A sleight of hand by governments to cut income tax rates but devalue the worth of tax-free allowances and credits at the same time has made workers feel richer while they are really getting poorer in many leading economies.
New research shows that the tax burden has worsened for everyone in 23 out of 34 nations belonging to the Organisation of Economic Co-operation and Development (OECD) over the past two years after a golden period of falling taxes.
The average changes do not look a lot – but some of the gains and losses in individual nations are quite severe.
As expected, austerity budgets in North America and Europe have affected the tax picture as governments grapple with tax neutral budgets.
While income tax has dropped in many countries, top rate tax thresholds have fallen with them, so many workers pay tax at a higher rate on lower incomes.
Tax up in 19 countries
Overall, says the OECD, the average income tax and social security contributions rose 0.1% to 35.6% of wages in 2012 – but only six nations had higher income tax rates than in 2010.
Last year, workers in 19 countries saw the amount of tax they paid go up, while the rate fell in 14 countries and stayed the same in one.
Belgium exceeds OECD average tax takes in every category, while New Zealand is below each average.
A snapshot of the figures from the OECD research shows:
Single workers without children pay the most tax – the highest share of their wages goes in Belgium (56%), then France (50%), Germany (49%) and Hungary (49%). The lowest tax takes are Chile (7%), New Zealand (16%) and Mexico (19%).
Who pays the highest and lowest tax
For families, the highest tax takes are in France and Greece (Both 43%), Belgium (41%) and Italy (38%). Families in New Zealand pay the least tax (0.6%), then Ireland (6.4%), Chile (7%), and Switzerland (9%). The OECD average is 26%.
Mexico and Chile are the only OECD countries where families pay a higher share of income as tax than childless, single workers.
Although the average tax take for OECD workers rose 0.1% last year, that is significantly lower than the average 0.5% rise the year before – but the figure did drop from 36% to 35% between 2007 and 2010.
The tax calculations are worked out by adding up total employee/employer tax paid, less family benefits received, divided by employer labour costs.
A country-by-country comparison tool for each OECD nation is available online here https://www.oecd.org/newsroom/tax-burdens-on-labour-income-in-oecd-countries-continue-to-rise.htm
