Investors and workers are paying more tax in three-quarters of the world’s leading economies as governments slash the value tax-free allowances and tax credits.
More people are also paying extra tax as governments bring down the limits for paying higher rate tax, according to a study by the Organisation of Economic Co-Operation and Development (OECD).
The countries with the largest tax burdens are the USA, Portugal and the Slovak Republic.
The OECD average tax burden rose 0.2% to 35.9% of income in 2013 – following significant tax increases since 2010 following decreases from 2007 onwards.
Helping the poorest back to work
Out of the OECD’s 34 members, the tax burden increased in 21 states, fell in 12 and was unchanged in one.
The report also highlights governments are taking more money from indirect taxes like social security contributions as well as slices of income and capital gains.
The OECD study Taxing Wages 2014 explains member states have worked to smooth tax to help the poorest by targeting tax credits to encourage people to work rather than claim benefits.
However, single taxpayers who have no children bear the highest tax burden in many countries, especially Ireland, Sweden and Slovenia, while governments in Germany, Hungary and Israel have put policies in place to offer them more support.
Who pays the most and least tax
Key findings in the report include:
- The highest average tax paid by childless single workers earning an average wage was seen in Belgium (55.8%), Germany (49.3%), Austria (49.1%) and Hungary (49.0%). The lowest were in Chile (7%), New Zealand (16.9%) and Mexico (19.2%)
- The average tax burden for average earners has increased by a 0.8% between 2010 and 2013 to reach 35.9 % following a fall from 36.1% to 35.1% between 2007 and 2010.
- Income tax rises were the main driver in increasing the average OECD total tax take in 2013.
- The highest tax take for single adult/two children families earning the average wage were in Greece (44.5%), France (41.6%), Belgium (41.0%) and Austria (38.4%). New Zealand charged the lowest for these families (2.4%), followed by Ireland (6.8%), Chile (7%), and Switzerland (9.5%). The OECD average was 26.4%
- The largest increases in tax for one earner families with children were in New Zealand and Portugal, both up 1.9% and the Slovak Republic (up 1.8%). The largest drops were in France and the Netherlands, both down 1.5%
The study also found that in all OECD nations except Mexico and Chile, the tax paid by families with children is lower than that paid by single, childless workers.
