this type of family, of 1.5 percentage points, because of reduced family income supplement and frozen basic family benefit payments.

Governments have tried to balance deficit reduction with keeping economic recovery on track and average tax bills rose slowly in 2014, with an increase of 0.1 of a percentage point to 36 per cent. This followed rises of 0.2, 0.1 and 0.5 percentage points in the three years since 2010.

The increase in the tax wedge was generally driven by higher income taxes, which were mostly the result of wages rising faster than tax allowances and credits. Few countries raised the rate of income tax: in 2014, only seven countries had higher statutory income tax rates for workers on average earnings than in 2010, and in six countries they were lower.

The OECD also analysed five non-OECD countries: Brazil, China, India, Indonesia and South Africa. The tax wedges in Brazil and China for the average single worker were similar to those in many OECD countries in 2013. Employees in India, Indonesia and South Africa faced tax wedges that were much lower than in the vast majority of OECD economies.

The mix of labour taxes also varied across the non-OECD countries, with social security contributions comprising the bulk of the tax burden in all the countries except South Africa.

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation