The chapter presents the evolution of the tax burdens on labour income between 2000 and 2017. The chapter contains Tables 6.1 to 6.8, each corresponding to a particular model family type and divided into three parts: part a.-tables containing the (average) tax wedge comprising income taxes plus employee and employer social security contributions (including any applicable payroll taxes) less cash benefits; part b.-tables providing the (average) burden of personal income taxes; and the part c.-tables depicting the (average) burden of income taxes plus employee social security contributions less cash benefits (net personal average tax rates).
Taxing Wages 2018
Taxing Wages
Chapter 6. Evolution of the tax burden (2000-17)
Abstract
The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.
Historical trends
The evolution of the tax burden for the eight family types over the period 2000 to 2017 is presented in Tables 6.1 to 6.8 in the last section of this chapter titled “Tables showing income taxes, social security contributions and cash benefits”. Each of the Tables 1 to 8 corresponds to a particular family type and each is divided into three parts.
The discussion focuses on the main observable trends over the period and highlights selected important year-to-year changes.
Important trends
The OECD average tax wedge, the income tax burden and the net tax burden (personal income tax plus social security contributions less cash benefits) have all declined between 2000 and 2017 for each of the selected family types.
The reductions over the period in the OECD average tax wedge ranged from 1.1 percentage point (for single persons on average wage [AW]) to 3.8 percentage points (for single parents at 67% of the AW).
The decrease in the OECD average income tax burden ranged from 0.4 percentage points (for single persons on AW) to 1.9 percentage points (for single parents at 67% of the AW).
The OECD net personal average tax burden has also declined for all family types in the period considered. The reduction ranged from 0.5 percentage points (for single persons on AW) to 3.2 percentage points (for single parents at 67% of the AW).
Tax wedge
Focusing on the overall (average) tax wedge (a.-tables), there are fourteen OECD member countries with a reduction of more than 5 percentage points between 2000 and 2017 for at least one family type – Belgium, Canada, Denmark, Finland, France, Hungary, Ireland, Israel, the Netherlands, New Zealand, Poland, Sweden, Turkey and the United Kingdom.
The largest decline is observed in Poland where the single parent benefited from a reduction in the tax wedge of 50.4 percentage points. A decrease of 23.3 percentage points was also observed for the one-earner married couple on AW with two children. In the Netherlands the single parent at 67% of the AW experienced a reduction of 19.5 percentage points in the tax wedge.
A reduction of more than 7 percentage points in the tax wedge for at least one family-type was observed in nine other countries – Canada, Denmark, France, Hungary, Ireland, Israel, New Zealand, Sweden and Turkey. In Canada, the tax wedge decreased by 14.9 percentage points for the single parent at 67% of the AW and by 11.6 percentage points for the one‐earner married couple on the AW with two children. In Denmark, the largest decrease was for the single person earning 167% of the AW (7.9 percentage points). In France, the single parent experienced the largest decrease in the tax wedge (9.9 percentage points) among the other family types. In Hungary, there were reductions of more than 7 percentage points for six out of the eight family types. The largest decreases were for the one-earner married couple, with two children, earning the AW (13.1 percentage points) and the single person earning 167% of the AW (13.0 percentage points). In Ireland, the tax wedge decreased by 16.4 percentage points for the single parent on 67% of the AW. In Israel, the tax wedge decreased by more than 7 percentage points for the single person, without children, earning 67% of the AW (8.1 percentage points) and earning the AW (7.5 percentage points). In New Zealand, the single parent earning 67% of the AW benefited the most from the reduction in the tax wedge (10.5 percentage points). It also decreased by 7.1 percentage points for the one-earner married couple earning the AW with two children. In Sweden, the tax wedge decreased by more than 7 percentage points for three out of the eight family types: by 7.9 percentage points for the two-earner married couple with total earnings at 133% of the AW without children, by 7.7 percentage points for the single person, without children, earning 67% of the AW and by 7.2 percentage points for the single person on the AW.
The tax wedge has decreased for all family types in twelve of the OECD member countries (Australia, Belgium, Canada, Denmark, Finland, Germany, Hungary, Israel, New Zealand, Poland, Sweden and Switzerland) while it has increased across all family types in two countries (Korea and Mexico).
Average income tax rate
Between 2000 and 2017, the average income tax burden (b.-tables) has decreased for all family types in thirteen of the OECD member countries: Belgium, Canada, Estonia, Finland, Hungary, Ireland, Israel, New Zealand, Slovenia, Sweden, Switzerland, Turkey and the United Kingdom. Among those countries, the most significant reductions affecting most of the family types are noted in Hungary where there were significant decreases of 15.3 percentage points for the single person earning 167% of the AW, 13.4 percentage points for the one‐earner married couple earning the AW with children, and 10.3 percentage points for the single parent earning 67% of the AW with two children. In Sweden, seven out of the eight family types had decreases of around 9-10 percentage points except the single taxpayer earning 167% of the AW for whom the decrease was 4.7 percentage points. In Estonia, the average income tax burden has decreased by more than 6 percentage points for all families with children, with the single parent at 67% of the AW receiving an income tax reduction of 8.3 percentage points. In Finland, it also decreased by more than 6 percentage points for all families with children, with the largest decrease being for the single parent on 67% of the AW (8.1 percentage points). In Israel, the average income tax rate decreased by 6 to around 9 percentage points in all family types except for the single parent at 67% of the AW who had a reduction of 3.8 percentage points. Other decreases of more than 5 percentage points were observed in Turkey (by 5.6 percentage points for the single parent earning 67% of the AW), and in the United Kingdom where there was a reduction of 9.4 percentage points for the single parent at 67% of the AW. Reductions of less than 5 percentage points in average income tax rates are observed for all family types in Belgium, Canada, Ireland, New Zealand,Slovenia and Switzerland.
There are fifteen other OECD member countries with reductions in the personal income tax in at least one family type: Australia, Austria, the Czech Republic, France, Germany, Iceland, Italy, Latvia, Luxembourg, Norway, Poland, Portugal, the Slovak Republic, Spain and the United States. In the Czech Republic the reductions in average income tax rates exceeded 10 percentage points for two family types (11.0 percentage points for the single parent on 67% of the AW and 10.2 percentage points for the one-earner married couple on AW with two children).
At the other extreme, the personal income tax burden has increased across all family types in six OECD member countries: Denmark, Greece, Japan, Korea, Mexico and the Netherlands. In Mexico the increases were in the range of 6 to 10 percentage points over the eight family types. In the Netherlands, there were increases of 12.0 percentage points for the one-earner married couple with two children and 7.7 percentage points for the single person on AW.
In contrast, in Chile the average income tax rates stayed constant for all the family types between 2000 and 2017.
Net personal average tax rate
The net tax burden takes into account personal income taxes and employee social security contributions as well as cash benefits (c.-tables). It decreased between 2000 and 2017 for all family types in eight OECD countries: Belgium, Canada, Denmark, Israel, New Zealand, Poland, Sweden and Switzerland. Of these, the most significant reductions were observed in Poland, where the net personal average tax rate fell by 58.4 percentage points for the single parent earning 67% of the AW and by 26.9 percentage points for the one-earner married couple on AW with two children. In Sweden, seven out of the eight family types had reductions exceeding 7 percentage points. In Sweden, the net personal average tax rate decreased the most for the two-earner married couple, without children, with total earnings at 133% of the AW (9.6 percentage points). Reductions ranging between 5 and 8 percentage points were observed in Israel for all but one family type, the exception being single parents earning 67% of the average wage where the reduction was only 1.2 percentage points. In Canada, the net personal average tax rate significantly decreased for the family types with children, notably by 16.6 percentage points for the single parents and 13.0 percentage points for the one-earner married couple, with two children, earning the AW. In Denmark, the tax burden also declined for all family types, with significant decreases for half of them by percentage points ranging from 5.2 (for the two-earner married couple with total earnings at 167% of the AW and with two children) to 8.1 (for the single person earning 167% of the AW).
The net personal average tax rate also decreased strongly for single parents at 67% of the AW in France (11.8 percentage points), Ireland (20.4 percentage points), the Netherlands (18.2 percentage points) and New Zealand (10.5 percentage points). There are seven other OECD member countries with reductions in the net personal average tax rate of more than 5 percentage points in at least one family type: Belgium, Estonia, Finland, Hungary, Portugal, Spain and the United Kingdom. In Belgium, the net personal average tax rate decreased by more than 5 percentage points for two-earner couples with total earnings at 133% of the AW with and without children (respectively 5.5 and 6.3 percentage points). In Estonia, married couples with children had significant declines (5.7 percentage points for the one-earner couple on AW, 5.5 percentage points for the two-earner couple with total earnings at 133% of the AW and 5.3 percentage points for the two-earner couple with total earnings at 167% of the AW). In Finland, the net personal average tax rate decreased by 5.2 percentage points for the two-earner married couple with total earnings at 133% of the AW without children and by 5.1 percentage points for the childless single person earning 67% of the AW. A significant decrease was observed in Hungary for the single person earning 167% of the AW (9.3 percentage points) and the one-earner married couple on AW with two children (6.0 percentage points). There were decreases of more than 5 percentage points in Portugal (5.6 percentage points), Spain (5.2 percentage points) and the United Kingdom (7.3 percentage points) for the single parents earning 67% of the AW.
Between 2000 and 2017, an increase of more than 5 percentage points in the net personal average tax rate for one or more family types was only observed in ten countries. In seven of these countries, Austria, the Czech Republic, Iceland, Latvia, Mexico, Norway and the Slovak Republic, single parents earning 67% of the average wage saw increases of between 5 and 15 percentage points. There were also increases of similar size for other family types. For example, in Mexico increases were between 8 and 10 percentage points for each of the family types except the single person earning 167% of the AW (5.7 percentage points). In Iceland, the net personal average tax rate increased by 8.1 percentage points for the two-earner married couple at 133% of the AW with children and by 9.7 percentage points for the one-earner married couple on AW with children. For the latter, it also increased significantly in the Czech Republic (6.0 percentage points).
Progressivity
The discussion of the 2017 results in Part I of this publication gave some consideration to their use in assessing the progressivity of personal income taxes and the results presented in Part II can also be used to look at the evolution of this measure.
The degree of progressivity of the personal income tax system can be assessed by comparing the burden faced by single persons earning 67% of the AW with that faced by their counterparts earning 167% of the AW. Hence Table 6.1b is compared with Table 6.3b. For all OECD countries (except Hungary) and for all years between 2000 and 2017 the higher paid worker always pays a higher percentage of income in personal income tax than the lower paid worker. In Hungary, the exceptions are that the levels are the same for both workers from 2013 onwards. In Mexico, from 2000 to 2010, personal income tax was negative for the single persons earning 67% of the AW due to non-wastable tax credits.
On average, the progressivity of the personal income taxes has not changed in OECD countries. On average (excluding Mexico), the single worker earning 67% of the AW paid 53% of the tax burden of the worker earning 167% of the AW in 2000 and in 2017.
Comparing the situation in each OECD country, personal income taxes have become more progressive in seventeen countries. The most significant changes were in New Zealand where the burdens on lower paid worker fell from 77% to 58%, in Sweden where it fell from about 68% to 48% and in Turkey where it decreased from 73% to 55%.
Personal income taxes have become slightly less progressive (using this measure) in sixteen OECD countries: Australia, Austria, Denmark, Estonia, Greece, Hungary, Iceland, Korea, Latvia, Mexico, the Netherlands, Poland, Portugal, the Slovak Republic, Spain and the United States. The most significant change occurred in Hungary where the ratio rose from about 58% of the higher paid worker in 2000 to 100% from 2013 onwards. The tax burden ratio remained at the same level in Chile and Japan in 2000 and 2017.
Families
The results presented in Tables 6.5 and 6.2 can be used to compare the tax burdens faced by a one-earner married couple earning the AW with two children, and the childless single worker at the same income level. Focusing on the net tax burden (personal income tax plus employee social security contributions less cash benefits which can be found in Part c of the Tables), one observes that the OECD average tax savings for the married couple compared with the single worker represented 10.9% of gross income in 2000 and 11.6% in 2017.
The savings for the one-earner married couple have increased in eighteen countries and declined in sixteen others. There were four countries where the tax savings have increased by more than 5 percentage points: in Poland increasing by 24.2 percentage points from 5.7% to 29.9% of gross income, in Canada increasing by 10.7 percentage points from 10.9% to 21.6% of gross income, in Portugal increasing by 6.8 percentage points from 8.8% to 15.6% of gross income and in New Zealand increasing by 5.9 percentage points from 5.8% to 11.7% of gross income. There were corresponding reductions of more than 5 percentage points in Iceland where the tax savings decreased by 6.4 percentage points from 16.5% to 10.1% of gross income, in Norway where the decrease was of 6.3 percentage points from 11.4% to 5.1% of gross income and in the Netherlands with a reduction in the tax savings by 5.4 percentage points from 11.2% to 5.8% of gross income.
Tables showing the income taxes, social security contributions and cash benefits
The evolution of the income taxes, social security contributions and cash benefits for the eight family types across the OECD over the period 2000 to 2017 is presented in Tables 6.1 to 6.8. Each of the Tables 1 to 8 corresponds to a particular family type and each is divided into three parts.
Part a.-tables containing the (average) tax wedge comprising income taxes plus employee and employer social security contributions (including any applicable payroll taxes) less cash benefits,
Part b.-tables providing the (average) burden of personal income taxes, and the
Part c.-tables depicting the (average) burden of income taxes plus employee social security contributions less cash benefits (net personal average tax rates).
Tables 6.9 and 6.10 show the average gross and net earnings of a single individual between 2000 and 2017 in US dollar using purchasing power parities of national currencies and in national currencies.
Table 6.1a. Income tax plus employee and employer contributions less cash benefits, single persons at 67% of average earnings
Tax burden as a % of labour costs, single persons without children
1. Information on data for Israel: http://oe.cd/israel-disclaimer.
2. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
Table 6.1b. Income tax, single persons at 67% of average earnings
Tax burden as a % of grosswage earnings, single persons without children
1. Information on data for Israel: http://oe.cd/israel-disclaimer.
2. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
Table 6.1c. Income tax plus employee contributions less cash benefits, single persons at 67% of average earnings
Tax burden as a % of grosswage earnings, single persons without children
1. Information on data for Israel: http://oe.cd/israel-disclaimer.
2. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
Table 6.2a. Income tax plus employee and employer contributions less cash benefits, single persons at 100% of average earnings
Tax burden as a % of labour costs, single persons without children
1. Information on data for Israel: http://oe.cd/israel-disclaimer.
2. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
Table 6.2b. Income tax, single persons at 100% of the average earnings
Tax burden as a % of grosswage earnings, single persons without children
1. Information on data for Israel: http://oe.cd/israel-disclaimer.
2. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
Table 6.2c. Income tax plus employee contributions less cash benefits, single persons at 100% of average earnings
Tax burden as a % of grosswage earnings, single persons without children
1. Information on data for Israel: http://oe.cd/israel-disclaimer.
2. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
Table 6.3a. Income tax plus employee and employer contributions less cash benefits, single persons at 167% of average earnings
Tax burden as a % of labour costs, single persons without children
1. Information on data for Israel: http://oe.cd/israel-disclaimer.
2. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
Table 6.3b. Income tax, single persons at 167% of average earnings
Tax burden as a % of grosswage earnings, single persons without children
1. Information on data for Israel: http://oe.cd/israel-disclaimer.
2. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
Table 6.3c. Income tax plus employee contributions less cash benefits, single persons at 167% of average earnings
Tax burden as a % of grosswage earnings, single persons without children
1. Information on data for Israel: http://oe.cd/israel-disclaimer.
2. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
Table 6.4a. Income tax plus employee and employer contributions less cash benefits, single parent at 67% of average earnings
Tax burden as a % of labour costs, single parent with two children
1. Information on data for Israel: http://oe.cd/israel-disclaimer.
2. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
Table 6.4b. Income tax, single parent at 67% of average earnings
Tax burden as a % of grosswage earnings, single parent with two children
1. Information on data for Israel: http://oe.cd/israel-disclaimer.
2. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
Table 6.4c. Income tax plus employee contributions less cash benefits, single parent at 67% of average earnings
Tax burden as a % of grosswage earnings, single parent with two children
1. Information on data for Israel: http://oe.cd/israel-disclaimer.
2. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
Table 6.5a. Income tax plus employee and employer contributions less cash benefits, married couple at 100% of average earnings
Tax burden as a % of labour costs, one-earner married couple with two children
1. Information on data for Israel: http://oe.cd/israel-disclaimer.
2. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
Table 6.5b. Income tax, married couple at 100% of average earnings
Tax burden as a % of grosswage earnings, one-earner married couple with two children
1. Information on data for Israel: http://oe.cd/israel-disclaimer.
2. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
Table 6.5c. Income tax plus employee contributions less cash benefits, married couple at 100% of average earnings
Tax burden as a % of grosswage earnings, one-earner married couple with two children
1. Information on data for Israel: http://oe.cd/israel-disclaimer.
2. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
Table 6.6a. Income tax plus employee and employer contributions less cash benefits, married couple with two children, at 100% and 33% of average earnings
Tax burden as a % of labour costs, two-earner married couple with two children
1. Information on data for Israel: http://oe.cd/israel-disclaimer.
2. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
Table 6.6b. Income tax, married couple with two children, at 100% and 33% of average earnings
Tax burden as a % of grosswage earnings, two-earner married couple with two children
1. Information on data for Israel: http://oe.cd/israel-disclaimer.
2. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
Table 6.6c. Income tax plus employee contributions less cash benefits, married couple with two children, at 100% and 33% of average earnings
Tax burden as a % of grosswage earnings, two-earner married couple with two children
1. Information on data for Israel: http://oe.cd/israel-disclaimer.
2. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
Table 6.7a. Income tax plus employee and employer contributions less cash benefits, married couple at 100% and 67% of average earnings
Tax burden as a % of labour costs, two-earner married couple with two children
1. Information on data for Israel: http://oe.cd/israel-disclaimer.
2. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
Table 6.7b. Income tax, married couple at 100% and 67% of average earnings
Tax burden as a % of grosswage earnings, two-earner married couple with two children
1. Information on data for Israel: http://oe.cd/israel-disclaimer.
2. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
Table 6.7c. Income tax plus employee contributions less cash benefits, married couple at 100% and 67% of average earnings
Tax burden as a % of grosswage earnings, two-earner married couple with two children
1. Information on data for Israel: http://oe.cd/israel-disclaimer.
2. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
Table 6.8a. Income tax plus employee and employer contributions less cash benefits, married couple at 100% and 33% of average earnings
Tax burden as a % of labour costs, two-earner married couple without children
1. Information on data for Israel: http://oe.cd/israel-disclaimer.
2. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
Table 6.8b. Income tax, married couple at 100% and 33% of average earnings
Tax burden as a % of grosswage earnings, two-earner married couple without children
1. Information on data for Israel: http://oe.cd/israel-disclaimer.
2. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
Table 6.8c. Income tax plus employee contributions less cash benefits, married couple at 100% and 33% of average earnings
Tax burden as a % of grosswage earnings, two-earner married couple without children
1. Information on data for Israel: http://oe.cd/israel-disclaimer.
2. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
Table 6.9. Annual average gross and net wage earnings, single individual no children, 2000-17
In US dollars using PPP
1. Information on data for Israel: http://oe.cd/israel-disclaimer.
2. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
Table 6.10. Annual average gross and net wage earnings, single individual no children, 2000-17 (national currency)
Note : The annual average gross wage earnings in euro area countries are expressed in euros for all years.
1. Information on data for Israel: http://oe.cd/israel-disclaimer.
2. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.