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Taxing Wages
IMPACT OF COVID‑19
ON THE TAX WEDGE IN OECD
COUNTRIES
2022
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Taxing Wages
2022
IMPACT OF COVID‑19 ON THE TAX WEDGE IN OECD
COUNTRIES
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
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This work is published under the responsibility of the Secretary-General of the OECD. The opinions expressed and
arguments employed herein do not necessarily reflect the official views of the Member countries of the OECD.
This document, as well as any data and map included herein, are without prejudice to the status of or sovereignty over
any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.
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.
Please cite this publication as:
OECD (2022),
Taxing Wages 2022: Impact of COVID-19 on the Tax Wedge in OECD Countries,
OECD Publishing, Paris,
https://doi.org/10.1787/f7f1e68a-en.
ISBN 978-92-64-46546-6 (print)
ISBN 978-92-64-41809-7 (pdf)
ISBN 978-92-64-92138-2 (HTML)
ISBN 978-92-64-98488-2 (epub)
Taxing Wages
ISSN 1995-3844 (print)
ISSN 2072-5124 (online)
Photo credits:
Cover © Baseline Arts with elements from Shutterstock.
Corrigenda to publications may be found on line at:
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© OECD 2022
The use of this work, whether digital or print, is governed by the Terms and Conditions to be found at
https://www.oecd.org/termsandconditions.
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3
Foreword
This annual publication,
Taxing Wages,
1
provides details of taxes paid on wages in the 38 member
countries of the OECD. The information contained in the Report covers the personal income tax and social
security contributions paid by employees, the social security contributions and payroll taxes paid by their
employers and cash benefits received by families. The objective of the Report is to illustrate how personal
income taxes, social security contributions and payroll taxes are calculated and to examine how these
levies and cash family benefits impact on net household incomes. The results also allow quantitative cross-
country comparisons of labour cost levels and of the overall tax and benefit position of single persons and
families.
The Report shows the amount of taxes, social security contributions, payroll taxes and cash benefits for
eight household types, which differ by income level and household composition. It also presents the
resulting average and marginal tax rates. Average tax rates show the share of gross wage earnings or
total labour costs which are taken in personal income taxes (before and after cash benefits), social security
contributions and payroll taxes. Marginal tax rates show the share of an increase in gross earnings or total
labour costs that is paid in these levies.
The focus of the Report is the presentation of new data on the tax/benefit position of employees in 2021.
In addition, the new data is compared with corresponding data for the year 2020. The average worker is
designated as a full-time employee (including manual and non-manual) in either industry sectors B-N
inclusive with reference to the International Standard Industrial Classification of All Economic Activities,
Revision 4 (ISIC Rev.4) or industry sectors C-K inclusive with reference to the International Standard
Industrial Classification of All Economic Activities, Revision 3
(
ISIC Rev.3).
The Report is structured as follows:
Part I (Tax burden comparisons and trends) includes 6 chapters:
‒
‒
‒
‒
‒
‒
Chapter 1 contains an overview of the main results for 2021.
Chapter 2 contains the Special Feature on
“The
impact of COVID-19 on the tax wedge in
OECD countries”.
Chapter 3 reviews the main results for 2021, which are summarised in comparative tables
and figures included at the end of that chapter.
Chapter 4 presents a graphical exposition of the estimated tax burden on labour income
in 2021 for gross wage earnings between 50% and 250% of the average wage.
Chapter 5 reviews the main results for 2020, which are summarised in the comparative
tables at the end of the chapter and compares them with the 2021 figures.
Chapter 6 focuses on the historical trends in the tax burden for the period 2000-2021.
Part II contains individual country tables specifying the wage levels considered and the associated
tax burdens for eight separate household types, together with descriptions of
each country’s
tax/benefit system.
The Annex describes the methodology and its limitations.
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The Report has been prepared by the OECD’s Centre for Tax Policy and Administration (CTPA). Each
chapter was shared with the Working Party No.2 on Tax Policy Analysis and Tax Statistics (WP2) for review
and comment. Data was confirmed by the individual Member concerned. The Report was led by Leonie
Cedano and Dominique Paturot under the supervision of Michelle Harding, Head of the Tax Data and
Statistical Analysis Unit, and of Alexander Pick. The Special Feature was authored by Alexander Pick with
statistical and analytical support from Leonie Cedano. The authors would like to acknowledge Michael
Sharratt for his role in data management and dissemination and Marie-Aurélie Elkurd for the publication
formatting. The authors would also like to thank other colleagues in CTPA for their support and valuable
comments: David Bradbury, Bert Brys, Karena Garnier, Natalie Lagorce, Pascal Saint-Amans and Carrie
Tyler. The authors would also like to thank the delegates of WP2 for their inputs. This document has been
produced with the financial assistance of the European Union. The views expressed herein can in no way
be taken to reflect the official opinion of the European Union.
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5
Table of contents
Foreword
Executive Summary
Key findings
Notes
3
15
16
17
Part I Tax burden comparisons and trends
Overview
Introduction
Taxation of single workers
Single versus one-earner couple taxpayers
Taxation of two-earner couples
Wages
References
Notes
18
19
20
21
30
34
39
44
44
2 Special feature: Impact of COVID-19 on the tax wedge in OECD countries
Introduction
The impact of the pandemic on labour taxation and wages
Changes to the tax wedge between 2019 and 2021
Changes to the tax wedge since 2000
Conclusion
References
45
45
46
52
54
58
59
3 2021 tax burdens
Average tax burdens
Marginal tax burdens
Notes
60
61
63
86
4 Graphical exposition of the 2021 tax burden
Notes
87
128
5 2020 tax burdens (and changes to 2021)
Notes
129
146
6 Evolution of the tax burden (2000-21)
Key trends between 2000 and 2021
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Tables showing the income taxes, social security contributions and cash benefits
Note
152
180
Part II Country details, 2021
Australia (2020-2021 Income tax year)
1. Personal income tax system
2. Social security contributions
3. Other taxes
4. Universal cash transfers
5. Recent changes in the tax/benefit system
6. Memorandum items
181
182
185
187
188
188
191
193
Austria
1. Personal Income Tax
2. Compulsory Social Security Contributions to Schemes Operated within the Government
Sector
3. Universal Cash Transfers
4. Main Changes in Tax/Benefit Systems Since 2004
5. Memorandum Items
201
204
206
207
208
209
Belgium
1. Personal income tax system
2. Compulsory social security contributions to schemes operated within the government sector
3. Universal cash transfers
4. Main changes in the tax/benefit system since 2016
5. Memorandum Items
214
217
220
221
223
223
Canada
1. Personal Income Tax Systems
2. Compulsory Social Security Contributions to Schemes Operated Within the Government
Sector
3. Universal Cash Transfers
4. Main changes in the Tax/Benefit system since 2009
Notes
228
231
234
236
237
242
Chile
1. Personal income tax system
2. Compulsory social security contributions to schemes operated within the government sector
3. Universal cash transfers
4. Recent changes in the tax/benefit system
5. Memorandum items
Notes
243
246
247
249
250
250
252
Colombia
1. Personal income tax system
2. Compulsory social security contributions to schemes operated within the government sector
3. Universal cash transfers
4. Main Changes in Tax/Benefit Systems Since 2019
5. Memorandum items
253
256
257
258
259
259
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Notes
262
Costa Rica
1. Personal income tax system
2. Compulsory social security contributions to schemes operated within the government sector
3. Universal cash transfers
4. Recent changes in the tax/benefit system
5. Memorandum items
263
266
267
267
267
268
Czech Republic
1. Personal Income Tax System
2. Compulsory Social Security Contributions to Schemes Operated within the Government
Sector
3. Universal Cash Transfers
4. Main Changes in Tax/Benefit Systems since 2021
5. Memorandum Items
270
273
275
275
276
277
Denmark
1. Personal income tax system
2. Compulsory Social Security Contributions to Schemes Operated Within the Government
Sector
3. Universal Cash Transfers
4. Main Changes in Tax/Benefit Systems
5. Memorandum Items
280
283
285
286
286
289
Estonia
1. Personal income tax system
2. Compulsory social security insurance system
3. Payroll tax
4. Universal cash transfers
5. Main changes in tax/benefit system since 2005
6. Memorandum items
293
296
297
297
297
298
299
Finland
1. Personal Income Tax System
2. Compulsory Social Security Contributions to Schemes Operated within the Government
Sector
3. Universal Cash Transfers
4. Main Changes in the Tax/Benefit System since 2020
5. Memorandum Items
303
306
307
308
308
309
France
312
1. Personal income tax system
315
2. Compulsory social security contributions to schemes operated within the government sector 317
3. Universal cash transfers
319
4. Main changes in the tax system and social benefits regime since the taxation of 2015 income 320
5. Memorandum items
322
Notes
328
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Germany
1. Personal Income Tax Systems
2. Compulsory Social Security Contributions to Schemes Operated Within the Government
Sector
3. Universal Cash Transfers
4. Main Changes in Tax/Benefit Systems Since 1997
5. Memorandum Items
329
332
334
336
337
338
Greece
1. Personal income tax system
2. Mandatory Social Security Contributions to schemes operated within the Government Sector
3. Universal Cash Transfers
4. Main Changes in the Tax/benefit System since 2016
5. Memorandum items
Notes
342
345
349
351
351
352
355
Hungary
1. Personal Income Tax Systems
2. Compulsory Social Security Contributions to Schemes Operated within the Government
Sector
3. Universal cash transfers
4. Main Changes in the Tax/benefit System Since 2010
5. Memorandum Items
356
359
360
362
362
363
Iceland
1. Personal Income Tax System
2. Compulsory Social Security Contributions to Schemes Operated Within the Government
Sector
3. Universal Cash Transfers
4. Main Changes in the Tax/Benefit System Since 1998
5. Memorandum Items
Notes
367
370
371
371
372
376
379
Ireland
1. Personal income tax systems
2. Compulsory Social Security Contributions to Schemes Operated within the Government
Sector.
3. Universal Cash Transfers
4. Other Main Changes in Tax/Benefit System Since 2016
5. Memorandum Items
380
383
385
385
386
390
Israel
1. Personal income tax system
2. Compulsory social security insurance system
3. Payroll taxes
4. Universal cash transfers
5. Main changes in the tax and benefit systems since 2002
6. Memorandum items
395
398
399
400
400
401
401
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Italy
1. Personal Income Tax
2. Compulsory Social Security
3. Universal Cash Transfers
4. Main Changes
5. Memorandum Item
407
410
413
414
414
415
Japan
1. Personal Income Tax Systems
2. Compulsory Social Security Contribution to Schemes Operated Within the Government
Sector
3. Cash Benefits
4. Main changes in the Tax/benefit Systems since 1998
5. Memorandum Item
Note
420
423
427
428
430
432
437
Korea
1. Personal Income Tax System
2. Compulsory Social Security Contribution to Schemes Operated Within the Government
Sector
3. Universal Cash Transfers
4. Main Changes in Tax/Benefit System since 2000
5. Memorandum Item
438
441
444
446
446
448
Latvia
1. Personal income tax system
2. Compulsory social security contributions to schemes operated within the government sector
3. Universal cash transfers
4. Main changes in tax/benefit system in 2021
5. Memorandum items
451
454
457
459
460
460
Lithuania
1. Personal income tax system
2. Compulsory social security insurance system
3. Universal cash transfers
4. Main changes in tax/benefit system since 2000
5. Memorandum items
463
466
467
469
469
473
Luxembourg
1. Personal income tax system
2. Compulsory social security contributions to schemes operated within the government sector
3. Universal cash transfers
4. Main changes since 2008
5. Memorandum item
476
479
482
482
483
485
Mexico
1. Personal Income Tax
2. Compulsory Social Security Contributions to Schemes Operated within the Government
Sector
3. Universal Cash Transfers
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489
492
494
494
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4. Main Changes in the Tax/Benefit System since 1995
5. Memorandum Items
Notes
495
496
498
Netherlands
1. Personal Income Tax System (Central Government)
2. Compulsory Social Security Contributions to Schemes Operated Within the Government
Sector
3. Universal Cash Transfers
4. Main Changes in the Tax/Benefit Systems Since 2000
5. Memorandum Items
Note
499
502
504
505
506
508
512
New Zealand (2021-2022 Income tax year)
1. Personal Income Tax System
2. Compulsory Social Security Contributions to Schemes Operated Within the Government
Sector
3. Universal Cash Transfers
4. Main Changes in Personal Tax/Benefit Systems since 2019/20
5. Memorandum Items
513
516
516
517
518
522
Norway
1. Personal Income Tax System
2. Social Security Contributions
3. Universal Cash Transfers
4. Main Changes in Tax/Benefit Systems Since 2002
5. Memorandum Items
525
528
529
529
530
533
Poland
1. Personal income tax system
2. Social Security Contributions
3. Universal Cash Transfers
4. Main Changes in Tax/benefit Systems Since 2012
5. Memorandum Items
Notes
536
539
541
542
543
544
547
Portugal
1. Personal income tax system
2. Compulsory social security contributions to schemes operated within the government sector
3. Universal cash benefits
4. Main changes in the tax/benefit system since 2006
5. Memorandum items
Notes
548
551
554
554
555
556
559
Slovak Republic
1. Personal Income Tax System
2. Compulsory Social Security Contributions to Schemes Operated within the Government
Sector
3. Universal Cash Transfers
4. Main Changes in Tax/Benefit Systems since 2017
560
563
565
567
568
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5. Memorandum items
Notes
569
571
Slovenia
1. Personal income tax system
2. Compulsory social security insurance system
3. Payroll tax
4. Universal cash transfers
5. Main changes in tax/benefit system since 2005
6. Memorandum items
572
575
576
577
578
579
581
Spain
1. Personal Income Tax System
2. Compulsory Social Security Contributions to Schemes Operated within the Government
Sector
3. Universal Cash Transfers
4. Main Changes in Tax/Benefit Systems in 2017
5. Memorandum Items
584
587
589
590
590
590
Sweden
1. Personal Income Tax Systems
2. Compulsory Social Security Contributions to Schemes Operated within the Government
Sector
3. Universal Cash Transfers
4. Main Changes in Tax/Benefit Systems Since 1998
5. Memorandum Items
594
597
599
600
600
602
Switzerland
1. Personal income tax systems
2. Compulsory social security contributions to schemes operated within the government sector
3. Universal cash benefits
4. Main changes in the tax/benefit system since 1998
5. Memorandum item
606
609
613
614
614
614
Turkey
1. Personal Income Tax Systems
2. Compulsory Social Security Contributions to Schemes Operated within the Government
Sector
3. Universal Cash Transfers
4. Main Changes in Tax/Benefit System Since 2004
5. Memorandum Items
Notes
619
622
623
625
625
625
628
United Kingdom (2021-2022 Inocme tax year)
1. Personal Income Tax System
2. Compulsory Social Security Contributions to Schemes Operated Within the Government
Sector
3. Universal Cash Transfers
4. Recent changes in the tax/benefit system
5. Memorandum Items
629
632
633
634
634
635
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United States
1. Personal Income Tax System
2. Compulsory Social Security Contributions to Schemes Operated within the Government
Sector
3. Universal Cash Transfers
4. Principal Changes since 2017
5. Memorandum Items
Notes
639
642
645
645
646
647
652
Annex A. Methodology and limitations
Notes
653
671
FIGURES
Figure 1.1. Income tax plus employee and employer social security contributions, 2021
Figure 1.2. Percentage of gross wage earnings paid in income tax and employee social security contributions,
2021
Figure 1.3. Income tax plus employee contributions less cash benefits, 2021
Figure 1.4. Income tax plus employee and employer social security contributions less cash benefits, 2021
Figure 2.1. Impact of COVID-19 on unemployment and labour-force participation
Figure 2.2. Distribution of year-on-year changes in nominal average wages across OECD countries
Figure 2.3. Correlation between changes to the tax wedge and in average wages in 2020 and 2021
Figure 2.4. Tax wedge changes 2019-2021
Figure 2.5. Average OECD tax wedge for different family types, 2000-2021
Figure 2.6. Year-on-year change in the average tax wedge across the OECD, 2001-2021
Figure 2.7. Composition of the tax wedge, 2000-2021
Figure 3.1. Income tax plus employee and employer contributions less cash benefits, 2021
Figure 3.2. Income tax plus employee contributions, 2021
Figure 3.3. Income tax plus employee contributions less cash benefits, 2021
Figure 3.4. Income tax, by family-type, 2021
Figure 3.5. Employee contributions, 2021
Figure 3.6. Marginal rate of income tax plus employee and employer contributions less cash benefits, 2021
Figure 3.7. Marginal rate of income tax plus employee contributions less cash benefits, 2021
26
29
33
36
46
50
51
53
55
56
57
67
69
71
73
75
77
79
TABLES
Table 1.1. Comparison of total tax wedge
Table 1.2. Income tax plus employee and employer social security contributions
Table 1.3. Income tax plus employee social security contributions, 2021
Table 1.4. Comparison of total tax wedge for single and one-earner couple taxpayers, 2021
Table 1.5. Comparison of total tax wedge for two-earner couples with children, 2021
Table 1.6. Income tax plus employee social security contributions less cash benefits, 2021
Table 1.7. Comparison of wage levels
Table 1.8. Average Wage Industry Classification
Table 2.1. Summary of tax and benefit measures in response to COVID-19 within sectors B to N in ISIC rev. 4
Table 2.2. Summary of country COVID-19 measures included in the Taxing Wages models
Table 3.1. Income tax plus employee and employer contributions less cash benefits, 2021
Table 3.2. Income tax plus employee contributions, 2021
Table 3.3. Income tax plus employee contributions less cash benefits, 2021
Table 3.4. Income tax, 2021
Table 3.5. Employee contributions, 2021
Table 3.6. Marginal rate of income tax plus employee and employer contributions less cash benefits, 2021
Table 3.7. Marginal rate of income tax plus employee contributions less cash benefits, 2021
Table 3.8. Percentage increase in net income relative to percentage increase in gross wages, 2021
Table 3.9. Percentage increase in net income relative to percentage increase in gross labour cost, 2021
24
25
28
32
36
37
41
42
48
49
66
68
70
72
74
76
78
80
81
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Table 3.10. Annual gross wage and net income, single person, 2021
82
Table 3.11. Annual gross wage and net income, married couple, 2021
83
Table 3.12. Annual labour costs and net income, single person, 2021
84
Table 3.13. Annual labour costs and net income, married couple, 2021
85
Table 5.1. Income tax plus employee and employer contributions less cash benefits, 2020
133
Table 5.2. Income tax plus employee contributions, 2020
134
Table 5.3. Income tax plus employee contributions less cash benefits, 2020
135
Table 5.4. Income tax, 2020
136
Table 5.5. Employee contributions, 2020
137
Table 5.6. Marginal rate of income tax plus employee and employer contributions less cash benefits, 2020
138
Table 5.7. Marginal rate of income tax plus employee contributions less cash benefits, 2020
139
Table 5.8. Percentage increase in net income relative to percentage increase in gross wages, 2020
140
Table 5.9. Percentage increase in net income relative to percentage increase in gross labour cost, 2020
141
Table 5.10. Annual gross wage and net income, single person, 2020
142
Table 5.11. Annual gross wage and net income, married couple, 2020
143
Table 5.12. Annual labour costs and net income, single person, 2020
144
Table 5.13. Annual labour costs and net income, married couple, 2020
145
Table 6.1. Income tax plus employee and employer contributions less cash benefits, single persons at 67% of
average wage
154
Table 6.2. Income tax plus employee and employer contributions less cash benefits, single persons at 100%
of average wage
155
Table 6.3. Income tax plus employee and employer contributions less cash benefits, single persons at 167%
of average wage
156
Table 6.4. Income tax plus employee and employer contributions less cash benefits, single parent at 67% of
average wage
157
Table 6.5. Income tax plus employee and employer contributions less cash benefits, married couple at 100%
of average wage
158
Table 6.6. Income tax plus employee and employer contributions less cash benefits, married couple with two
children, at 100% and 67% of average wage
159
Table 6.7. Income tax plus employee and employer contributions less cash benefits, married couple, both at
100% of average wage
160
Table 6.8. Income tax plus employee and employer contributions less cash benefits, married couple at 100%
and 67% of average wage
161
Table 6.9. Income tax, single persons at 67% of average wage
162
Table 6.10. Income tax, single persons at 100% of average wage
163
Table 6.11. Income tax, single persons at 167% of average wage
164
Table 6.12. Income tax, single parent at 67% of average wage
165
Table 6.13. Income tax, married couple at 100% of average wage
166
Table 6.14. Income tax, married couple with two children, at 100% and 67% of average wage
167
Table 6.15. Income tax, married couple, both at 100% of average wage
168
Table 6.16. Income tax, married couple at 100% and 67% of average wage
169
Table 6.17. Income tax plus employee contributions less cash benefits, single persons at 67% of average
wage
170
Table 6.18. Income tax plus employee contributions less cash benefits, single persons at 100% of average
wage
171
Table 6.19. Income tax plus employee contributions less cash benefits, single persons at 167% of average
wage
172
Table 6.20. Income tax plus employee contributions less cash benefits, single parent at 67% of average wage 173
Table 6.21. Income tax plus employee contributions less cash benefits, married couple at 100% of average
wage
174
Table 6.22. Income tax plus employee contributions less cash benefits, married couple with two children, at
100% and 67% of average wage
175
Table 6.23. Income tax plus employee contributions less cash benefits, married couple, both at 100% of
average wage
176
Table 6.24. Income tax plus employee contributions less cash benefits, married couple at 100% and 67% of
average wage
177
Table 6.25. Annual average gross and net wage earnings, single individual no children, 2000-21
178
Table 6.26. Annual average gross and net wage earnings, single individual no children, 2000-21 (national
currency)
179
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Table A A.1. Terminology
Table A A.2. Characteristics of taxpayers
Table A A.3. International Standard Industrial Classification of All Economic Activities
Table A A.4. Method used to calculate average earning
Table A A.5. Source of earnings data, 2021
Table A A.6. Estimated gross wage earnings, 2020-2021 (in national currency)
Table A A.7. Purchasing power parities and exchange rates for 2021
654
654
655
658
660
662
663
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Executive Summary
The tax wedge, the primary indicator presented in this Report, measures the difference between the labour
costs to the employer and the corresponding net take-home pay of the employee. It is calculated as the
sum of the total personal income tax and social security contributions (SSCs) paid by employees and
employers, minus cash benefits received, as a proportion of the total labour costs for employers.
2
This Report finds that labour taxation rebounded across the OECD in 2021 as countries recovered from
the severe economic contraction experienced in 2020 as a result of the COVID-19 pandemic. In most
countries, COVID-19 measures were withdrawn or scaled back and average wages rose, while a number
of countries also enacted significant reforms to labour taxation. As a result, the tax wedge for most
household types increased in a majority of OECD countries between 2020 and 2021, even though the
OECD average tax wedge declined slightly due to large decreases in a small number of countries. In most
countries, increases to the tax wedge in 2021 have more than offset the sharp declines recorded in 2020
and have seen the tax wedge rebound to higher levels than in 2019, before the pandemic.
For the single worker earning the average wage, the OECD average tax wedge was 34.6% in 2021, a
decrease of 0.06 percentage points from 2020. The tax wedge increased in 24 of the 38 OECD countries,
decreased in 12 and remained unchanged in two. Increases larger than one percentage point were
observed in Israel (1.02 percentage points), the United States (1.20 percentage points) and Finland (1.33
percentage points). In almost all countries where the tax wedge increased for the single worker, the rise
was driven by higher personal income tax. In some countries, this was a result of higher average wages
interacting with progressive income tax systems. In others, it was driven by a higher proportion of earnings
becoming subject to tax as the value of tax allowances and tax credits fell relative to the average wage.
The decrease in the tax wedge for the single worker earning the average wage was greater than one
percentage point in Australia (-1.25 percentage points), Latvia (-1.73 percentage points), Greece (-2.23
percentage points) and the Czech Republic (-4.12 percentage points). Where the tax wedge decreased,
this was primarily due to lower personal income tax in a majority of cases. In Australia, the income tax
schedule was reformed by enlarging the tax brackets,
and the employer’s payroll tax rate decreased from
5.45% to 4.85%
3
in the 2020-2021 tax year. Chile and Sweden both raised the income threshold within
their tax schedule. In the Czech Republic, the personal income tax base was reformed to include only the
employee’s gross income in
2021. In Germany, the Solidarity Surcharge (a surtax) paid by the single
worker earning the average wage in 2020 was not paid in 2021, as the exempt income limit was
significantly increased. In Latvia, the tax allowance for workers on the average wage was raised in 2021.
In Mexico, the decrease in personal income tax derived from a decline in the average wage.
The OECD average tax wedge for the two-earner couple with two children decreased by 0.36 percentage
points between 2020 and 2021 to 28.8%. For this household type, the tax wedge increased in 23 countries,
decreased in 14 and remained the same in one. Increases exceeded one percentage point in Luxembourg
and Canada (1.14 percentage points), Lithuania (1.25 percentage points), Austria (1.28 percentage
points), Israel (1.4 percentage points) and Finland (1.49 percentage points). Decreases of more than one
percentage point were observed in Chile (-15.28 percentage points), the Czech Republic (-4.8 percentage
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points), Greece (-2.2 percentage points), Mexico (-1.54 percentage points) and Australia (-1.43 percentage
points).
The OECD average tax wedge for the couple with one earner and two children decreased by 0.42
percentage points between 2020 and 2021 to 24.6%. The tax wedge increased in 27 countries, decreased
in 10 and remained unchanged in one. For the single parent household type, which is examined in detail
in the Special Feature, the tax wedge increased slightly on average by 0.1 percentage points to 15.04%
in 2021. It increased in 26 countries, declined in 11 and stayed the same in one. In most countries where
the tax wedge for families with children declined between 2020 and 2021, this resulted from changes in
income tax systems and SSCs, as well as from increased cash benefits or tax provisions for dependent
children, including COVID-19 support measures.
The Report contains a Special Feature on the impact of COVID-19 on the tax wedge in OECD countries.
This examines the cumulative impact of the COVID-19 crisis on labour taxation in the OECD, and
compares this with longer-term trends and the impact of the Global Financial Crisis on the tax wedge.
Key findings
The average tax wedge for single workers increased in the majority of countries in 2021
Across OECD countries, the average personal income tax and total employee and employer SSCs
on employment incomes of single workers with no children earning the average national wage
was 34.6% in 2021, a decrease of 0.06 percentage points from 2020.
Between 2020 and 2021, the tax wedge for this household type increased in 24 OECD countries
and fell in 12. Increases larger than one percentage point were observed in Israel, the United States
and Finland. The decrease was greater than one percentage point in Australia, Latvia, Greece and
the Czech Republic.
In 2021, the largest average tax wedges for this household type were observed in Belgium (52.6%),
Germany (48.1%), Austria (47.8%), France (47.0%) and Italy (46.5%). The smallest were observed
in Colombia (zero), Chile (7.0%) and New Zealand (19.4%).
The personal average tax rate for a single worker at average earnings in OECD countries
was 24.6% of gross wage earnings in 2021. Belgium had the highest rate at 39.8%; Denmark,
Germany and Lithuania were the only other countries with rates above 35%. The lowest personal
average tax rates were observed in Costa Rica (10.5%), Mexico (10.2%), Chile (7.0%) and
Colombia (0.0%).
The average wage for the single worker increased in all OECD countries, with the exception of
Mexico and Greece. Real wages (before personal income tax and employee SSCs) increased by
more than two percentage points in thirteen countries and decreased by more than two percentage
points in two countries.
The average tax wedge for households with children varied across the OECD in 2021
The OECD average tax wedge for the two-earner couple with two children was 28.8% in 2021,
larger than the tax wedge for couples with one earner at the average wage (24.6%) and the single
parent household (15.5%).
The largest decline across all eight household types between 2020 and 2021 was observed in the
tax wedge for couples with one earner at the average wage and two children. This decreased
by 0.42 percentage points on average despite declining in only 10 of 38 countries. Decreases of
more than one percentage point were observed in five countries: Chile (-25.52 percentage points),
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the Czech Republic (-5.04 percentage points), Greece (-2.38 percentage points), Australia (-1.73
percentage points) and the United States (-1.59 percentage points).
In 2021, the tax wedge for this household type was highest in France (39.0%), with Finland, Turkey,
Italy, Sweden and Belgium also exceeding 35.0%. Colombia and Chile had negative tax wedges,
of -5.0% and -18.5%, respectively.
The tax wedge for married couples with one earner and two children was lower than for the single
worker in almost all OECD countries. The difference was greater than 20% of labour costs in Chile,
Luxembourg and Poland, and it exceeded 15% of labour costs in Belgium, the Czech Republic,
Germany and the United States.
The impact of COVID-19 on the tax wedge in OECD countries (Special Feature)
Tax wedges declined on average and across a majority of OECD countries in 2020 as governments
implemented a range of policies in response to the COVID-19 pandemic.
However, tax wedges rebounded in the majority of countries in 2021 as most of these measures
were withdrawn or scaled back and average wages increased in 36 out of 38 countries.
For the one-earner couple with two children on 100% of the average wage and for the single parent
on 67% of the average wage, the tax wedge was greater in 2021 than it was in 2019 in 21 countries
(versus 16 countries for the single worker on 100% of the average wage).
The average tax wedge for the one-earner couple declined by -1.2 percentage points and for the
single parent household by -1.0 percentage point between 2019 and 2021, which was larger than
the average decline for the single worker (-0.6 percentage points).
Notes
1
Earlier editions were published under the title The Tax/Benefit Position of Employees (1996–
1998 editions) and The Tax/Benefit Position of Production Workers (editions published before 1996).
2
While the
Taxing Wages
models calculate the tax wedge (as well as average and marginal tax rates) for
eight household types, the analysis in this Report focuses on four of those household types: the single
worker earning the average wage, two-earner couples with two children earning 100% and 67% of the
average wage, couples with one earner at the average wage and two children, and a single parent earning
67% of the average wage.
3
In Australia, employer payroll tax rates, thresholds and deductions differ between States. The payroll tax
rate that is applied in the State of New South Wales is used in the Taxing Wages calculations.
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Part I
Tax burden
comparisons and trends
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Overview
This chapter presents the main results of the analysis of the taxation of
labour income across OECD member countries in 2021. Most emphasis is
given to the tax wedge
–
a measure of the difference between labour costs
to the employer and the corresponding net take-home pay of the employee
–
which is calculated by expressing the sum of personal income tax,
employee plus employer social security contributions together with any
payroll tax, minus benefits as a percentage of labour costs. The
calculations also focus on the net personal average tax rate. This is the
term used when the personal income tax and employee social security
contributions net of cash benefits are expressed as a percentage of gross
wage earnings. The analysis focuses on the single worker, with no children,
at average earnings and makes a comparison with the one-earner married
couple with two children, at the same income level. A complementary
analysis focuses on the two-earner couple with two children, where one
spouse earns the average wage and the other 67% of it.
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This Report provides unique information for each of the 38 OECD countries on the income taxes paid by
workers, their social security contributions, the transfers they receive in the form of cash benefits, as well
as the social security contributions (SSCs) and payroll taxes paid by their employers. Results reported
include the marginal and average tax burden for one- and two-earner households,
1
and the implied total
labour costs for employers. These data are widely used in academic research and in the formulation and
evaluation of social and economic policies. The taxpayer-specific detail in this Report complements the
information provided annually in
Revenue Statistics,
a publication providing internationally comparative
data on tax levels and tax structures in OECD countries. The methodology followed in this Report is
described briefly in the introduction section below and in more detail in the Annex.
The tables and charts present estimates of tax burdens and of the tax ‘wedge’ between labour costs and
net take-home pay for eight illustrative household types on comparable levels of income. The key results
for 2021 are summarised in the second section below. Part I of the Report presents more detailed results
for 2021, together with comparable results for 2020 and discusses the changes between the two years.
Part I of the Report also reviews historical changes in tax burdens between 2000 and 2021.
The present chapter begins with an introduction to the
Taxing Wages
methodology, which is followed by a
review of the results of tax burden indicators for 2021. The review includes the tax wedge and the personal
average tax rates results for a single worker, without children, earning the average wage, and also the
corresponding indicators for a one-earner couple at the average wage level and a two-earner couple where
one spouse earns the average wage and the other 67% of it, and assumes that both couples have two
children. Finally, the chapter ends with a section on the change in the average wage levels by country and
the industry classification on which they are based.
The Report covers the period of crisis related to the COVID-19 pandemic. We pay particular attention to
the changes made to tax and benefit systems in response to the pandemic. Only measures that are
relevant for the
Taxing Wages
publication are considered. In particular, these measures are changes in
personal income tax (central and local/state levels), SSCs, payroll taxes and cash benefits paid to workers.
Consistent with the approach in
Taxing Wages,
these measures must affect the majority of full-time
workers that are covered within the sectors B to N in ISIC rev 4. Further information on the methodology
is given in the Special Feature. Furthermore, detailed information on the COVID-19 related measures are
given within the country chapters in the Part II of the Report.
Introduction
This section briefly introduces the methodology employed for
Taxing Wages,
which focuses on full-time
employees. It is assumed that their annual income from employment is equal to a given percentage of the
average full-time adult gross wage earnings for each OECD economy, referred to as the average wage
(AW). This covers both manual and non-manual workers for either industry sectors C-K inclusive with
reference to the International Standard Industrial Classification of All Economic Activities, Revision 3 (ISIC
Rev.3) or industry sectors B-N inclusive with reference to the International Standard Industrial
Classification of All Economic Activities, Revision 4 (ISIC Rev.4).
2
Further details are provided in Table 1.8
as well as in the Annex of this Report. Additional assumptions are made about the personal circumstances
of these wage earners in order to determine their tax/benefit position.
In
Taxing Wages,
the term
‘tax’
includes personal income tax, SSCs and payroll taxes (which are
aggregated with employer social contributions in the calculation of tax rates) payable on gross wage
earnings. Consequently, any income tax that might be due on non-wage income and other kinds of taxes
–
e.g. corporate income tax, net wealth tax and consumption taxes
–
is not taken into account. The
transfers included are those paid by general government as cash benefits, usually in respect of dependent
children.
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For most OECD countries, the tax year is equivalent to the calendar year, the exceptions being Australia,
New Zealand and the United Kingdom. In the case of New Zealand and the United Kingdom, where the
tax year starts in April, the calculations apply a ‘forward-looking’ approach. This implies that, for example,
the tax rates reported for 2021 are those for the tax year 2021-2022. However, in Australia, where the tax
year starts in July, it has been decided to take a ‘backward-looking’ approach in order to present more
reliable results. So, for example, the year 2021 in respect of Australia has been defined to mean its tax
year 2020-2021.
Taxing Wages
presents several measures of taxation on labour. Most emphasis is given to the tax wedge
–
a measure of the difference between labour costs to the employer and the corresponding net take-home
pay of the employee
–
which is calculated by expressing the sum of personal income tax, employee plus
employer SSCs together with any payroll tax, minus benefits as a percentage of labour costs. Employer
SSCs and
–
in some countries
–
payroll taxes are added to gross wage earnings of employees in order to
determine a measure of total labour costs. The average tax wedge measures identify that part of total
labour costs which is taken in tax and SSCs net of cash benefits. In contrast, the marginal tax wedge
measures identify that part of an increase of total labour costs that is paid in taxes and SSCs less cash
benefits. However, it should be noted that this measure only includes payments that are classified as taxes.
Employees and employers may also have to make non-tax compulsory payments (NTCPs)
3
that may
increase the indicators that are presented in the
Taxing Wages
publication. An accompanying paper to
Taxing Wages
that is available on the
OECD Tax Database
presents “compulsory payment indicators” that
combine the burden of taxes and NTCPs:
http://www.oecd.org/tax/tax-policy/non-tax-compulsory-
payments.pdf.
The calculations also focus on the personal average tax rate and the net personal average tax rate. The
personal average tax rate is the term used when the personal income tax and employee SSCs are
expressed as a percentage of gross wage earnings. The net personal average tax rate corresponds to the
above measure net of cash benefits. The net personal marginal tax rate shows that part of an increase of
gross wage earnings that is paid in personal income tax and employee SSCs net of cash benefits.
Taxation of single workers
Tax wedge
Table 1.1 shows that the tax wedge between the labour costs to the employer and the corresponding net
take-home pay for single workers without children, at average earnings levels, varied widely across OECD
countries in 2021 (see column 1). While in Austria, Belgium, France, Germany and Italy, the tax wedge as
a percentage of labour costs was more than 45%, it was lower than 20% in Chile, Colombia, Mexico and
New Zealand. The highest tax wedge was observed in Belgium (52.6%) and the lowest in Colombia (0.0%).
In Colombia, the single worker at the average wage level did not pay personal income taxes in 2021, while
their contributions to pension, health and employment risk insurance are considered to be non-tax
compulsory payments (NTCPs)
4
and therefore are not counted as taxes in the
Taxing Wages
calculations.
Table 1.1 shows that the average tax wedge as a percentage of labour costs in OECD countries was
34.6% in 2021.
The changes in the tax wedge as a percentage of labour costs between 2020 and 2021 for the average
worker without children are described in column 2 of Table 1.1. The OECD average decreased by 0.06
percentage points in 2021, which was 0.17 percentage points smaller than the decrease observed in 2020
(0.23 percentage points) at the height of the COVID-19 crisis. Among OECD member countries, the tax
wedge increased in 24 countries and fell in twelve. The tax wedge remained at the same level for the
average worker in Colombia and in Costa Rica between 2020 and 2021. The increases were comparatively
small and only three of them were of one percentage point or greater: Israel (1.02 percentage points), the
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United States (1.20 percentage points) and Finland (1.33 percentage points). In contrast, there were
decreases exceeding one percentage point in Australia (1.25 percentage points), Latvia (1.73 percentage
points), Greece (2.23 percentage points) and the Czech Republic (4.12 percentage points).
In almost all countries where the tax wedge increased, the rise was driven by higher personal income tax
(see column 3 of Table 1.1). In some countries, this increase was driven by increases in the average wage
between 2020 and 2021 (discussed below). Higher average wages increase personal income tax through
the progressivity of income tax systems if income tax thresholds increase by less than average earnings.
In other countries, higher personal income tax was primarily the result of a higher proportion of earnings
becoming subject to tax as the value of tax allowances and tax credits fell relative to earnings.
In Canada, Finland and Korea, the increase in the tax wedge was due to higher employee and employer
SSCs as a percentage of labour costs. In Canada, the maximum contributions for pension and
unemployment insurance were increased in 2021 and the worker earning the average wage also paid a
higher Ontario Health Premium compared with 2020. In Finland, total SSC rates increased for the
employee (from 9.58% to 9.91%) and for the employer (from 18.69% to 20.78%) in 2021. In Korea, the
contribution rate for national health insurance increased from 3.6768375% to 3.825136% in 2021. In the
United States, the main factor behind the increase in the tax wedge (of 0.74 percentage points of labour
costs) was the decrease in cash benefits related to COVID-19 for the single average worker between 2020
and 2021.
In seven of the twelve OECD countries where the tax wedge decreased as a percentage of labour costs,
the decrease was mostly derived from lower personal income tax (Australia, Chile, the Czech Republic,
Germany, Latvia, Mexico and Sweden). In Australia, the income tax schedule was reformed by enlarging
the tax brackets,
and the employer’s payroll tax rate decreased from 5.45% to 4.85%
5
in the 2020-2021
tax year. Chile and Sweden both raised the income threshold within the tax schedules, resulting in
decreases in personal income tax of less than 0.1 percentage points in both countries. In the
Czech Republic, the personal income tax base was reformed to
include only the employee’s gross income
in
2021 (in prior years, the tax base also included the employer’s SSC).
In Germany, the Solidarity
Surcharge (a surtax) paid by the single worker earning the average wage in 2020 was not paid in 2021, as
the exempt income limit was significantly increased (from EUR 972 to EUR 16 956). In Latvia, the tax
allowance (the “differentiated
non-taxable minimum”)
was substantially increased for the worker on the
average wage in 2021. In Mexico, the decrease in personal income tax derived from a decline in the
average wage between 2020 and 2021, while the income thresholds within the income tax schedule also
increased.
In the four other OECD countries with decreasing tax wedges as a percentage of labour costs, the changes
were driven by lower SSCs (Greece, Hungary, Iceland and the Netherlands). In Greece, SSCs as a
percentage of labour costs decreased by 1.30 percentage points for the employer and by 0.93 percentage
points for the employee. This reflects reductions from 1 January 2021 in the contribution rates for
employers (from 24.33% to 22.54%) and for employees (from 15.33% to 14.12%). In Hungary, employer
SSCs as a percentage of labour costs decreased by 0.72 percentage points due to a decline in the
contribution rate from 17.5% to 15.5% from 1 July 2020 onwards (the reduced employer SSC rate thus
applied to the whole year in 2021 but only six months of 2020). In Iceland, SSCs paid by the employer
decreased due to a temporary reduction of the social security tax from 6.35% to 6.1%. In the Netherlands,
the income ceiling that was applied to employee SSC calculations increased at a lower rate than the
average wage in 2021.
Table 1.2 and Figure 1.1 show the components of the tax wedge in 2021: personal income tax, employee
SSCs and employer SSCs (including payroll taxes where applicable), as a percentage of labour costs for
the average worker without children. Labour costs in Table 1.2 are expressed in US dollars with equivalent
purchasing power.
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The percentage of labour costs paid in income tax varied considerably across OECD countries in 2021.
The lowest figures were in Colombia, Costa Rica and Chile (all at zero), with the Czech Republic, Greece,
Japan, Korea, Mexico, Poland and the Slovak Republic also below 10%. The highest share was in
Denmark (35.5%), with Australia, Belgium, Iceland and Ireland also over 20%. The percentage of labour
costs paid in employee SSCs also varied widely, ranging from zero in Australia, Colombia, Denmark and
New Zealand to 19.0% in Slovenia and 19.2% in Lithuania. Employers in France paid 26.6% of labour
costs in social security contributions, the highest amongst OECD countries. Employer SSCs were more
than 20% of labour costs in nine other countries
–
Austria, Belgium, Costa Rica, the Czech Republic,
Estonia, Italy, the Slovak Republic, Spain and Sweden.
As a percentage of labour costs, the total of employee and employer SSCs exceeded 20% in 23 OECD
countries. It represented at least one-third of labour costs in five OECD countries: Austria, the
Czech Republic, France, Germany and the Slovak Republic.
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Table 1.1. Comparison of total tax wedge
As % of labour costs, 2021
Country
1
Total tax wedge 2021
(1)
52.6
48.1
47.8
47.0
46.5
43.6
43.2
42.7
42.6
41.8
41.3
40.5
40.2
39.9
39.9
39.3
38.1
37.6
36.7
36.0
35.4
35.3
34.9
34.0
32.6
32.2
31.5
31.3
29.2
28.4
27.1
24.2
23.6
22.8
19.6
19.4
7.0
0.0
34.6
Annual change, 2021/20 (in percentage points)²
Tax wedge
(2)
0.38
-0.72
0.37
0.45
-0.41
0.46
-0.48
1.33
-0.08
0.30
0.01
-1.73
0.75
-4.12
0.44
0.28
0.73
0.52
-2.23
0.20
0.16
-0.76
0.08
0.29
0.06
-0.36
0.60
0.40
0.00
1.20
-1.25
1.02
0.23
0.32
-0.78
0.16
-0.03
0.00
-0.06
Income tax
(3)
0.35
-0.86
0.37
0.44
-0.41
0.46
0.11
-0.26
-0.08
0.30
0.14
-1.03
0.70
-4.12
0.44
0.28
0.73
0.52
0.01
0.12
0.16
-0.33
0.08
0.29
0.06
-0.14
-0.02
0.21
0.00
0.49
-0.66
0.70
0.01
0.27
-0.92
0.16
-0.03
0.00
-0.04
Employee SSC
(4)
0.00
0.07
0.00
0.00
0.00
0.00
0.13
0.13
0.00
0.00
0.02
-0.37
-0.01
0.00
0.00
0.00
0.00
0.00
-0.93
-0.01
0.00
-0.49
0.00
0.00
0.00
0.00
0.39
0.09
0.00
0.00
0.00
0.22
0.13
0.02
-0.01
0.00
0.00
0.00
--0.02
Employer SSC
3
(5)
0.03
0.07
0.00
0.01
0.00
0.00
-0.72
1.46
0.00
0.00
-0.15
-0.33
0.06
0.00
0.00
0.00
0.00
0.00
-1.30
0.08
0.00
0.06
0.00
0.00
0.00
-0.22
0.23
0.10
0.00
-0.04
-0.59
0.10
0.10
0.02
0.15
0.00
0.00
0.00
-0.02
Belgium
Germany
Austria
France
Italy
Slovenia
Hungary
Finland
Sweden
Portugal
Slovak Republic
Latvia
Luxembourg
Czech Republic
Turkey
Spain
Estonia
Lithuania
Greece
Norway
Denmark
Netherlands
Poland
Ireland
Japan
Iceland
Canada
United Kingdom
Costa Rica
United States
Australia
Israel
Korea
Switzerland
Mexico
New Zealand
Chile
Colombia
Unweighted average
OECD Average
Note: Single individual without children at the income level of the average worker.
1. Countries ranked by decreasing total tax wedge.
2. Due to rounding, the changes in tax wedge in column (2) may differ by one-hundredth of a percentage point from the sum of columns (3)-(5).
For Denmark and the United States, cash benefits contribute to the difference as they are not included in columns (3)-(5).
3. Includes payroll taxes where applicable.
Sources: Country submissions, (OECD
[1]
) Economic Outlook Volume 2021 Issue 2.
StatLink 2
https://stat.link/1c9ql8
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Table 1.2. Income tax plus employee and employer social security contributions
As % of labour costs, 2021
Country
1
Total tax wedge
2
(1)
22.8
40.2
52.6
47.8
48.1
35.3
47.0
34.0
36.0
32.2
42.6
31.3
35.4
42.7
46.5
28.4
27.1
31.5
23.6
32.6
39.3
24.2
43.6
38.1
19.4
39.9
41.8
36.7
39.9
34.9
43.2
37.6
40.5
41.3
29.2
7.0
19.6
0.0
34.6
Income tax
(2)
10.8
17.2
20.3
11.9
14.6
13.9
12.1
20.4
17.2
26.3
13.3
12.9
35.5
16.8
15.3
15.9
22.1
17.0
5.5
6.8
11.3
10.8
10.7
11.6
19.4
6.4
13.8
6.8
12.2
5.5
12.8
16.7
12.9
8.0
0.0
0.0
7.9
0.0
13.0
Social security contributions
employee
(3)
6.0
10.8
11.0
14.0
16.9
10.6
8.3
3.6
7.3
0.1
5.3
8.5
0.0
8.7
7.2
7.1
0.0
5.9
8.2
12.5
4.9
7.9
19.0
1.2
0.0
8.2
8.9
11.5
12.8
15.3
15.8
19.2
8.5
10.3
8.3
7.0
1.2
0.0
8.2
employer
3
(4)
6.0
12.2
21.3
21.9
16.6
10.8
26.6
10.0
11.5
5.7
23.9
9.9
0.0
17.2
24.0
7.5
5.0
8.5
9.8
13.3
23.0
5.5
13.9
25.3
0.0
25.3
19.2
18.4
14.9
14.1
14.5
1.8
19.1
23.0
20.9
0.0
10.5
0.0
13.5
Labour costs
4
(5)
89 841
88 678
88 663
85 480
85 370
82 060
77 248
75 109
74 318
73 167
72 961
71 852
70 755
70 148
68 848
68 077
65 689
64 905
61 381
59 899
57 802
52 843
47 438
47 424
46 216
45 985
45 872
44 496
43 664
41 867
41 865
41 562
39 245
35 430
33 475
25 127
15 619
13 877
58 270
Switzerland
Luxembourg
Belgium
Austria
Germany
Netherlands
France
Ireland
Norway
Iceland
Sweden
United Kingdom
Denmark
Finland
Italy
United States
Australia
Canada
Korea
Japan
Spain
Israel
Slovenia
Estonia
New Zealand
Czech Republic
Portugal
Greece
Turkey
Poland
Hungary
Lithuania
Latvia
Slovak Republic
Costa Rica
Chile
Mexico
Colombia
Unweighted average
OECD Average
Note: Single individual without children at the income level of the average worker.
1. Countries ranked by decreasing labour costs.
2. Due to rounding, the total in column (1) may differ by one tenth of a percentage point from the sum of columns (2)-(4). For Denmark and the
United States, cash benefits contribute to the difference as they are not included in columns (2)-(4).
3. Includes payroll taxes where applicable.
4. US dollars with equal purchasing power.
Sources: Country submissions, (OECD
[1]
) Economic Outlook Volume 2021 Issue 2.
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2675007_0028.png
26
Figure 1.1. Income tax plus employee and employer social security contributions, 2021
As a % of labour costs
Income tax
0%
Belgium
Germany
Austria
France
Italy
Slovenia
Hungary
Finland
Sweden
Portugal
Slovak Republic
Latvia
Luxembourg
Czech Republic
Turkey
Spain
Estonia
Lithuania
Greece
Norway
Denmark
Netherlands
Poland
OECD Average
Ireland
Japan
Iceland
Canada
United Kingdom
United States
Costa Rica
Australia
Israel
Korea
Switzerland
Mexico
New Zealand
Chile
Colombia
.
Employee SSC
20%
30%
40%
Employer SSC
50%
60%
10%
Notes: Single individual without children at the income level of the average worker.
Includes payroll taxes where applicable.
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Personal average tax rates
The personal average tax rate is defined as income tax plus employee SSCs as a percentage of gross
wage earnings. Table 1.3 and Figure 1.2 show the personal average tax rates in 2021 for a single worker
without children at the average wage
level. The average workers’ gross wage earnings figures
in Table 1.3
are expressed in terms of US dollars with equivalent purchasing power. Figure 1.2 provides a graphical
representation of the personal average tax rate decomposed between income tax and employee SSCs.
Table 1.3 and Figure 1.2 show that on average, the personal average tax rate for a single worker at
average earnings in OECD countries was 24.6% in 2021. Belgium had the highest rate at 39.8% of gross
wage earnings; Denmark, Germany and Lithuania were the only other countries with rates above 35%.
The lowest personal average tax rates were in Mexico (10.2%), Costa Rica (10.5%), Chile (7.0%) and
Colombia (0.0%). The personal average tax rate was zero for Colombia as the single worker did not pay
personal income tax at the average wage level in 2021. Moreover, contributions to pension, health and
employment risk insurance in Colombia are considered to be non-tax compulsory payments (NTCPs)
6
and
are not counted as taxes in the
Taxing Wages
calculations.
The impact of taxes and benefits on a worker’s take-home
pay varies greatly among OECD countries.
Such wide variations in the size and make-up of tax wedges, in part, reflect differences in:
The overall ratio of aggregate tax revenues to Gross Domestic Product; and
The share of personal income tax and social security contributions in national tax mixes.
The mix of income tax and SSCs paid out of gross wage earnings also varies greatly between countries,
as illustrated in Figure 1.2.
In 2021, the share of income tax within the personal average tax rate was higher than the share of the
employee SSCs for 23 of the 38 OECD member countries. No employee SSCs were levied in Australia,
Colombia, Denmark and New Zealand and their levels were at 4% or less of gross earnings in Estonia,
Iceland, Ireland and Mexico. In contrast, the single worker at the average wage level paid substantially
more in employee SSCs than in personal income tax (i.e., more than six percentage points) in five countries
–
Chile, Costa Rica, Japan, Poland and Slovenia. In six countries
–
the Czech Republic, Germany, Israel,
Korea, Lithuania and Turkey
–
the shares of personal income tax and employee SSCs as a percentage of
gross earnings were very close (i.e., differences of less than 3 percentage points).
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28
Table 1.3. Income tax plus employee social security contributions, 2021
As % of gross wage earnings
Country
1
Switzerland
Luxembourg
Netherlands
Germany
Denmark
Belgium
Iceland
Ireland
Austria
Norway
United Kingdom
United States
Australia
Canada
Finland
France
Sweden
Korea
Italy
Japan
Israel
New Zealand
Spain
Slovenia
Lithuania
Turkey
Portugal
Greece
Poland
Hungary
Estonia
Czech Republic
Latvia
Slovak Republic
Costa Rica
Chile
Mexico
Colombia
Unweighted average
OECD Average
Total payment
2
(1)
17.9
31.9
27.5
37.7
35.5
39.8
28.0
26.7
33.2
27.6
23.7
24.8
23.2
25.1
30.8
27.8
24.5
15.3
29.6
22.3
19.7
19.4
21.1
34.5
36.5
29.4
28.0
22.4
24.2
33.5
17.1
19.6
26.5
23.8
10.5
7.0
10.2
0.0
24.6
Income tax
(2)
11.5
19.6
15.6
17.5
35.5
25.8
27.9
22.7
15.2
19.4
14.3
17.2
23.2
18.6
20.3
16.5
17.5
6.2
20.1
7.8
11.4
19.4
14.7
12.4
17.0
14.4
17.0
8.3
6.4
15.0
15.5
8.6
16.0
10.4
0.0
0.0
8.9
0.0
14.9
Employee social security contributions
(3)
6.4
12.3
11.9
20.2
0.0
14.0
0.1
4.0
18.0
8.2
9.4
7.7
0.0
6.5
10.5
11.3
7.0
9.1
9.5
14.5
8.3
0.0
6.4
22.1
19.5
15.0
11.0
14.1
17.8
18.5
1.6
11.0
10.5
13.4
10.5
7.0
1.4
0.0
9.7
Gross wage earnings
3
(4)
84 437
77 897
73 185
71 157
70 755
69 734
68 960
67 635
66 751
65 769
64 716
62 954
62 376
59 377
58 079
56 677
55 518
55 346
52 324
51 923
49 921
46 216
44 497
40 860
40 831
37 161
37 068
36 311
35 981
35 782
35 444
34 369
31 747
27 264
26 462
25 127
13 984
13 877
50 223
Note: Single individual at the income level of the average worker, without children.
1. Countries ranked by decreasing gross wage earnings.
2. Due to rounding total may differ by one tenth of a percentage point from aggregate of columns for income tax and social security contributions
3. US dollars with equal purchasing power.
Sources: Country submissions, (OECD
[1]
) Economic Outlook Volume 2021 Issue 2.
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29
Figure 1.2. Percentage of gross wage earnings paid in income tax and employee social security
contributions, 2021
Income tax
0%
Belgium
Germany
Lithuania
Denmark
5%
10%
15%
20%
Social security contributions
25%
30%
35%
40%
45%
Slovenia
Hungary
Austria
Luxembourg
Finland
Italy
Turkey
Portugal
Iceland
France
Norway
Netherlands
Ireland
Latvia
Canada
United States
OECD Average
Sweden
Poland
Slovak Republic
United Kingdom
Australia
Greece
Japan
Spain
Israel
Czech Republic
New Zealand
Switzerland
Estonia
Korea
Costa Rica
Mexico
Chile
Colombia
Notes: Countries ranked by decreasing tax burden.
Single workers at the income level of the average worker.
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Single versus one-earner couple taxpayers
Table 1.4 compares the tax wedges as a percentage of labour costs for a one-earner married couple with
two children and a single individual without children, at average wage levels. These tax wedges varied
widely across OECD countries in 2021 (see columns 1 and 2). The tax wedge for the couple with children
is generally smaller than that observed for the individual without children, since many OECD countries
provide a fiscal benefit to households with children through advantageous tax treatment and/or cash
benefits. Hence, the OECD average tax wedge as a percentage of labour costs for the one-earner couple
with two children was 24.6% compared to 34.6% for the single average worker. This gap increased slightly
(by 0.36 percentage points) between 2020 and 2021.
The tax savings realised by a one-earner married couple with two children compared with a single worker
without children were greater than 20% of labour costs in Chile, Luxembourg, Poland, and they exceeded
15% of labour costs in four other countries: Belgium, the Czech Republic, and Germany and the United
States. The tax burdens of one-earner married couples and single workers on the average wage were the
same in Costa Rica and Mexico, and they differed by less than three percentage points in Israel and Turkey
(see columns 1 and 2).
The tax wedge of an average one-earner married couple with two children declined by -0.42 percentage
points between 2020 and 2021 (see column 3). In 22 of the 38 OECD countries, there was only a small
change (not exceeding plus or minus one percentage point), and there was no change in Costa Rica.
There were increases of more than one percentage point in ten countries: Austria, Canada, Estonia,
Finland, France, Israel, Korea, Lithuania, Luxembourg and Poland.
In a number of cases, these increases were caused by the scaling back of COVID-19 measures
implemented in 2020. In Lithuania (2.87 percentage points), a one-off extra benefit payment in response
to COVID-19 paid in 2020 was not repeated in 2021. In Austria (1.90 percentage points), the extra child
benefit that was paid in response to the COVID-19 crisis in 2020 was limited to specific social benefit
recipients in 2021; as a result, it was not included in the
Taxing Wages
calculations for 2021 since it did
not cover the majority of workers. In Canada (1.78 percentage points), the one-earner couple with two
children benefited from increases in cash benefits in response to the COVID-19 crisis in 2020 that were
not paid in 2021. In Israel (1.17 percentage points), the average tax wedge for the one-earner family
increased due to the removal of the earned tax income credit, a temporary COVID-19 measure introduced
in 2020. In Korea (1.03 percentage points), a temporary childcare coupon introduced in response to the
COVID-19 crisis was paid in 2020 but not in 2021.
In other cases, the increase was not directly linked to COVID-19 measures. In Finland (1.53 percentage
points), cash benefit payments remained at the same level in 2021 as in 2020 while employee and
employer SSC rates increased over this period. In Estonia (1.32 percentage points), the one-earner couple
received a lower basic tax allowance, which is progressive and diminishes as salaries increase. In France
(1.32 percentage points), the increase in the tax wedge was derived from lower in-work benefit payments
in 2021. In Luxembourg (1.02 percentage points), the higher tax wedge can be explained by an increase
in income taxes due to a higher average wage combined with the progressivity of the tax credit, which
decreases as income increases. In Poland (1.22 percentage points), the tax schedule and basic tax relief
amounts remained unchanged between 2020 and 2021, leading to a higher proportion of income being
taxed away and thus an increase in the tax wedge.
There were decreases of one percentage point or more in five countries: Australia, Chile, the
Czech Republic, Greece and the United States. In Australia (1.73 percentage points), the decrease mainly
resulted from the aforementioned reform of the income tax schedule and reduced employer’s payroll tax
rate.
7
In addition, the one-earner couple with two children who were eligible for the Family Tax Benefit in
Australia also received three one-off cash benefit payments in response to the COVID-19 crisis during
the 2020-2021 tax year. One payment of this extra benefit was made during the 2019-2020 tax year. In
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Chile, the average tax wedge decreased by 25.52 percentage points for the one-earner married couple
with two children. This sharp decrease was due to the introduction of a temporary Emergency Family
Income (Ingreso
Familiar de Emergencia)
paid from June to November 2021, a cash transfer which
increased with the number of household members. In the Czech Republic (5.04 percentage points), as
mentioned in the previous section, the personal income tax base was reformed and only included the
worker’s gross income in 2021. In addition, a large increase in the value of child benefits contributed to the
decline of the tax wedge for the family. In Greece (2.38 percentage points), as previously mentioned,
employee and the employer SSC rates decreased in 2021. In the United States (1.59 percentage points),
the American Rescue Plan Act (ARP) enacted on 21 March 2021 made the Child Tax Credit fully
refundable and increased the maximum value of the credit. Detailed explanations on COVID-19 related
measures are provided in the country chapters in Part II of the Report.
A comparison of the changes in tax wedges between 2020 and 2021 for one-earner married couples with
two children and single persons without children, at the average wage level, is shown in column 5 of
Table 1.4. The fiscal preference for families increased in eight of the 38 OECD countries: Australia, Chile,
Colombia, the Czech Republic, Greece, the Slovak Republic, Turkey and the United States. The fiscal
preference increased by more than one percentage point for the United States (2.78 percentage points)
and Chile (25.49 percentage points) due the temporary Emergency Family Income, while Turkey
experienced a very small increase, of 0.03 percentage points. Additionally, the effect of changes in the tax
system on the tax wedge were of similar magnitude for both household types in Costa Rica and Mexico.
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32
Table 1.4. Comparison of total tax wedge for single and one-earner couple taxpayers, 2021
As % of labour costs
Country
1
Family² Total tax
wedge 2021
(1)
Single³ Total tax
wedge 2021
(2)
Annual change, 2021/20
(in percentage points)
Family tax
wedge
(3)
1.32
1.53
0.42
0.53
0.12
0.89
1.90
0.38
-2.38
0.25
0.37
-0.69
0.51
0.30
-0.80
0.96
0.00
-0.50
1.32
0.13
0.60
0.49
2.87
1.17
-5.04
1.78
0.54
1.02
-0.78
1.03
-1.73
0.52
1.22
0.49
-1.59
0.74
-0.29
-25.52
-0.42
Single tax
wedge
(4)
0.45
1.33
0.44
-0.41
-0.08
0.38
0.37
0.28
-2.23
-0.72
0.20
-1.73
0.30
-0.48
0.01
0.46
0.00
-0.76
0.73
0.06
0.40
0.16
0.52
1.02
-4.12
0.60
-0.36
0.75
-0.78
0.23
-1.25
0.29
0.08
0.32
1.20
0.16
0.00
-0.03
-0.06
Difference between single and
family (4)-(3)
(5)
-0.87
-0.20
0.03
-0.94
-0.20
-0.51
-1.53
-0.10
0.16
-0.97
-0.17
-1.04
-0.21
-0.78
0.81
-0.51
0.00
-0.26
-0.59
-0.07
-0.20
-0.33
-2.35
-0.15
0.92
-1.18
-0.91
-0.27
0.00
-0.80
0.48
-0.23
-1.14
-0.17
2.78
-0.58
0.29
25.49
0.36
France
Finland
Turkey
Italy
Sweden
Belgium
Austria
Spain
Greece
Germany
Norway
Latvia
Portugal
Hungary
Slovak Republic
Slovenia
Costa Rica
Netherlands
Estonia
Japan
United Kingdom
Denmark
Lithuania
Israel
Czech Republic
Canada
Iceland
Luxembourg
Mexico
Korea
Australia
Ireland
Poland
Switzerland
United States
New Zealand
Colombia
Chile
39.0
38.6
38.3
37.9
37.6
37.3
34.1
33.8
33.2
32.7
32.6
31.4
30.9
30.5
29.6
29.5
29.2
29.1
28.9
27.4
27.0
25.7
23.6
21.9
21.8
20.4
20.0
19.7
19.6
19.6
19.1
19.0
14.3
10.6
8.5
6.5
-5.0
-18.5
24.6
47.0
42.7
39.9
46.5
42.6
52.6
47.8
39.3
36.7
48.1
36.0
40.5
41.8
43.2
41.3
43.6
29.2
35.3
38.1
32.6
31.3
35.4
37.6
24.2
39.9
31.5
32.2
40.2
19.6
23.6
27.1
34.0
34.9
22.8
28.4
19.4
0.0
7.0
34.6
Unweighted average
OECD Average
1. Countries ranked by decreasing tax wedge of the family.
2. One earner married couple with two children and earnings at the average wage level.
3. Single individual without children and earnings at the average wage level.
Sources: Country submissions, (OECD
[1]
) Economic Outlook Volume 2021 Issue 2.
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33
Figure 1.3. Income tax plus employee contributions less cash benefits, 2021
As % of gross wage earnings, by single and one-earner couple taxpayers
Single no child
Belgium
Germany
Lithuania
Denmark
Slovenia
Hungary
Austria
Luxembourg
Finland
Italy
Married one-earner couple 2 children
Turkey
Portugal
Iceland
France
Norway
Netherlands
Ireland
Latvia
Canada
Sweden
Poland
Slovak Republic
United Kingdom
Australia
United States
Greece
Japan
Spain
Israel
Czech Republic
New Zealand
Switzerland
Estonia
Korea
Costa Rica
Mexico
Chile
Colombia
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
Notes: Countries ranked by decreasing rates for single taxpayer without children.
The household type ‘single no child’ corresponds to a wage level of 100% of average wage and ‘married one earner couple 2 children’
corresponds to a combined wage level of 100%-0% of average wage
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Figure 1.3 compares the net personal average tax rate for the average worker between a single individual
and a one-earner married couple with two children at the same income level. These results show the same
pattern as the tax wedge results. This is because employer social security contributions, which are not
taken into account in the former but included in the latter, are independent of household type. Due to tax
reliefs and cash benefits for families with children, the one-earner
married couple’s disposable income was
higher than the single individual’s by more than 20% of earnings in
five countries: Chile (25.5%), the
Czech Republic (24.2%), Luxembourg (23.4%), Poland (24.0%) and the United States (21.5%). At the
lower end of the spectrum, the disposable income of the one-earner married couple was higher than the
single individual by less than 10% of earnings in fourteen countries: Denmark (9.7%), Australia (8.43%),
Spain (7.1%), the Netherlands (7.0%), Sweden (6.6%), Japan (6.1%), Finland (5.0%), Colombia (4.97%),
the United Kingdom (4.74%), Korea (4.48%), Greece (4.3%), Norway (3.8%), Israel (2.4%) and Turkey
(1.9%). The disposable income was the same for both household types in Costa Rica and Mexico, as their
net personal average tax rates were identical.
Taxation of two-earner couples
The preceding analysis focuses on two households with comparable levels of income: the single worker
at 100% of the average wage and the married couple with one earner at 100% of the average wage, with
two children. This section extends the discussion to include a third household type: the two-earner married
couple, earning 100% and 67% of the average wage, with two children.
Tax wedge
For this household type, the OECD average tax wedge as a percentage of labour costs for the household
was 28.8% in 2021 (Figure 1.4 and Table 1.5). Belgium had a tax wedge of 45.2%, which was the highest
among OECD countries. The other countries with tax wedges exceeding 40% were Italy, France and
Germany (all three at 40.9%). At the other extreme, the lowest tax wedges were observed in Colombia
(- 6.0%) and Chile (-8.6%). In Colombia, the tax wedge was negative because this household type did not
pay income taxes at that level of earnings (although it paid contributions that are not considered to be
taxes)
8
and received cash benefits that were paid on top of their wages. In Chile, the tax wedge was
negative due to the introduction of the temporary Emergency Family Income. Similar to Colombia,
households received cash benefits on top of their wages. The other countries with tax wedges of less
than 20% were Mexico (18.5%), Israel (18.1%), the United States (17.9%), New Zealand (17.3%) and
Switzerland (16.8%).
Figure 1.4 shows the average tax wedge and its components as a percentage of labour costs for the two-
earner couple for 2021. On average across OECD countries, income tax represented 10.1% of labour
costs and the sum of the employees’ and employers’
SSCs represented 21.6%. The OECD tax wedge is
net of cash benefits, which represented 2.9% of labour costs in 2021.
The cash benefits that are considered in the
Taxing Wages
publication are those universally paid to
workers in respect of dependent children between the ages of six to eleven inclusive. In-work benefits that
are paid to workers regardless of their family situation are also included in the calculations. For the
observed two-earner couple, Denmark paid an income-tested cash benefit (the Green Check) that also
benefited childless single workers. In response to the COVID-19 crisis, workers without children also
received cash benefits in the United States as observed in the previous section on the tax wedge for the
average single worker.
Compared to 2020, the OECD average tax wedge of the two-earner couple decreased by 0.36 percentage
points in 2021, as indicated in Table 1.5 (column 2). For this household type, the tax wedge decreased in
fourteen out of 38 OECD countries, increased in 23 and remained at the same level in Costa Rica.
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35
Increases exceeded one percentage point in six countries: Luxembourg and Canada (1.14 percentage
points), Lithuania (1.25 percentage points), Austria (1.28 percentage points), Israel (1.4 percentage points)
and Finland (1.49 percentage points).
In Luxembourg, the increase was a result of higher income taxes due to the progressivity of the income
tax schedule and the tax credit. In Canada, the increase occurred as the household no longer received
cash benefits that were paid out in 2020 in response to the COVID-19 pandemic. In Lithuania, the one-off
extra benefit payments in response to COVID-19 were paid only in 2020. In Austria, a decline in cash
benefits underpinned the increase of the tax wedge: the extra child benefit that was paid in response to
the COVID-19 crisis in 2020 was limited to specific social benefit recipients in 2021 and thus not included
in
Taxing Wages
calculations for that year. In Israel, the average tax wedge increased because of higher
income taxes resulting from lower tax credits due to the removal of the earned tax income credit, which
was introduced as a temporary COVID-19 measure in 2020. In Finland, SSC rates increased for the
employee and employer while cash benefits decreased as a percentage of labour costs.
Among the countries where tax wedges increased for two-earner couples with children in 2021, the
increase in income tax as a percentage of labour costs represented the bulk of the increase in seventeen
of them
–
Austria, Belgium, Denmark, Estonia, Ireland, Israel, Japan, Lithuania, Luxembourg,
New Zealand, Poland, Portugal, Slovenia, Spain, Sweden, Switzerland and Turkey. Meanwhile, an
increase in SSCs was the main factor responsible for higher tax wedges in three countries in 2021:
Canada, Finland and France. In Korea and the United Kingdom, personal income tax and SSCs increased
evenly.
In most countries with decreasing tax wedges for families with children between 2020 and 2021, the lower
tax wedges resulted from changes in income tax systems and SSCs, as observed for the single workers,
and also from increased cash benefits or tax provisions for dependent children between the two years.
Decreases of more than one percentage point were observed in five countries: Chile (-15.28 percentage
points), the Czech Republic (-4.8 percentage points), Greece (-2.2 percentage points), Mexico (-1.54
percentage points) and Australia (-1.43 percentage points). As observed in previous sections, the
decreases in the tax wedge resulted from a reformed income tax schedule in Australia, Iceland and Mexico
(in Mexico,a decrease in average wage enhanced the decline of the tax wedges); from a reformed personal
income tax base in the Czech Republic along with a strong increase in child benefits; from increased
income tax relief in Latvia and the United States; and from reduced employee and employer SSC rates in
Greece.
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36
Figure 1.4. Income tax plus employee and employer social security contributions less cash
benefits, 2021
For two-earner couples with two children, as % of labour costs
Income tax
50
45
40
Employee SSC
Employer SSC
Cash benefits
Total tax wedge
35
30
25
20
15
10
5
0
-5
-10
-15
-20
Notes: Two earner married couple, one at 100% and the other at 67% of the average wage, with 2 children.
Includes payroll taxes where applicable.
StatLink 2
https://stat.link/bdew0y
Table 1.5. Comparison of total tax wedge for two-earner couples with children, 2021
As % of labour costs
Country
1
Total tax wedge 2021
(1)
Tax wedge
(2)
0.64
-0.26
0.80
0.21
-0.20
1.28
0.29
1.49
0.45
0.60
0.63
-0.51
-0.01
-0.71
Income tax
(3)
0.44
-0.40
0.21
0.02
-0.31
0.46
0.29
-0.22
0.45
0.40
0.63
-0.43
0.39
-0.20
Annual change, 2021/20 (in percentage points)²
Employee SSC
(4)
-0.05
0.07
-0.06
0.00
-0.01
0.00
0.00
0.13
0.00
0.00
0.00
0.02
0.13
-0.37
Employer SSC
3
(5)
0.15
0.07
0.54
0.00
0.00
0.00
0.00
1.46
0.00
0.00
0.00
-0.15
-0.72
-0.33
Cash benefits
(6)
-0.09
0.00
-0.11
-0.19
-0.12
-0.82
0.00
-0.12
0.00
-0.20
0.00
-0.05
-0.19
-0.19
Belgium
Germany
France
Italy
Sweden
Austria
Turkey
Finland
Portugal
Slovenia
Spain
Slovak Republic
Hungary
Latvia
45.2
40.9
40.9
40.9
38.5
38.4
37.9
37.6
37.2
36.4
36.2
35.9
35.6
34.0
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37
Greece
Norway
Estonia
Lithuania
Denmark
Czech Republic
Iceland
Japan
Luxembourg
Costa Rica
Canada
Netherlands
United Kingdom
Ireland
Australia
Poland
Korea
Mexico
Israel
United States
New Zealand
Switzerland
Colombia
Chile
OECD Average
33.6
32.7
32.0
31.0
30.9
30.7
29.9
29.6
29.4
29.2
27.8
27.4
27.2
26.5
24.9
22.7
20.2
18.5
18.1
17.9
17.3
16.8
-6.0
-8.6
28.8
-2.20
0.30
0.91
1.25
0.28
-4.80
-0.48
0.08
1.14
0.00
1.14
-0.78
0.59
0.40
-1.43
0.75
0.72
-1.54
1.40
-0.97
0.15
0.47
-0.34
-15.28
-0.36
0.06
0.12
0.68
0.66
0.16
-4.01
-0.32
0.05
0.82
0.00
-0.01
-0.29
0.26
0.35
-0.84
0.19
0.02
-1.73
0.92
-1.39
0.15
0.30
0.00
0.00
-0.06
-0.93
-0.01
0.00
0.00
0.00
0.00
0.00
0.00
-0.01
0.00
0.38
-0.55
0.11
0.00
0.00
0.00
0.13
-0.01
0.26
0.00
0.00
0.02
0.00
0.00
-0.02
-1.30
0.08
0.00
0.00
0.00
0.00
-0.22
0.00
0.06
0.00
0.20
0.06
0.12
0.00
-0.59
0.00
0.10
0.20
0.12
-0.05
0.00
0.02
0.00
0.00
0.00
0.03
-0.10
-0.23
-0.59
-0.12
0.79
-0.06
-0.03
-0.27
0.00
-0.57
0.00
-0.11
-0.05
0.00
-0.56
-0.47
0.00
-0.09
-0.47
0.00
-0.12
0.34
15.28
0.28
Unweighted average
Note: Two-earner married couple, one at 100% and the other at 67% of the average wage, with 2 children.
1. Countries ranked by decreasing total tax wedge.
2. Due to rounding, the changes in tax wedge in column (2) may differ by one hundredth of a percentage point from the sum of columns (3)-(6).
3. Includes payroll taxes where applicable.
Sources: Country submissions, (OECD
[1]
) Economic Outlook Volume 2021 Issue 2.
StatLink 2
https://stat.link/8dl9tg
Table 1.6. Income tax plus employee social security contributions less cash benefits, 2021
For two-earner couples with two children, as % of gross wage earnings
Country
1
Total payment
2
(1)
11.5
19.6
18.6
29.1
30.9
30.5
25.6
18.4
21.1
24.0
19.5
11.2
20.9
Income tax
(2)
8.9
14.1
10.5
9.1
34.5
21.2
26.2
18.3
9.3
18.1
13.2
8.9
20.9
Employee social security
contributions
(3)
6.4
12.3
10.4
20.0
0.0
13.9
0.1
4.0
18.0
8.2
8.9
7.7
0.0
Cash benefits
(4)
3.8
6.8
2.4
0.0
3.6
4.6
0.7
4.0
6.1
2.3
2.5
5.3
0.0
Gross wage
earnings
3
(5)
141 010
130 088
122 219
118 832
118 161
116 456
115 163
112 951
111 474
109 833
108 076
105 134
104 168
Switzerland
Luxembourg
Netherlands
Germany
Denmark
Belgium
Iceland
Ireland
Austria
Norway
United Kingdom
United States
Australia
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38
Canada
Finland
France
Sweden
Korea
Italy
Japan
Israel
New Zealand
Spain
Slovenia
Lithuania
Greece
Turkey
Portugal
Poland
Hungary
Estonia
Czech Republic
Latvia
Slovak Republic
Costa Rica
Chile
Mexico
Colombia
Unweighted average
OECD Average
20.7
24.7
21.0
19.1
11.5
22.2
18.8
13.6
17.3
17.2
26.1
29.8
18.7
27.0
22.3
10.0
24.6
9.0
7.3
18.4
16.8
10.5
-8.6
8.3
-6.0
17.9
16.5
17.2
12.0
16.1
3.9
14.8
7.2
7.4
17.3
10.8
7.4
15.7
6.5
12.0
11.3
4.0
9.7
12.1
0.5
10.0
6.0
0.0
0.0
6.9
0.0
11.5
7.0
10.4
11.3
7.0
9.1
9.5
14.5
7.6
0.0
6.4
22.1
19.5
14.1
15.0
11.0
17.8
18.5
1.6
11.0
10.5
13.4
10.5
7.0
1.3
0.0
9.6
2.9
3.0
2.4
3.9
1.5
2.1
2.8
1.4
0.0
0.0
3.4
5.4
1.9
0.0
0.0
11.8
3.5
4.7
4.2
2.1
2.6
0.0
15.6
0.0
6.0
3.2
99 160
96 992
94 650
92 715
92 427
87 381
86 712
83 368
77 181
74 311
68 236
68 188
66 704
62 059
61 904
60 088
59 755
59 192
57 395
53 017
45 531
44 192
41 963
23 353
23 175
84 032
Notes: Two earner married couple, one at 100% and the other at 67% of the average wage, with 2 children.
1. Countries ranked by decreasing gross wage earnings.
2. Due to rounding total may differ by one tenth of a percentage point from aggregate of columns for income tax, social security contributions
and cash benefits.
3. US dollars with equal purchasing power.
Sources: country submissions, (OECD
[1]
) Economic Outlook Volume 2021 Issue 2.
StatLink 2
https://stat.link/iwtruk
Personal average tax rates
Regarding the net personal average tax rate as a percentage of gross wage earnings, the OECD average
was 17.9% in 2021 for the two-earner couple with two children where one spouse earns the average wage
and the other earns 67% thereof. Table 1.6 shows the net personal average tax rates for the OECD
countries and their components as a percentage of gross wage earnings. Household gross wage earnings
figures in column 5 are expressed in terms of US dollars with equivalent purchasing power. Unlike the
results shown in Table 1.3, cash benefits are taken into account in Table 1.6 and reduce the impact of the
employees’ income taxes and
SSCs (column 2 plus column 3, minus column 4).
The net personal average tax rate on the two-earner couple varied greatly among OECD countries in 2021,
ranging from -8.6% in Chile and -6.0% in Colombia to 30.9% in Denmark. In Chile, the tax wedge was
negative as the household did not pay income taxes at this level of income and received a temporary cash
benefit, the Emergency Family Income mentioned previously. In Colombia, the tax wedge was negative as
the household did not pay income taxes at that level of earnings, paid contributions that are not considered
to be taxes
9
and received cash benefits that were paid on top of their wages. The disposable income of
the household after tax represented 108.5%
of the couple’s gross wage earnings
in Chile and 106.0% in
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39
Colombia while it represented 69.1% in Denmark. The net personal average tax rate was equal to or less
than 10% in Poland (10.0%), Estonia (9.0%), Mexico (8.3%) and the Czech Republic (7.3%).
The
Taxing Wages
indicators focus on the structure of income tax systems on disposable income. To
assess the overall
impact of the government sector on people’s welfare other factors such as indirect taxes
(e.g. VAT) should also be taken into account, as should other forms of income (e.g. capital income). Non-
tax compulsory payments that affect households’ disposable
incomes are not included in the calculations
presented in the publication, but further analysis of those payments is presented in the online report:
http://www.oecd.org/tax/tax-policy/non-tax-compulsory-payments.pdf.
Wages
Table 1.7 shows the gross wage earnings in national currency of the average worker in each OECD
member country for 2020 and 2021. The figures for 2021 are estimated by the OECD Secretariat by
applying the change in the compensation per employee in the total economy as presented in the
OECD
Economic Outlook
(Volume 2021 Issue 2) database to the final average wage values provided by OECD
member countries. More information on the values of the average wage and the estimation methodology
is included in the Annex of this Report.
The annual change in gross wages in 2021
–
shown in column 3
–
ranged from -1.6% in Mexico to 19.5%
in Turkey. To a large extent, the changes in wage levels in 36 OECD countries reflect inflation trends,
although they went in opposite directions in Japan and Mexico (see column 4 of Table 1.7). The annual
change in real wage levels (before personal income tax and employee social security contributions) was
within the range of -2% to +2% for 23 countries; see column 5 of Table 1.7. Fifteen countries showed
changes outside this range. Among these countries, increases exceeded 2% in Denmark (2.2%), Estonia
and Slovak Republic (both at 2.3%), Portugal (2.4%), the United Kingdom (2.5%), Switzerland (2.8%),
France (3.3%), Italy (3.7%), Costa Rica (4.0%), Israel (4.9%), Slovenia (5.0%), Lithuania (7.1%) and Latvia
(8.7%). The declines were larger than -2% in New Zealand (-2.2%) and Mexico (-6.8%).
In 25 out of the 38 OECD countries, the average single worker without children had higher real post-tax
income in 2021 than in 2020, either because real wages before tax increased more or decreased less than
personal average tax rates, or because personal average tax rates decreased or remained unchanged
while real wages before tax increased (see column 6). The real post-tax income remained unchanged in
Finland as the personal tax rate and the real wage before tax increased at the same rate.
In contrast, the average single worker without children had lower real post-tax income in 2021 in Austria,
Belgium, Canada, Estonia, Ireland, Israel, Korea, Luxembourg, New Zealand, Spain, Turkey and the
United States:
The real wage before tax decreased whereas the personal average tax rate increased in Austria,
Canada, Ireland, Korea and New Zealand.
The personal average tax rate increased more than the real wage before tax in Belgium, Estonia,
Israel, Luxembourg, Spain, Turkey and the United States.
When comparing wage levels, it is important to note that the definition of average wage earnings can vary
between countries due to data limitations. For instance, some countries do not include the wages earned
by supervisory and managerial workers or do not exclude wage earnings from part-time workers (see Table
A.4 in the Annex).
Table 1.8 provides more information on whether the average wages for the years 2000 to 2021 are based
on industry sectors C-K inclusive with reference to the International Standard Industrial Classification of All
Economic Activities, Revision 3 (ISIC Rev.3) or industry sectors B-N inclusive with reference to the
International Standard Industrial Classification of All Economic Activities, Revision 4 (ISIC Rev.4).
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40
Most OECD countries have calculated average wage earnings on the basis of sectors B-N in the ISIC Rev.
4 Industry Classification since 2008 or earlier. Some countries have revised the average wage values for
prior years as well. Average wage values based on the ISIC Rev. 4 Classification or any variant are
available for years back to 2000 for Australia, the Czech Republic, Estonia, Finland, Greece, Hungary,
Iceland, Italy, Japan, Latvia, Lithuania, the Slovak Republic, Slovenia, Spain and Switzerland.
Australia (for all years) and New Zealand (from 2004 onwards) have provided values based on the 2006
ANZSIC industry classification, divisions B to N, which substantially overlaps the ISIC Rev.4, sectors B to
N. For New Zealand, the years prior to 2004 continue to be based on sectors C-K in ANZSIC. Turkey has
provided values based on the NACE Rev.2 classification sectors B-N from 2007 onwards. Values for the
years prior to 2007 are based on the average production worker wage (ISIC rev.3.1, sector D). The average
wages are not based on the sectors B-N in the ISIC Rev. 4 Industry Classification for Costa Rica(all years),
the Netherlands (from 2012 onwards) and Mexico (all years).
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41
Table 1.7. Comparison of wage levels
Country
Gross wage in national currency
2020
(1)
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
90 866
49 087
50 312
71 994
10 277 863
18 345 584
8 294 100
416 997
440 000
17 224
46 470
37 922
51 000
18 834
5 043 851
9 528 000
49 876
165 240
32 262
5 082 722
46 753 752
13 656
16 844
64 424
138 349
54 510
65 079
628 685
60 723
19 959
13 418
21 054
26 028
464 186
91 427
72 933
41 897
59 517
2021
(2)
93 313
50 460
52 248
74 037
10 776 819
19 240 596
8 761 423
435 312
457 613
18 329
47 915
39 971
52 556
18 831
5 400 419
10 103 366
50 636
176 029
34 032
5 146 879
47 021 176
15 270
18 711
67 263
136 170
55 339
66 077
659 902
64 093
20 602
14 075
22 485
26 832
482 897
94 489
87 187
43 978
62 954
Gross
wage
(3)
2.7
2.8
3.8
2.8
4.9
4.9
5.6
4.4
4.0
6.4
3.1
5.4
3.1
0.0
7.1
6.0
1.5
6.5
5.5
1.3
0.6
11.8
11.1
4.4
-1.6
1.5
1.5
5.0
5.5
3.2
4.9
6.8
3.1
4.0
3.3
19.5
5.0
5.8
Inflation
1
(4)
2.7
2.8
2.9
3.3
4.3
3.5
1.6
3.8
1.8
4.1
1.9
2.1
3.1
0.4
5.0
4.3
2.1
1.5
1.8
-0.2
2.4
2.9
3.8
3.2
5.6
2.4
3.8
3.4
4.8
0.8
2.6
1.7
2.9
2.0
0.6
18.7
2.4
4.6
Annual change, 2021/20 (percentage)
Real wage
before tax
(5)
0.0
-0.1
0.9
-0.4
0.5
1.3
4.0
0.6
2.2
2.3
1.2
3.3
0.0
-0.4
2.0
1.6
-0.5
4.9
3.7
1.4
-1.7
8.7
7.1
1.2
-6.8
-0.9
-2.2
1.5
0.7
2.4
2.3
5.0
0.2
1.9
2.8
0.7
2.5
1.1
Change in personal average tax rate
2
(6)
-3.5
1.4
1.2
1.9
-0.5
0.0
0.0
-21.9
0.5
6.1
1.2
2.2
-2.4
-6.3
0.0
-0.8
1.2
5.3
-1.8
0.3
1.1
-6.5
1.5
2.6
-9.1
-3.2
0.8
0.6
0.4
1.3
0.7
1.6
1.8
-0.4
1.8
1.8
1.5
6.2
1. Estimated percentage change in the total consumer price index.
2. Percentage change in the personal average tax rate of the average worker (single without children) between 2020 and 2021.
Sources: Country submissions, (OECD
[1]
) Economic Outlook Volume 2021 Issue 2.
StatLink 2
https://stat.link/kgv3zy
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Table 1.8. Average Wage Industry Classification
Years for which ISIC Rev. 3.1 or any variant (Sectors C-
K) has been used to calculate the AW
Australia
1
Austria
2
Belgium
Canada
Chile
3
Colombia
4
Costa Rica
5
Czech Republic
Denmark
6
Estonia
Finland
France
Germany
Greece
7
Hungary
Iceland
8
Ireland
9
Israel
10
Italy
Japan
Korea
11
Latvia
12
Lithuania
Luxembourg
Mexico
13
Netherlands
14
New Zealand
15
Norway
Poland
Portugal
Slovak Republic
16
Slovenia
Spain
Sweden
Switzerland
Turkey
17
United Kingdom
United States
2004-2007
2000-2007
2000-2021
2000-2008
2000-2021
Years for which ISIC Rev. 4 or any variant (Sectors B-N)
has been used to calculate the AW
2000-2021
2008-2021
2008-2021
2009-2021
2000-2007
2000-2007
2000-2005
2000-2007
2000-2012
2000-2007
2000-2004
2000-2007
2000-2003
2000-2008
2000-2006
2000-2005
2000-2021
2008-2021
2000-2021
2000-2021
2008-2021
2006-2021
2000-2021
2000-2021
2000-2021
2008-2021
2013-2021
2000-2021
2000-2021
2008-2021
2000-2021
2000-2021
2005-2021
2008-2011
2004-2021
2009-2021
2007-2021
2006-2021
2000-2021
2000-2021
2000-2021
2008-2021
2000-2021
2007-2021
2008-2021
2007-2021
2000-2007
2000-2007
2000-2006
1. Australia: based on ANZSIC06 such that the categories substantially overlap with ISIC 4, sectors B-N.
2. Austria: 2000-2003 average wage values are not based on the NACE (ISIC) classification.
3. Chile: the values for 2000 to 2008 are estimates deriving from the annual changes in the average wages based on “CIIU Rev.3” (2009=100)
between 2000 and 2008, and the average wage for 2009 based on CIIU Rev.4 (2016=100). From 2009, the values are based on ISIC4.CL2012
sectors B to R, excluding O (8422) “Defense Activities” and O (8423) “Public order and safety activities”.
4. Colombia: average wage values based on ISIC rev. 3. The “Agriculture, hunting and forestry”, “Other community, social and personal service
activities” and “Activities not adequately defined” sectors are excluded.
5. Costa Rica: the average wages from 2000 onwards refer to the earnings of workers within the formal sector. The average worker’s wage was
calculated based on data from CCSS.
6. Denmark: average wage values are based on sectors B-N and R-S (NACE rev 2).
7. Greece: the average annual earnings refer to full time employees for the sectors B to N of NACE Rev 2, including Division 95 and excluding
Divisions 37, 39 and 75 for 2008 onwards.
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8. Iceland: using national classification system that corresponds with the NACE rev. 2 classification system.
9. Ireland: values from 2008 onwards are based on CSO table EHA05 for NACE rev.2 B-N. Values for prior years are the Secretariat's estimates,
based on the growth rates of the average wages for sectors C to E in reference to NACE.
10. Israel: information on data for Israel: http://oe.cd/israel-disclaimer.
11. Korea: average wage values are based on 6th Korean Standard Industrial Classification (KSIC) C-K for 2000-2001, 8th KISC C-M for 2002
to 2007. Average wage data of 2008 to 2010 is based on the 9th KISC B-N (samples of firms with five or more permanent employees). Average
wage data of 2011 to 2019 is based on the 9th KISC B-N (samples of firms with one or more permanent employees). Average wage data of
2020 and the estimate for 2021 are based on the 10th KISC B-N (samples of firms with one or more permanent employees).
12. Latvia: Values are based on NACE rev.2 and cover the private sector that includes commercial companies with central or local government
capital participation up to 50%, commercial companies of all types without central or local government capital participation, individual merchants,
and peasant and fishermen farms with 50 and more employees.
13. Mexico: 2000-2021 AW values are based on the Mexican Classification of Economic Activities (Clasificación Mexicana de Actividades
Económicas (CMAE)), which is based on one of the first versions of ISIC.
14. Netherlands: the average wages from 2012 onwards include all economic activities (sectors A to U from SBI2008). Values for the private
sector only (sectors B to N) are not available.
15. New Zealand: see the note for Australia, which applies from 2004.
16. Slovak Republic: average wage values based on SK NACE Rev. 2 classification (B to N) without the earnings of the self-employed. However,
employment data used for the calculation of the weighted mean still include the self-employed.
17. Turkey: the average wage is based on the average production worker wage ISIC rev. 3.1 sector D for years 2000 to 2006.
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44
References
OECD (2021),
OECD Economic Outlook, Volume 2021 Issue 2,
OECD Publishing, Paris,
https://dx.doi.org/10.1787/66c5ac2c-en.
[1]
Notes
1
From the 2020 edition of
Taxing Wages,
the household types including spouses earning 33% of the
average wage were replaced with household types where both spouses are at the average wage level and
where one spouse is at the average wage level and the other at 67% of it.
2
Not all national statistical agencies use ISIC Rev.3 or Rev.4 to classify industries. However, the Statistical
Classification of Economic Activities in the European Community (NACE Rev.1 or Rev.2), the North
American Industry Classification System (US NAICS 2012). The Australian and New Zealand Standard
Industrial Classification (ANZSIC 2006) and the Korean Standard Industrial Classification (6th to 9th KISC)
include a classification which broadly conforms either with industries C-K in ISIC Rev. 3 or industries B-N
in ISIC Rev.4.
3
Non-tax compulsory payments are requited and unrequited compulsory payments to privately-managed
funds, welfare agencies or social insurance schemes outside general governments and to public
enterprises (https://www.oecd.org/tax/tax-policy/tax-database/).
4
In Colombia, the general social security system for healthcare is financed by public and private funds.
The pension system is a hybrid of two different systems: a defined contribution, fully-funded pension
system; and a pay-as-you-go system. Each of those contributions are mandatory and more than 50% of
total contributions are made to privately managed funds. Therefore, they are considered to be non-tax
compulsory payments (NTCPs) (further information is available in the country details in Part II of the report).
In addition, in Colombia, all payments for employment risk are made to privately managed funds and are
considered to be NTCPs. Other countries also have NTCPs (please see
https://www.oecd.org/tax/tax-
policy/tax-database/).
5
In Australia, the employer pay-roll tax rates, thresholds and deductions differ between States. The payroll
tax rate that is applied in the State of New South Wales is used in the
Taxing Wages
calculations.
6
7
8
9
See note 4.
See note 6.
See note 4.
See note 4.
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45
2
Special feature: Impact of COVID-19
on the tax wedge in OECD
countries
Introduction
In 2021, the COVID-19 pandemic continued to cause disruption around the world. However, the economic
impact was not as damaging as in 2020: across the OECD, GDP grew by an estimated 5.3% in 2021 after
contracting by 4.7% the previous year as countries were able to better manage the virus, aided by growing
vaccination coverage over the course of the year. Unemployment fell across the OECD, although
employment levels, hours worked and labour force participation generally remained below pre-crisis levels,
and wage growth in many countries did not keep pace with sharp rises in consumer prices. As economies
recovered, governments were able to scale back many of the measures such as job retention schemes
and cash benefits introduced to protect livelihoods and incomes in 2020. Nonetheless, the recovery in 2021
was uneven between and within countries. Low-income jobs were disproportionately affected by the
pandemic and many of those who lost their jobs have struggled to find new employment. Meanwhile, acute
labour shortages emerged in certain sectors (OECD, 2021
[1]
).
This chapter makes use of the
Taxing Wages
models to examine how labour taxation has evolved during
the pandemic across OECD countries. It compares key indicators, notably the size and composition of the
tax wedge and average wages, in 2021 with the situation in 2019 and examines how the changes over this
period contrast with long-term trends in labour taxation going back to 2000, while also allowing comparison
of the impact of the COVID-19 pandemic with the impact of the Global Financial Crisis in 2008-09. This
analysis is based on the results for three different types of worker:
The single worker: a single individual with no children at 100% of the average wage;
The one-earner couple: a married couple with one earner at 100% of the average wage and two
children; and
The single parent: a single individual with two children at 67% of the average wage.
The first two of these family types correspond to the main results discussed in chapter 1. The single parent
at a lower income level provides insights into the tax wedge applying to this more vulnerable family type.
The first section sets out the main policy measures enacted across the OECD in response to the COVID-
19 pandemic that are included in the
Taxing Wages
models and examines the impact of the pandemic on
average wages in 2020 and 2021. It also analyses the correlation between wage trends and changes to
the tax wedge during the pandemic. The second section tracks annual changes in the tax wedge across
OECD countries between 2019 and 2021, while the third section compares changes in the level and
composition of the average tax wedge in the OECD over this period with trends observed since 2000.
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46
The impact of the pandemic on labour taxation and wages
Although unemployment declined and labour market participation rose in 2021, labour markets had not yet
fully recovered from the sharp rise in unemployment recorded in 2020 (Figure 2.1). Employment rates are
only projected to return to pre-pandemic levels by the end of 2022 (assuming no interruptions to the
economic recovery), and labour market participation is expected to recover to pre-crisis levels in most parts
of the OECD by the end of 2023. Even in economies where the number of people in work had recovered
to its pre-pandemic level by mid 2021, total hours worked were often still lower than in late 2019 (OECD,
2021
[1]
). While wage growth generally returned to pre-pandemic levels in 2021, consumer prices rose more
sharply; chapter 1 shows that average wages fell in real terms in eight countries.
Figure 2.1. Impact of COVID-19 on unemployment and labour-force participation
A. Unemployment rate
% of labour
force
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
2019
2020
2021
2022
2023
55.0
2019
2020
2021
2022
2023
57.5
60.0
62.5
United States
Japan
Euro area
United Kingdom
% of labour
force
65.0
B. OECD employment rate
Source: OECD Economic Outlook, Volume 2021 Issue 2, (OECD, 2021
[1]
)
StatLink 2
https://stat.link/o51bml
The composition of the workforce across the OECD also changed as a result of COVID-19. According to
(OECD, 2021
[2]
) one in ten jobs in low-paying occupations was destroyed across the OECD when the
COVID-19 crisis hit and hours worked by this cohort fell by over 28%. This was eighteen percentage points
larger than the fall among high-paying occupations, which were able to absorb the shock through
reductions in working time, supported by job retention schemes, or by switching to teleworking. Workers
who lost their jobs at the start of the pandemic have found it harder to re-enter the workforce: at the end
of 2020, there were 60% more people unemployed for at least six months, a figure that continued to grow
in the first quarter of 2021 (OECD, 2021
[2]
). The pandemic has also accelerated pre-existing labour market
trends such as automation, digitalisation and increasing demand for professionals in the health care and
green sectors, which might favour workers with higher skills.
Changes to the composition of the labour force, the level of employment and wage dynamics associated
with the pandemic are not fully reflected in the
Taxing Wages
models. As discussed below, the
Taxing
Wages
models only cover workers in certain sectors of the economy. They also exclude part-time workers,
which make up a growing proportion of the labour force in OECD countries and tended to be more
vulnerable to loss of employment during the pandemic (OECD, 2021
[2]
). Moreover, the
Taxing Wages
models are based on nominal rather than real wages and thus do not pick up the loss in workers’
purchasing power caused by rising prices. Changes in the composition of the workforce might cause the
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47
average wage in a given country to rise, even when wages of individual workers may not have changed or
were only small (OECD, 2020
[3]
).
The pandemic elicited an unprecedented policy response that has included measures to protect
employment and workers, as well as to support household incomes through sharp declines in economic
activity. This section begins by outlining the COVID-19 measures identified by countries in Part II of this
Report and identifies which of them are included in the
Taxing Wages
models. It then views changes in
average wages during the pandemic against longer-term wage trends. Finally, it compares changes in the
tax wedge with changes in average wages between 2019 and 2021 to understand the extent to which the
impact of wage changes on the tax wedge might have been offset by changes in the policy settings.
When interpreting these results, it is important to note that the
Taxing Wages
models do not include the
full range of policies introduced across the OECD to protect workers and jobs during the pandemic.
Moreover, not all policies implemented in 2020 and 2021 and included in the models were related to the
pandemic.
The policy response to COVID-19 in 2020-21
During the COVID-19 crisis, governments have introduced a range of measures, both within and beyond
the tax system, to support businesses and households. For the 2020 and 2021 editions of
Taxing Wages,
countries were asked to provide a short summary of labour tax measures implemented in response to the
COVID-19 pandemic, which are included in the country chapters in Part II. Table 2.1 provides an overview
of these tax and benefit measures implemented for workers employed within sectors B-N in ISIC rev.4,
differentiating between provisions that are included in the
Taxing Wages
models and those that are not.
The
Taxing Wages
models for 2020 and 2021 include the support measures for businesses and
households that are consistent with the general
Taxing Wages
assumptions, as detailed in the introduction
of chapter 1 and in Annex A.
1
Therefore, support measures included in the
Taxing Wages
models for 2020
and 2021 are those that:
apply to labour income (including changes to the rates, thresholds, allowances or credits allowable
under personal income taxes, social security contributions (employee or employer) and cash
benefits);
apply to the majority of full-time workers in sectors B to N in ISIC rev 4 (i.e. sector-specific or other
targeted measures are not included, nor are measures for the self-employed, who are not covered
by the models);
do not vary based on taxpayer circumstances other than income level and family status, as in the
case of a universal cash benefit or a standard tax relief (i.e. non-standard tax reliefs, or benefits
applying based on employment status are not included); and
represent a variation in the taxpayer’s liabilities
in 2020 or 2021, rather than a timing difference (i.e.
deferrals of tax liabilities are not included whereas temporary measures and one-off payments are).
Measures are not included for one of the following reasons: (i) because they applied to less than the
majority of private sector workers; (ii) because they were not standard; or (iii) because they amounted to
a deferral rather than the reduction or removal of a tax liability. Across OECD countries, measures in
response to the COVID-19
crisis were less widespread in 2021 than in 2020, reflecting the pandemic’s
diminished impact on the economy in 2021.
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48
Table 2.1. Summary of tax and benefit measures in response to COVID-19 within sectors B to N in
ISIC rev. 4
Personal income taxes
Changes in Changes in
Deferred
tax reliefs
PIT rate or
PIT
thresholds
payments
20
Australia
Austria
Belgium
Canada
Chile
Colombia
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Korea
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Sweden
United Kingdom
United States
21
20
21
20
21
Social security contributions
Changes in Discount or
Cancelled
SSC rates
tax credit
SSC
or
in SSC
payments
thresholds
payments
20
21
20
21
20
21
Cash benefits
Deferred
Changes in
SSC
cash
payments
benefits
20
21
20
21
Note: This table shows the tax and benefit measures that were introduced by countries to respond to the COVID-19 crisis and that are described
in the country chapters in Part II of the Report. They include only measures relating to labour income. Measures shown in dark blue are included
in the
Taxing Wages
model; measures in green were not modelled as they do not meet the assumptions outlined above.
Source: OECD, based on the description of country measures in each country chapter in Part II of the Report.
In total, specific tax and benefit provisions that were implemented in response to COVID-19 were included
in the
Taxing Wages
models for 13 countries (Table 2.2). These largely related to one-off payments or
increases in cash benefit provisions (Australia, Austria, Canada, Chile, Iceland, Korea, Lithuania and the
United States), particularly for families with children; and increases in tax reliefs under personal income
taxes (Australia, Germany, Israel, Lithuania, Sweden, and the United Kingdom). The tax relief in Australia
was a result of higher income tax thresholds that had initially been planned for July 2022 but whose
implementation was brought forward to July 2020 in response to the pandemic. In addition, Austria made
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49
a change to its marginal tax rate schedule, and Hungary reduced its employer SSC rate. The
Taxing Wages
models take into account the duration of these measures when calculating their impact on key indicators.
Table 2.2. Summary of country COVID-19 measures included in the Taxing Wages models
Country
Australia
Austria
Canada
Chile
Germany
Hungary
Iceland
Israel
Korea
Lithuania
Sweden
United
Kingdom
United
States
Description of COVID-19 related measure included in
Taxing Wages
models
Increases to income thresholds within income tax brackets and a non-taxable one-off Economic Support Payment paid in March
2020 (AUD 750), July 2020 (AUD 750), December 2020 (AUD 250) and March 2021 (AUD 250).
Change in the income tax schedule and extra child benefit payments in 2020
Additional payments under the Canada Child Benefit and the Goods and Services Tax Credit in May 2020
Temporary Emergency Family Income (Ingreso Familiar de Emergencia), dependent on the number of household members, paid
from June to November 2021, including a half-payment in September
One-time bonus benefit payment per child and a temporary increase in the tax allowance for single parents (in both cases, in 2020
and 2021)
Employer SSC rate decreased by 2 p.p., from 18.5% to 16.5%, in 2020
Special one-off child benefit supplements paid in 2020 and 2021 (in 2021 only if households are entitled other child benefits)
Temporary bonus to the Earned Income Tax Credit in April to December 2020
Extra childcare coupons paid to families with children in March 2020
Increase in tax-exempt income and one-off child benefit payment in 2020
Introduction of a temporary earned income tax credit in 2021
Additional temporary increases to Universal Credit and the Working Tax Credit in 2020 and 2021
Advance payment of the Economic Impact Payment as a part of the Coronavirus Aid, Relief and Economic Security Act in 2020. The
American Rescue Plan Act provided a Recovery Rebate Credit and made the Child Tax Credit fully refundable in 2021.
Source: OECD, based on the description of country measures in each country chapter in Part II of the Report.
Although the COVID-19 pandemic has prompted governments to implement a large number of policies
that affected labour taxation, not all the measures that were implemented in this area in 2020 and 2021
were directly related to the pandemic. A number of policies that were planned prior to the pandemic took
effect during the period under analysis. These policies, which are discussed in chapter 1 and the country
chapters in Part II of the Report, contributed to variations (both positive and negative) in the tax wedge
between 2020 and 2021.
Average wage trends during the pandemic and since 2001
Changes to average wages have been another key factor behind changes to the tax wedge across OECD
countries during the pandemic. Unlike the measures outlined in the previous section, changes in average
wages are a constant feature of the
Taxing Wages
models. However, given the turbulence in labour
markets in 2020 and 2021, it is important to understand how the interaction of wage dynamics and policy
measures affected the tax wedge. The special feature of the 2021 edition of
Taxing Wages
examined the
extent to which decreases in the tax wedge recorded across many OECD countries in 2020 were
attributable to decreases in the average wage or the policy response (OECD, 2021
[4]
).
This section shows trends in average wages in the OECD between 2001 and 2021. Wage changes affect
the tax wedge primarily through the progressivity of tax systems (discussed in chapter 3). An increase in
average wages tends to increase the tax wedge (absent offsetting policy measures), while a decline has
the opposite effect. It is important to note that
Taxing Wages
models are based on nominal wages. While
inflation tended to be mild in most OECD countries prior to the pandemic, consumer prices rose sharply
in 2021 while wage inflation was in line with pre-pandemic trends, meaning that wages declined in real
terms in a number of countries where they increased in nominal terms. In these cases, higher tax wedges
and lower real wages combined to reduce workers’
purchasing power.
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50
Figure 2.2. Distribution of year-on-year changes in nominal average wages across OECD countries
50.0
40.0
30.0
20.0
%
10.0
0.0
-10.0
-20.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
(1)
(2)
(2)
(0)
(1)
(1)
(1)
(3)
(7)
(4)
(5)
(1)
(3)
(2)
(3)
(4)
(1)
(0)
(0)
(7)
(2)
Note: The figures show maximum and minimum changes in OECD countries (dots); the upper and lower quartile of changes (in the boxes) and
the median change (bars). The figure in brackets on the horizontal axis indicate the number of countries with a year-on-year fall in nominal
wages. Wages for 2000-2020 have been provided by countries for full-time workers in sectors B-N of ISIC rev. 4 under the assumptions noted
in the Annex. The average wage estimates for 2021 have been produced using the percentage changes in compensation per employee from
the OECD Economic Outlook Volume 2021, Issue 2.
StatLink 2
https://stat.link/98d2zl
As discussed in chapter 1, average wages rose in all but two OECD countries between 2020 and 2021,
having fallen in seven countries between 2019 and 2020. Revised data for 2020 showed that the falls in
average wages were not as extensive as shown in the previous edition of this Report, which indicated that
they fell in 16 countries between 2019 and 2020 (OECD, 2021
[4]
).
Figure 2.2 compares changes to the average wage between 2019 and 2021 with those recorded
since 2001. The revised wage data for 2020 indicate that the changes between 2019 and 2020 were in
line with the changes between 2008 and 2009, during the Global Financial Crisis when wages also declined
in seven countries. Wage growth remained relatively weak in the wake of that crisis, falling in four countries
and five countries in 2010 and 2011 respectively, with median wage growth lower in both years than it was
in 2021. Although the number of countries that experienced a decline in average wages in 2020 was
relatively large compared with the years before and after 2009, the wage changes recorded in 2021 were
not inconsistent with trends observed prior to the pandemic.
The revised wage data for 2020 reaffirms one of the key findings from last year’s Report
(OECD, 2021
[4]
),
namely that falls in nominal average wages across the OECD were not the primary cause of the decrease
in the average tax wedge in 2020 (OECD, 2021
[4]
). Rather, decreases in the tax wedge were primarily
caused by changes in tax policy settings, which (except in a very small number of cases) caused a
reduction in the tax wedge, regardless of whether average wages rose or fell. Indeed, the tax wedge for
all family types decreased in many of the countries in which wages increased, as the decrease due to
policy changes more than offset the impact of higher wages.
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Comparing changes to the tax wedge and average wages
To illustrate the combined impact of the tax policy response to COVID-19 and changes to the average
wage described in this section, Figure 2.3 shows the correlation between changes to average wages and
changes to the tax wedge for the 38 OECD countries. It does so for two household types: the single worker
(left-hand panel) and the one-earner couple (right-hand panel). In both panels, each dark blue diamond
represents a single country and shows changes to both variables between 2019 and 2020. Each light blue
circle also represents a single country, and shows changes to both variables between 2020 and 2021.
Figure 2.3. Correlation between changes to the tax wedge and in average wages in 2020 and 2021
Single worker at 100% of average wage, without child
2019-20
2020-21
40.0%
One-earner married couple at 100% of average wage, with two children
2019-20
2020-21
40.0%
30.0%
20.0%
Change in tax wedge
30.0%
20.0%
Change in tax wedge
10.0%
0.0%
-10.0%
-20.0%
-30.0%
-40.0%
10.0%
0.0%
-10.0%
-20.0%
-30.0%
-40.0%
-10.0%
-5.0%
-50.0%
0.0%
5.0%
10.0%
Change in average wage
15.0%
20.0%
25.0%
-10.0%
-5.0%
-50.0%
0.0%
5.0%
10.0%
Change in average wage
15.0%
20.0%
25.0%
Note: Chile has been omitted from the one-earner couple panel as the tax wedge decreased by over 350%.
StatLink 2
https://stat.link/1sabl5
For both household types, the tax wedge increased in more countries between 2020 and 2021 than it did
between 2019 and 2020, while average wages also increased in more countries in 2021 than in 2020.
Although the average wage increased in 31 countries between 2019 and 2020, the tax wedge for the single
worker fell in 23 countries and in 21 countries for the one-earner couple over this period, demonstrating
the extent to which policy measures in 2020 offset the upwards pressure of the tax wedge resulting from
higher wages. In both panels, the correlation between changes to the tax wedge and in average wages
between 2019 and 2020 was relatively weak. For the single earner, the changes in the tax wedge were
clustered just above or below zero while changes in the average wage were distributed more widely.
Between 2020 and 2021, the positive correlation between changes in average wages and the size of the
tax wedge is clearer for both household types, reflecting the scaling-back of COVID-19 support measures
captured by the
Taxing Wages
models. It is notable that while the average wage increased in 36 countries,
the tax wedge still decreased in eleven countries for the single earner and in nine countries for the one-
earner couple. The difference between the two household types reflects the fact that the COVID-19
responses discussed earlier were predominantly directed at households with children; the absence of
these measures in 2021 was an important factor behind the rises in the tax wedge in certain countries
observed here. Policy changes in 2021 that were not directly related to COVID-19 (as described in
chapter 1) also influenced these results.
The two panels demonstrate that the small decline in the average tax wedge for both household types
across the OECD between 2020 and 2021 was driven primarily by the size of the declines registered in a
few countries. As discussed in chapter 1, the largest declines for the single worker between 2020 and 2021
were recorded by the Czech Republic and Greece, while for the single-earner couple, the largest declines
occurred in the same two countries as well as Chile.
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Changes to the tax wedge between 2019 and 2021
To understand better the overall impact of policy measures and changes in average wages on the three
household types examined in this chapter, this section shows how the tax wedge changed for each type
across every OECD country between 2019 and 2020 and between 2020 and 2021. It also examines the
changes recorded by the
Taxing Wages
models during the two pandemic years with longer-term trends,
starting in 2000, which allows for a comparison with the impact of the Global Financial Crisis of 2008-09.
The labour taxes that apply to workers in the
Taxing Wages
models include personal income taxes, their
social security contributions (SSCs) and those of their employer, and cash benefits that apply to all workers
based on their financial and family circumstances. Tax provisions or benefits targeted at particular sectors
or based on other individual circumstances are not included; nor are non-standard tax reliefs. The tax
wedge calculated in
Taxing Wages
shows the combined impact of taxes and SSCs paid, less cash benefits
received, divided by labour costs (gross wage earnings plus employer SSCs).
Figure 2.4 shows changes in the tax wedge between 2019 and 2021 for the three households examined
in this chapter. For two of the three household types, the average tax wedge decreased between 2000
and 2021. In the case of the single worker, the average tax wedge declined by 0.05 percentage points,
while for a one-earner couple it declined by 0.4 percentage points. For the single parent, it increased by 0.1
percentage points. However, the average tax wedge for this latter household type fell by more than for the
other two in 2020 across the OECD, underlining the need to compare changes in both years to understand
the overall impact of the pandemic on labour taxation.
The tax wedge for the single worker decreased by 0.3 percentage points on average across the OECD
between 2019 and 2021. It increased in sixteen countries, declined in 21 and remained unchanged at 0%
in Colombia. It increased by more than one percentage point in three countries: Luxembourg (1.7), Israel
(1.3) and Estonia (1.0). It decreased by more than that amount in eight countries: the Czech Republic (-
4.0), Greece (-3.7), Latvia (-1.9), the Netherlands (-1.6), Hungary, Italy (both -1.4), the United States and
Germany (both -1.2).
The tax wedge for the one-earner couple decreased by -1.2 percentage points on average across the
OECD between 2019 and 2021. It increased in 21 countries, and declined in seventeen. It increased by
more than one percentage point in six countries: Slovenia (3.7), Luxembourg (2.3), New Zealand (2.2),
Estonia (1.8), Israel (1.5) and Ireland (1.1). It decreased by more than that amount in twelve countries:
Chile (-25.5), the United States (-10.1), Lithuania (-6.4), the Czech Republic (-4.9), Greece (-4.0),
Poland (-3.2), the Netherlands (-2.9), Australia (-1.7), Germany (-1.5), Slovakia (-1.4) and Italy (-1.1).
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53
Figure 2.4. Tax wedge changes 2019-2021
Single worker at 100% of average wage, without child
p.p.
3.0
2.0
1.0
0.0
-1.0
-2.0
-3.0
-4.0
-5.0
2019-20
2020-21
2019-21
One-earner married couple at 100% of average wage, with two children
p.p.
2019-20
2020-21
2019-21
6.0
4.0
2.0
0.0
-2.0
-4.0
-6.0
-8.0
-10.0
-12.0
-25.5 p.p
.
Single parent at 67% of average wage, with two children
p.p.
15.0
2019-20
2020-21
2019-21
10.0
5.0
0.0
-5.0
-10.0
-15.0
-30.5 p.p
.
StatLink 2
https://stat.link/kn8mpy
The tax wedge for the single parent decreased by -1.0 percentage point on average between 2019
and 2021. It increased in 21 countries and declined in seventeen over this period. The tax wedge increased
by more than 1 percentage point between 2019 and 2021 in eleven countries: the United Kingdom (8.4),
Poland (6.2), Luxembourg (4.5), Canada (2.8), New Zealand (2.4), Israel (2.3), Slovenia (2.2), Estonia
(1.9), Hungary (1.5), Portugal, and Norway (1.0). It decreased by the same amount or more in twelve
countries: Chile (-30.5), the United States (-10.2), Lithuania (-9.8), the Czech Republic (-6.5), Greece (-
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54
5.1), Germany (-3.3), Slovakia, Australia (both -2.1), Belgium (-2.0), Korea and Israel (both -1.6) and the
Netherlands (-1.4).
The tax wedge for the single worker increased from the previous year in both 2020 and 2021 in nine
countries. For the one-earner couple and for a single parent, it increased in eleven countries in both years.
Decreases in the tax wedge over both years were recorded in seven countries for the single parent and
for the one-earner couple. For the single worker, the tax wedge declined in both years in eight countries.
Eight of the 22 countries where the tax wedge for the single worker declined in 2020 recorded an increase
in 2021 that exceeded the decline in the previous year. The equivalent figure was nine out of 21 countries
for the one-earner couple, and ten out of 22 countries for the single parent.
The large decline in the tax wedge for the household types with children in Chile, which is attributable to
the Emergency Family Income programme implemented in 2021, has a significant impact on the OECD
average for both. When Chile is excluded, the size of the decline in the OECD average tax wedge for the
single-earner couple between 2019 and 2021 narrows from -1.2 percentage points to -0.5 percentage
points; for the single parent, the decline narrows from -1.0 percentage points to -0.2 percentage points.
Changes to the tax wedge since 2000
This section compares the changes to the tax wedge in OECD countries in 2020 and 2021 with longer-
term trends dating back to 2000, with reference to both the level and composition of the tax wedge for the
household types covered by this chapter. By doing so, it sheds light on the extent to which labour taxation
during the pandemic has aligned to, accelerated or disrupted trends seen previously.
Changes to the level of the tax wedge
Figure 2.5 compares the changes to the average tax wedge across the OECD seen in 2020 and 2021 with
longer-term trends shown by the
Taxing Wages
models since 2000. A clear decline is evident for the two
household types with children between 2019 and 2020, with the tax wedge for the single parent recording
the larger drop. In both cases, the declines in 2020 continued downward trends recorded since the middle
of the 2010s, although it is notable that, for the single parent, the largest decline in the average tax wedge
since 2009 was recorded between 2015 and 2016 rather than during the COVID-19 pandemic. The tax
wedge for both categories had been on a downward trajectory prior to 2009 but increased significantly in
the years immediately after the Global Financial Crisis.
For the single worker, the small decline (relative to the household types with children) recorded in the
average tax wedge in 2020 and 2021 did not represent a significant deviation from the trend seen prior to
the pandemic. Between 2000 and 2021, the average tax wedge for this category decreased by -
1.6 percentage points. The sharpest decline in the average tax wedge was between 2008 and 2009, when
it fell by -0.5 percentage points to 34.4%. The tax wedge increased from 2010 to 2013 then gradually
declined. In 2021, it stood at 34.6%, above the level recorded in 2010. During the pandemic, the difference
grew between the tax wedge for the single worker and the two households with children, while the
difference between the single-earner couple and the single parent narrowed slightly.
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55
Figure 2.5. Average OECD tax wedge for different family types, 2000-2021
OECD average tax wedge, 2000-21
Single worker at 100% of average wage, without child
One-earner married couple at 100% of average wage, with two children
Single parent at 67% of average wage, with two children
%
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
StatLink 2
https://stat.link/9xfa34
Figure 2.6 provides a more detailed picture of how the changes in 2020 and 2021 compare with those in
other years by showing the variation in changes to the tax wedge among OECD countries in each year
since 2001. It focuses on the single worker (Panel A) and the one-earner couple (Panel B).
2
Care should
be taken when comparing the two graphs, as they have different scales.
For the single worker, variation in the tax wedge in 2020 across the OECD resembled 2018 and 2019, with
the difference that the tax wedge declined in twenty-three countries in 2020 versus sixteen in 2019 and
fifteen in the previous three years. Although the variation in the tax wedge for this household type was
slightly greater in 2021 than in 2020, it was not as great as that recorded during the Global Financial Crisis,
and the number of countries that recorded a decline in the tax wedge in 2021 was the lowest since 2011.
For the one-earner couple household, variation in the tax wedge in 2020 was not notably different from
that recorded in the six preceding years. The number of countries where the tax wedge declined was
significantly higher in 2020, at twenty-two versus fourteen in 2019. In 2021, Chile recorded the largest
decline in the tax wedge for this household type experienced by any OECD country at any point since 2001.
However, the median change in 2021 was in line with previous years, and the number of countries where
the tax wedge decreased was the lowest since 2011.
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56
Figure 2.6. Year-on-year change in the average tax wedge across the OECD, 2001-2021
%
25.0
20.0
15.0
10.0
5.0
0.0
-5.0
-10.0
-15.0
-20.0
-25.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
(22) (18) (17) (11) (15) (16) (16) (23) (26) (11) (6) (13) (13) (14) (12) (15) (15) (15) (16) (23) (12)
One-earner married couple at 100% of average wage, with two children
Single worker at 100% of average wage, without child
%
25.0
20.0
15.0
10.0
5.0
0.0
-5.0
-10.0
-15.0
-20.0
-25.0
%
250.0
150.0
50.0
-50.0
-150.0
-250.0
%
250.0
150.0
50.0
-50.0
-150.0
-250.0
-350.0
-450.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
(20) (17) (17) (12) (16) (12) (16) (24) (24) (10) (6) (10) (12) (12) (13) (14) (15) (15) (14) (21) (9)
-350.0
-450.0
Note: The figures show maximum and minimum changes in the average tax wedge in OECD countries (dots); the upper and lower quartile of
changes (in the boxes) and the median change (bars). Figures in brackets under years are the number of countries in which the tax wedge
decreased in a given year.
StatLink 2
https://stat.link/myioqc
Changes to the composition of the tax wedge
The
Taxing Wages
models allow for comparison of the composition of the tax wedge for different
households across OECD countries and over time. Figure 2.7 demonstrates the evolution of the average
OECD tax wedge for the two different household types with children examined in this chapter
between 2000 and 2021. The single worker is not analysed here because the cash benefits they received
are negligible on average across the OECD.
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57
Figure 2.7. Composition of the tax wedge, 2000-2021
One-earner married couple at 100% of average wage, with two children
Income tax as % of labour costs
Employee SSC as % of labour costs
Average tax wedge as % of labour costs
Employer SSC as % of labour costs
%
35.0
30.0
25.0
Single parent at 67% of average wage, with two children
Income tax as % of labour costs
Cash transfer as % of labour costs
Employee SSC as % of labour costs
Average tax wedge as % of labour costs
Employer SSC as % of labour costs
%
35.0
30.0
25.0
20.0
15.0
Cash transfer as % of labour costs
20.0
15.0
10.0
10.0
5.0
5.0
0.0
-5.0
-10.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
0.0
-5.0
-10.0
-15.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
StatLink 2
https://stat.link/fdrxvi
For both the one-earner couple and the single parent, the decline in the tax wedge between 2019 and 2021
was attributable to increases in cash transfers as a percentage of labour costs, of 1.0 percentage point in
the case of the single-earner couple and of 0.9 percentage points in the case of the single parent. The
other components of the tax wedge were largely unchanged as a percentage of labour for these two
household types in 2020 and 2021, with the exception of income tax for the single parent. For this
household type, income tax as a percentage of labour costs increased by 0.25 percentage points, more
than offsetting the increase of 0.15 percentage points in cash transfers over this period.
Changes to the composition of the average OECD tax wedge in 2020 and 2021 were in line with trends for
each component since 2000. Having declined gradually for the two household types examined here
between 2000 and 2008, income tax as a percentage of labour costs fell sharply in 2009 (by -0.6
percentage points for the one-earner couple and by -0.7 percentage points for the single parent). For the
single-earner couple, income tax as a percentage of labour costs then increased from 2010 onwards; by
2021, it stood at 8.8% of labour costs, the same level as in 2008. For the single parent, income tax as a
percentage labour costs increased until 2014, then declined until 2017 before trending upwards once more;
by 2021, it stood at 5.0% of labour costs, 0.6 percentage points below its level in 2008.
On a combined basis, employer and employee SSCs gradually declined as a percentage of labour costs
between 2000 and 2021, falling by -1.2 percentage points for both household types. In 2021, they stood
at 21.7% of labour costs for the one-earner household and at 21.5% of labour costs for the single parent.
However, employee SSCs and employer SSCs have followed opposite trajectories over this period for both
household types. For each, employee SSCs increased by 0.4 percentage points, while employer SSCs
declined by -1.6 percentage points. It is notable that the largest annual change in both employer and
employee SSCs was recorded between 2018 and 2019, before the COVID-19 pandemic: for both
household types, employee SSCs rose by 0.3 percentage points and employer contributions declined by -
0.6 percentage points between the two years.
Finally, cash benefits generally increased as a percentage of total labour costs for both household types
between 2000 and 2021, except during the period from 2012-2014 (inclusive), when they declined in each
of the three years. For the single-earner couple, cash benefits increased by 1.1 percentage points
between 2000 and 2021 to 5.8% of total labour costs, while for the single parent, they increased by 2.0
percentage points to 11.5%.
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Conclusion
The COVID-19 pandemic has caused major disruption and accelerated long-term changes to labour
markets in OECD countries. It has affected both the level of employment and the composition of the
workforce. This chapter examines how labour taxation, including benefits administered through the tax
system, responded to the impact of the pandemic across the OECD in 2020 and 2021. It does so with
reference to three household types included in the
Taxing Wages
models: a single worker on the average
wage, a single-earner married couple earning the average wage with two children, and a single parent
earning 67% of the average wage with two children.
While chapter 1 of this Report examines changes in the tax wedge for different household types
between 2020 and 2021, this chapter analyses the changes that occurred between 2019 and 2021, so as
to show the overall impact of the COVID-19 pandemic on labour taxation across the OECD. The chapter
also examines these changes against the evolution of labour taxation during the two decades prior to the
pandemic, including those that coincided with the Global Financial Crisis in 2008-09, to compare the scale
of the changes associated with COVID-19 and the extent to which these align with longer-term trends.
Between 2019 and 2020, the average tax wedge decreased for the three household types on average and
in a majority of countries. This was largely due to the policies enacted by governments in response to the
pandemic: the tax wedge declined even in a number of countries where average wages increased.
Between 2020 and 2021, the tax wedge continued to decline on average for two of the three household
types (the exception being the single parent on 67% of the average wage). However, it increased in the
majority of countries as wages increased in all but two OECD countries and most governments
discontinued COVID-19 support measures implemented in 2020 as the economic recovery took hold and
countries were able to better mitigate the impact of the virus.
For both household types with children, 21 OECD countries recorded a higher tax wedge in 2021 than
in 2019, prior to the pandemic. For the single earner, 16 countries recorded a higher tax wedge in 2019
than in 2021. The increases in the tax wedge observed across these countries contrasts with the overall
decline in the average OECD tax wedge between 2019 and 2021 for all three household types. It is also
notable that increases in the tax wedge were more widespread across the OECD for households with
children even though many of the policy measures identified in this chapter were directed at this household
type.
This chapter identifies two key factors behind changes to the tax wedge between 2019 and 2021. First,
declines in the average tax wedge were driven by a small number of countries that recorded relatively
large declines, notably Chile. Second, many of the COVID-19 measures were temporary and (in most
cases) limited to 2020. Over the course of the two years, the impact of higher wages experienced in a
majority of countries (31 in 2020, 36 in 2021) on the tax wedge was larger than the reductions caused by
the policy response. It is also important to recall that a number of countries introduced policies in 2021 that
were not related to the pandemic and which affected the tax wedge in that year.
The chapter underlines that the tax wedge is influenced by the combination of changes in average wages
and policy measures. Regarding wage changes, it is notable that wage growth in 2021 was not inconsistent
with trends observed prior to the pandemic, although the number of countries that experienced a decline
in average wages in 2020 was relatively large compared with the years before and after 2009, during the
Global Financial Crisis.
The changes to the tax wedge between 2019 and 2021 aligned with long-term trends: the tax wedge for
both household types with children had declined appreciably in the years immediately prior to the pandemic
(having increased in the wake of the Global Financial Crisis) while the tax wedge for the single worker
declined very gradually between 2000 and 2021. Looking at the different components within the tax wedge,
the decrease in the tax wedge was primarily due to the increase in cash benefits as a percentage of labour
costs, with the contribution of personal income tax and SSCs largely unchanged between 2019 and 2021
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59
on average. Cash benefits increased.as a percentage of labour costs throughout the period from 2000 to
2021, except between 2012 and 2014.
The changes to labour taxation associated with the COVID-19 pandemic have (so far) been no larger than
those observed around the time of the Global Financial Crisis. The tax wedge declined in more countries
in 2008 and 2009, while the distribution of changes in average wages across the OECD in 2020 was very
similar to that in 2009, with the same number of countries
–
seven
–
experiencing declines in both years.
The Global Financial Crisis had a more widespread impact on the different components of the tax wedge
as a proportion of total labour costs, on average, across the OECD than the pandemic.
Overall, these findings suggest that, in many cases, changes to labour taxation may have been a relatively
minor component of governments’ response to the economic
impact of the pandemic. Cash benefits for
children accounted for the majority of COVID-19 responses included in the
Taxing Wages
models in 2020
and 2021. Other policies not included here, such as job retention schemes or unemployment benefits, are
likely to have been equally or more important. It is also worth recalling that certain parts of the economy
have been affected more than others by the pandemic: specific support measures for these sectors are
not included in the
Taxing Wages
models.
Looking ahead, the labour market faces further instability in 2022. The rise of inflationary pressures across
the OECD in 2021 and into 2022 might have a significant impact on average wages in nominal and real
terms. Employment prospects might weaken as the conflict in Ukraine undermines the economic recovery.
At the same time, the ongoing COVID-19 pandemic retains the potential to cause major disruption. Future
editions of
Taxing Wages
will monitor the impact of these large-scale phenomena on the taxation of the
labour incomes of different family types, together with further changes in the labour market.
References
OECD (2021),
OECD Economic Outlook, Volume 2021 Issue 2,
OECD Publishing, Paris,
https://dx.doi.org/10.1787/66c5ac2c-en.
OECD (2021),
OECD Employment Outlook 2021: Navigating the COVID-19 Crisis and
Recovery,
OECD Publishing, Paris,
https://doi.org/10.1787/5a700c4b-en.
OECD (2021),
Taxing Wages 2021,
OECD Publishing, Paris,
https://doi.org/10.1787/83a87978-
en.
OECD (2020),
OECD Employment Outlook 2020: Worker Security and the COVID-19 Crisis,
OECD Publishing, Paris,
https://dx.doi.org/10.1787/1686c758-en.
[1]
[2]
[4]
[3]
Notes
1
The special feature of (OECD, 2021
[4]
) provides greater detail on the extent to which some of the most
widespread responses to the pandemic, including job-retention schemes, sickness benefits and
teleworking are captured by the
Taxing Wages
models.
2
The single parent category is not described in this section due to the impact of the large variation for
Chile’s tax wedge on the graph.
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60
3
2021 tax burdens
The 2021 tax burden results based on the eight model household types are
presented in Tables 3.1 to 3.13 and Figures 3.1 to 3.7. The model
household types vary by marital status, number of children and economic
status: single taxpayers, without children, earning 67%, 100% and 167% of
the average wage (AW); a single parent, with two children, earning 67% of
the AW; a one-earner couple at the AW level with two children; two-earner
couples at 167% and 200% of the AW with two children; and a two-earner
couple, without children, at 167% of the AW.
The chapter presents different measures for the average tax burdens (tax
wedge, personal tax rate, net personal tax rate, personal income tax rate
and employee social security contribution rate) and marginal rates (tax
wedge and net personal tax rate). The results for two measures of tax
progressivity are also considered: tax elasticity on gross earnings and
labour costs.
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Average tax burdens
Table 3.1
1
and Figure 3.1 show the average tax wedge for 2021, calculated as the combined burden of
income tax, employee and employer social security contributions (SSCs) taking into account the amount
of cash benefits to which each specific household type was entitled. Total taxes due minus transfers
received are expressed as a percentage of labour costs, defined as gross wage
plus
employers’
SSCs
(including payroll taxes). In the case of a single person on the average wage (AW), the tax wedge ranged
from zero (Colombia) and 7.0% (Chile) to 48.1% (Germany) and 52.6% (Belgium). For a one-earner
married couple with two children, at the average wage level, the tax wedge was lowest in Chile (-18.5%)
and Colombia (-5.0%) and highest in Finland (38.6%) and France (39.0%). As stated in Chapter 1, the tax
wedge tends to be lower for a married couple with two children at this wage level than for a single individual
without children due to receipt of cash benefits and/or more advantageous tax treatment. It is also
interesting to note that the tax wedge for a single parent with two children, earning 67% of the AW, was
negative in Chile (-24.4%), New Zealand (-16.3%), Colombia (-7.4%), Australia (-1.0%) and the
United States (-0.1%). Negative tax wedges are due to the cash benefits received by families, plus any
applicable non-wastable tax credits, exceeding the sum of the total tax and social security contributions
that are due.
Table 3.2 and Figure 3.2 present the combined burden of the personal income tax and employee SSCs
in 2021, expressed as a percentage of gross wage earnings (the corresponding measures for income tax
and employee contributions separately are shown in Tables 3.4 and 3.5). For single workers at the average
wage level without children, the highest average tax plus contributions burdens were seen in
Germany (37.7%) and Belgium (39.8%). The lowest average rates were in Colombia (0.0%), Chile (7.0%),
Mexico (10.2%), Costa Rica (10.5%), Korea (15.3%), Estonia (17.1%), Switzerland (17.9%), New Zealand
(19.4%), the Czech Republic (19.6%) and Israel (19.7%).
Table 3.3 shows the combined burden of income tax and employee SSCs, reduced by the entitlement to
cash benefits, for each household type in 2021. Figure 3.3 illustrates this burden for single individuals
without children and one-earner married couples with two children, with both household types on average
earnings. Comparing Table 3.2 and Table 3.3, the average tax rates for families with children (columns 4
-7) are lower in Table 3.3 because most OECD countries support families with children through cash
benefits.
Comparing Table 3.2 and Table 3.3 for single parents with two children earning 67% of the average wage
shows that 33 countries provided cash benefits in 2021. In Poland, New Zealand and Chile, these
represented respectively 31.7%, 31.6% and 31.4% of income and they exceeded 25% of income in
Denmark (25.7%). Thirty-three countries provided cash benefits for a one-earner married couple, with two
children, earning the average wage level, although these were less generous relative to income, ranging
up to 19.7% in Poland and 25.5% in Chile. The lower level of cash benefits for the married couple can be
attributed to three reasons: single parents may be eligible for more generous treatment; the benefits
themselves may be fixed in absolute amount; or the benefits may be subject to income testing.
Table 3.4 shows personal income tax due as a percentage of gross wage earnings in 2021. For single
persons without children at the average wage (column 2), the income tax burden ranged from 0.0% (Chile,
Colombia and Costa Rica) to 35.5% (Denmark). In most OECD member countries, at the average wage
level, the income tax burden for one-earner married couples with two children is lower than that for single
persons (compare columns 2 and 5). These differences are illustrated in Figure 3.4. In twelve OECD
countries, the income tax burden faced by a one-earner married couple with two children is less than half
that faced by a single individual (the Czech Republic, Germany, Hungary, Luxembourg, Poland, Portugal,
the Slovak Republic, Slovenia, Switzerland and the United States). In contrast, there was no difference in
eleven countries: Australia, Chile, Colombia, Costa Rica, Finland, Israel, Lithuania, Mexico, New Zealand,
Norway and Sweden. In Chile, Colombia and Costa Rica, neither the single worker on the average wage
nor the one-earner married couple at the average wage paid personal income taxes.
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There were only three OECD countries where a married average worker with two children had a negative
personal income tax burden. This was due to the presence of non-wastable tax credits, whereby credits
were paid in excess of the taxes otherwise due. This resulted in tax burdens of -0.5% in the
Slovak Republic, -0.7% in Germany and -8.6% in the Czech Republic. Similarly, single parents with two
children earning 67% of the average wage showed a negative tax burden in seven countries: Austria, the
Czech Republic, Germany, Poland, the Slovak Republic, Spain and the United States. In four other
countries
–
Chile, Colombia, Costa Rica and Israel
–
this household type paid no income tax.
Comparison of columns 5 and 6 in Table 3.4 demonstrates that if the second spouse had a job that
paid 67% of the average wage, the income tax burden of the household (now expressed as 167% of the
average wage) was slightly higher in 22 countries, the largest differences being in the Czech Republic
(9.1 percentage points) and Germany (9.8 percentage points). At the same time, the income tax burden
was lower in thirteen countries, the largest differences being in the Netherlands (-4.9 percentage points)
and Israel (-4.0 percentage points). There was no impact on the tax burden in Chile, Colombia and
Costa Rica.
An important consideration in the design of an income tax is the degree of progressivity
–
the rate at which
the income tax burden increases with income. A comparison of columns 1 to 3 in Table 3.4 provides an
insight into the progressivity of income tax systems of OECD countries. Comparing the income tax burden
of single individuals at the average wage level with their counterparts at 167% of the average wage
(columns 2 and 3), the lower-paid worker faced a lower tax burden in all countries except in Colombia and
Hungary in 2021. In Colombia, neither the average single worker nor their counterpart at 167% of the
average wage paid income tax. In Hungary, a flat tax rate was applied on labour income and all households
without children paid the same percentage of income tax. Comparing single individuals at 67% of the
average wage level with their counterparts at the average wage level (columns 1 and 2), the lower-paid
worker also faced a lower tax burden across all OECD countries, except Colombia and Hungary for the
reasons previously mentioned. Finally, the burden faced by single individuals at 67% of the average wage
level represented less than 25% of the burden faced by their counterparts at 167% in five OECD countries:
Chile (0.0%), Costa Rica (0.0%), Greece (16.7%), the Netherlands (18.7%) and Korea (23.6%).
The addition of SSCs to the average tax rate reduces this progressivity as well as the proportional tax
savings (i.e. tax savings of the low-income workers relative to higher-income workers). When comparing
Table 3.2 with Table 3.4, the OECD personal average tax burden including SSCs for single individuals
at 67% of the average wage level was only 31.7% lower than their counterparts at 167% compared to the
OECD average tax savings of 48.0% for personal income taxes alone in 2020. The OECD average tax
savings observed for one-earner married couples with two children at the average wage level relative to
the average single worker fell from 33.6% for the personal income tax to 20.5% for the personal average
tax burden including SSCs. These lower figures reflect that there is little variation in SSC rates across
household types, as shown in Table 3.5.
Table 3.5 shows employee SSCs as a percentage of gross wage earnings in 2021. For a single worker
without children at the average wage (column 2), the contribution rate varied between zero (Australia,
Colombia, Denmark and New Zealand) and 22.1% (Slovenia). Australia, Denmark and New Zealand did
not levy any employee SSCs paid to general government. In Colombia, most of the SSCs are paid to funds
outside the general government and are considered to be non-tax compulsory payments. Therefore, they
are not counted as SSCs in the
Taxing Wages
calculations. There were three other countries with very low
rates: Iceland (0.1%), Mexico (1.4%) and Estonia (1.6%).
SSCs are usually levied at a flat rate on all earnings, i.e. without any exempt threshold. In a number of
OECD member countries, a ceiling applies. However, this ceiling usually applies to wage levels higher
than 167% of the AW. The flat rates result in a constant average burden of SSCs for most countries
between 67% and 167% of average wage earnings. A constant proportional burden for employee SSCs
for the eight model household types was observed in Slovenia (22.1%), Lithuania (19.5%), Hungary
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63
(18.5%), Poland (17.8%), Turkey (15.0%), Greece (14.1%), the Slovak Republic (13.4%), the
Czech Republic and Portugal (both 11.0%), Latvia and Costa Rica (both 10.5%), Norway (8.2%), the
United States (7.7%), Chile (7.0%), Spain and Switzerland (both 6.4%), Ireland (4.0%) and Estonia (1.6%).
In addition, at the average wage level, Germany and the Netherlands imposed different levels of SSCs on
employees according to their family status (see Figure 3.5).
Marginal tax burdens
Table 3.6 and Figure 3.6 show the percentage of the marginal increase in labour costs that was deducted
through the combined effect of increasing personal income tax, employee and employer SSCs (including
payroll taxes) and decreasing cash transfers in 2021. It is assumed that the gross earnings of the principal
earner rise by 1 currency unit. This is the marginal tax wedge.
In most cases, the marginal tax wedge absorbed 25% to 55% of an increase in labour costs for single
individuals on average wage without children in 2021. However, in seven OECD countries, these
individuals faced marginal wedges above 55%: Finland (56.1%), Luxembourg (57.2%), Germany (58.0%),
France (58.2%), Austria (59.5%), Italy (64.0%) and Belgium (65.1%). By contrast, Chile (7.0%) had the
lowest marginal tax wedge in 2021. For Colombia, no income tax was paid at the average wage level
in 2021 while SSCs are considered as non-tax compulsory payments and are thus not included in the
Taxing Wages
calculations.
2
In twenty-six OECD member countries, the
marginal tax wedge
for one-earner married couples at
average earnings with two children was either the same as that for single persons at average wage with
no children or within 5 percentage points thereof. The marginal tax wedge was more than 5 percentage
points lower for one-earner married couples in seven countries: France (16.3 percentage points),
Luxembourg (14.2 percentage points), the Czech Republic (11.2 percentage points), the United States
(9.3 percentage points), Switzerland (7.9 percentage points), Slovenia (6.7 percentage points) and
Germany (6.2 percentage points). In contrast, the marginal rate for one-earner married couples with two
children was more than 5 percentage points higher than it was for single workers with no children in
Canada (5.5 percentage points), the Netherlands (5.6 percentage points), Iceland (9.0 percentage points)
and New Zealand (25.0 percentage points). These higher marginal rates arise because of the phase-out
of income-tested tax reliefs and/or cash benefits. When an income-tested measure is phased out, the
reduction in the relief or benefit compounds the increase in the tax payable. These programmes are set
out in greater detail in the relevant country chapters in Part II of the Report.
Table 3.7 and Figure 3.7 show the incremental change to personal income tax and employee SSCs less
cash benefits when gross wage earnings increased at the margin in 2021. As in the case of the tax wedge,
in most cases personal income tax and employee SSCs absorb 25% to 55%
of a worker’s pay rise for
single individuals without children at the average wage level. The marginal tax rate for the average worker
was higher than 55% only in Belgium (55.6%) and lower than 25% in Chile (7.0%), Costa Rica (10.5%),
Mexico (17.6%) and Korea (23.3%). As previously mentioned, no income tax was paid in Colombia at the
average wage while SSCs are considered as non-tax compulsory payments and not included in the
Taxing
Wages
calculations.
In twenty-six OECD member countries, the
net personal marginal tax rate
for one-earner married
couples with two children at the average wage level was either the same or within 5 percentage points as
that for single persons with no children. The marginal rate was more than 5 percentage points lower for
the one-earner married couples in eight countries: France (22.2 percentage points), Luxembourg (16.2
percentage points), the Czech Republic (15.0 percentage points), the United States (10.0 percentage
points), Switzerland (8.4 percentage points), Slovenia (7.8 percentage points), Germany (7.6 percentage
points) and Portugal (5.5 percentage points). In contrast, the marginal rate for one-earner married couples
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64
with two children was more than 5 percentage points higher than it was for single persons with no children
in Canada (5.7 percentage points), the Netherlands (6.3 percentage points), Iceland (9.6 percentage
points) and New Zealand (25.0 percentage points). Similar to the marginal tax wedges, these higher
marginal rates arise because of the phase-out of income-tested tax reliefs and/or cash transfers.
Table 3.8 shows the percentage increase in net income relative to the percentage increase in gross wages
when the latter increased by 1 currency unit in 2021, i.e. the elasticity of after-tax income.
3
Under a
proportional tax system, net income would increase by the same percentage as the increase in gross
earnings, in which case the elasticity is equal to 1. The more progressive the system is
–
at the income
level considered
–
the lower this elasticity will be. In the case of the one-earner married couples with two
children at the average wage (column 5 of Table 3.8), the most progressive systems of income tax plus
employee SSCs in 2021 were found in New Zealand (0.48), Belgium and Italy (both 0.56) and Ireland
(0.57). In contrast, France (0.95) and Mexico (0.92) either implemented or were close to a proportional
system of income tax plus employee SSCs for this household type. For Colombia (0.95) and Costa Rica
(1.0), no income tax was paid at that level of earnings. In Colombia, SSCs are considered as non-tax
compulsory payments and not included in the
Taxing Wages
calculations. However, the household’s cash
benefit payment remained fixed while the gross wage increased. As a result, the percentage increase in
net income was slightly less than the percentage increase in gross wage.
Table 3.9 provides a different elasticity measure: the percentage increase in net income relative to the
percentage increase in labour costs (i.e. gross wage earnings plus employer SSCs and payroll taxes) when
the latter rose by 1 currency unit in 2021.
4
In this case, taxes and SSCs paid by employers are also part
of the analysis. In twenty OECD countries, the value of this elasticity lay between 0.50 and 0.97 for the
eight selected household types. This elasticity was below 0.50 for single parents earning 67% of the
average wage level in New Zealand (0.49), the United States (0.48), Luxembourg and Belgium (both 0.45),
Australia (0.41), France (0.32), Ireland (0.27), Canada (0.24) and Poland (0.03) and for one-earner married
couples at the average wage level with two children in New Zealand (0.48). In contrast, the elasticity was
between 0.98 and 1.0 for most household types in Costa Rica and some household types in Canada, Chile,
Colombia, Hungary, Mexico and Poland, and one household type in Estonia for the single worker
earning 167% of the AW (1.0). Using this elasticity measure, the income tax system was regressive for a
single individual at 167% of the AW in Germany (1.08) and Austria (1.11).
Table 3.10 and Table 3.11 set out gross wage earnings and net income for the eight household types
in 2021, after all amounts have been converted into U.S. dollars with the same purchasing power. Single
workers with the average wage took home over USD 45 000 in eleven countries:
Switzerland (USD 69 359), Luxembourg (USD 53 025), the Netherlands (USD 53 070), Iceland (USD 49
642), Ireland (49 602), United Kingdom (USD 49 396), Australia (USD 47 884), the United States (USD 48
737), Norway (USD 47 596), Korea (USD 46 891) and Denkmark (USD 45 685). (Table 3.10 column 4).
The lowest levels (less than USD 20 000) were in Mexico (USD 12 554) and Colombia (USD 13 877). In
the case of a one-earner married couple with two children at the average wage level, families took home
over USD 50 000 in Australia, Austria, Belgium, Canada, Denmark, Germany, Iceland, Ireland,
Luxembourg, Netherlands, Norway, Switzerland, the United Kingdom and the United States; with the
lowest level again being in Colombia and Mexico (Table 3.11). With the exception of Costa Rica and
Mexico, the one-earner married couple in OECD countries took home more than the single individual (with
both household types at the average wage level) due to the favourable tax treatment of this household
and/or the cash transfers to which they were entitled.
Table 3.12 and Table 3.13 show the corresponding figures to Table 3.10 and Table 3.11 for labour costs
and net income in 2021. Thus, the
‘net’ columns in
Table 3.10 and Table 3.11 are identical to those in
Table 3.12 and Table 3.13, respectively. Usually, labour costs are significantly higher than gross wages,
because any employer SSCs (including payroll taxes) are taken into account. If measured in US dollars
with equal purchasing power, labour costs for single workers earning the average wage level (see
Table 3.12) were highest (more than USD 80 000) in the Netherlands (USD 82 060), Germany (USD 85
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65
370), Austria (USD 85 480), Belgium (USD 88 663), Luxembourg (USD 88 678) and Switzerland
(USD 89 841), and lowest (less than USD 30 000) in Colombia (USD 13 877), Mexico (USD 15 619) and
Chile (USD 25 127). Annual labour costs are equal to annual gross wage in Chile, Colombia, Denmark
and New Zealand. In those countries, neither compulsory employer SSCs nor payroll taxes paid to general
government are levied on wages. However, employers in Chile, Colombia and Denmark are subject to
non-tax compulsory payments.
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66
Table 3.1. Income tax plus employee and employer contributions less cash benefits, 2021
As % of labour costs, by household type and wage level
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
Single
no ch
67 (% AW)
21.6
43.3
46.2
28.9
-6.5
0.0
29.2
37.6
32.7
33.9
36.2
41.1
44.2
31.9
43.2
28.2
25.0
17.6
41.2
31.2
20.4
37.9
34.4
32.3
16.8
27.6
14.2
32.9
34.2
37.6
39.0
40.4
35.7
39.8
19.9
36.3
26.7
24.7
30.5
37.1
Single
no ch
100 (% AW)
27.1
47.8
52.6
31.5
7.0
0.0
29.2
39.9
35.4
38.1
42.7
47.0
48.1
36.7
43.2
32.2
34.0
24.2
46.5
32.6
23.6
40.5
37.6
40.2
19.6
35.3
19.4
36.0
34.9
41.8
41.3
43.6
39.3
42.6
22.8
39.9
31.3
28.4
34.6
41.3
Single
no ch
167 (% AW)
33.0
51.1
58.9
34.5
8.3
0.0
31.0
41.8
41.1
41.2
49.1
54.0
50.7
41.8
43.2
37.4
42.4
34.1
54.7
35.6
26.6
42.6
40.2
46.6
22.7
40.7
24.8
41.7
35.9
47.3
43.3
46.4
43.7
50.5
27.4
43.1
37.7
34.7
38.9
45.8
Single
2 ch
67 (% AW)
-1.0
22.8
29.4
2.8
-24.4
-7.4
29.2
16.2
5.3
20.0
26.1
20.6
28.0
24.6
23.4
16.5
6.2
6.0
26.4
17.1
15.4
24.3
13.5
12.9
16.8
4.6
-16.3
23.1
1.5
24.7
27.9
17.0
24.4
32.4
5.6
34.9
21.0
-0.1
15.0
19.6
Married
2 ch
100-0 (% AW)
19.1
34.1
37.3
20.4
-18.5
-5.0
29.2
21.8
25.7
28.9
38.6
39.0
32.7
33.2
30.5
20.0
19.0
21.9
37.9
27.4
19.6
31.4
23.6
19.7
19.6
29.1
6.5
32.6
14.3
30.9
29.6
29.5
33.8
37.6
10.6
38.3
27.0
8.5
24.6
29.9
Married
2 ch
100-67 (% AW)
1
24.9
38.4
45.2
27.8
-8.6
-6.0
29.2
30.7
30.9
32.0
37.6
40.9
40.9
33.6
35.6
29.9
26.5
18.1
40.9
29.6
20.2
34.0
31.0
29.4
18.5
27.4
17.3
32.7
22.7
37.2
35.9
36.4
36.2
38.5
16.8
37.9
27.2
17.9
28.8
34.6
Married
2 ch
100-100 (% AW)
1
27.1
41.5
48.4
30.1
-5.8
-5.0
29.2
33.0
32.5
34.4
40.6
44.1
43.5
37.1
36.8
32.2
31.0
21.3
44.0
30.6
21.8
36.0
33.2
34.0
19.6
31.3
19.4
34.3
24.9
39.5
37.6
39.5
37.9
40.1
19.3
39.4
29.4
21.6
31.2
37.3
Married
no ch
100-67 (% AW)
1
24.9
46.0
50.0
30.4
-1.8
0.0
29.2
39.3
34.3
36.4
40.1
44.3
46.3
35.8
43.2
30.6
30.1
21.1
44.4
32.1
22.3
39.5
36.3
35.4
18.5
32.2
17.3
34.7
34.6
40.0
40.4
42.3
37.8
41.5
22.5
38.5
29.4
26.1
32.8
39.6
Note: ch = children
1. Two-earner couple.
StatLink 2
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67
Figure 3.1. Income tax plus employee and employer contributions less cash benefits, 2021
As a % of labour costs, by household type
Single no child
Belgium
Germany
Austria
France
Italy
Slovenia
Hungary
Finland
Sweden
Portugal
Slovak Republic
Latvia
Luxembourg
Czech Republic
Turkey
Spain
Estonia
Lithuania
Greece
Norway
Denmark
Netherlands
Poland
Ireland
Japan
Iceland
Canada
United Kingdom
Costa Rica
United States
Australia
Israel
Korea
Switzerland
Mexico
New Zealand
Chile
Colombia
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
Married one-earner couple 2 children
Note: The household type ‘single no child’ corresponds to a wage level of 100% of average wage and ‘married one earner couple 2 children’
corresponds to a combined wage level of 100%-0% of average wage.
Sources: OECD calculations based on country submissions and OECD Economic Outlook, Volume 2021 issue 2.
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68
Table 3.2. Income tax plus employee contributions, 2021
As % of gross wage earnings, by household type and wage level
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
Single
no ch
67 (% AW)
17.4
27.3
32.0
21.3
7.0
0.0
10.5
16.5
32.8
11.5
23.0
23.6
33.1
16.6
33.5
23.9
16.7
13.5
22.7
20.6
11.8
23.3
33.2
23.0
5.3
18.7
14.2
24.2
23.4
22.8
20.8
30.8
16.5
20.9
14.8
25.2
19.6
21.7
20.4
23.8
Single
no ch
100 (% AW)
23.2
33.2
39.8
25.1
7.0
0.0
10.5
19.6
35.5
17.1
30.8
27.8
37.7
22.4
33.5
28.0
26.7
19.7
29.6
22.3
15.3
26.5
36.5
31.9
10.2
27.5
19.4
27.6
24.2
28.0
23.8
34.5
21.1
24.5
17.9
29.4
23.7
24.8
24.6
28.7
Single
no ch
167 (% AW)
29.4
38.2
47.7
30.2
8.3
0.0
12.8
22.2
41.1
21.3
38.5
33.6
42.6
28.7
33.5
33.6
36.0
29.8
40.4
26.3
19.3
29.0
39.1
39.2
14.9
35.9
24.8
34.2
25.4
34.8
26.3
37.8
26.9
34.9
22.8
33.1
30.2
29.5
29.8
34.2
Single
2 ch
67 (% AW)
17.4
16.5
26.3
14.4
7.0
0.0
10.5
-1.6
31.0
8.5
23.0
20.8
13.7
15.6
20.2
23.9
11.9
6.5
15.9
20.6
10.0
11.5
33.2
17.7
5.3
11.1
15.3
21.6
17.0
14.1
12.8
25.4
1.8
20.9
9.0
23.5
19.6
1.4
15.1
16.7
Married
2 ch
100-0 (% AW)
23.2
25.9
28.1
21.6
7.0
0.0
10.5
2.4
31.8
12.7
30.8
20.8
19.3
23.0
24.6
22.0
16.7
19.7
23.5
20.9
13.3
18.6
36.5
19.9
10.2
26.8
19.4
27.6
19.9
17.7
12.9
26.7
14.0
24.5
11.3
27.5
23.1
9.9
19.6
21.7
Married
2 ch
100-67 (% AW)
1
20.9
27.3
35.1
23.6
7.0
0.0
10.5
11.5
34.5
13.7
27.7
23.3
29.1
20.6
28.2
26.3
22.3
15.0
24.3
21.6
13.0
20.5
35.2
26.4
8.3
20.9
17.3
26.3
21.8
22.3
19.4
29.5
17.2
23.1
15.3
27.0
22.0
16.5
21.2
24.3
Married
2 ch
100-100 (% AW)
1
23.2
30.2
38.3
25.1
7.0
0.0
10.5
13.9
35.5
16.1
30.8
25.8
32.2
23.0
29.1
28.0
26.7
17.9
27.6
22.3
14.6
22.6
36.5
30.5
10.2
24.9
19.4
27.6
22.5
25.1
21.1
31.6
19.3
24.5
17.4
28.8
23.7
19.7
23.2
26.7
Married
no ch
100-67 (% AW)
1
20.9
30.8
36.6
23.6
7.0
0.0
10.5
18.8
34.5
14.9
27.7
25.6
35.6
21.3
33.5
26.3
22.3
16.8
26.8
21.6
13.9
25.2
35.2
26.4
8.3
24.0
17.3
26.3
23.9
25.8
22.6
33.1
19.3
23.1
17.6
27.7
22.0
22.6
22.9
26.7
Note: ch = children
1. Two-earner couple.
StatLink 2
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TAXING WAGES 2022 © OECD 2022
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2675007_0071.png
69
Figure 3.2. Income tax plus employee contributions, 2021
As % of gross wage earnings, by household type
Single no child
Belgium
Germany
Lithuania
Denmark
Slovenia
Hungary
Austria
Luxembourg
Finland
Italy
Turkey
Portugal
Iceland
France
Norway
Netherlands
Ireland
Latvia
Canada
United States
Sweden
Poland
Slovak Republic
United Kingdom
Australia
Greece
Japan
Spain
Israel
Czech Republic
New Zealand
Switzerland
Estonia
Korea
Costa Rica
Mexico
Chile
Colombia
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Married one-earner couple 2 children
Note: The household type ‘single no child’ corresponds to a wage level of 100% of average wage and ‘married one earner couple 2 children’
corresponds to a combined wage level of 100%-0% of average wage.
Sources: OECD calculations based on country submissions and OECD Economic Outlook, Volume 2021 issue 2.
StatLink 2
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TAXING WAGES 2022 © OECD 2022
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2675007_0072.png
70
Table 3.3. Income tax plus employee contributions less cash benefits, 2021
As % of gross wage earnings, by household type and wage level
Single
no ch
67 (% AW)
17.4
27.3
32.0
21.3
-6.5
0.0
10.5
16.5
32.7
11.5
23.0
23.6
33.1
16.6
33.5
23.9
16.7
13.5
22.7
20.6
11.8
23.3
33.2
23.0
5.3
18.7
14.2
24.2
23.4
22.8
20.8
30.8
16.5
20.9
14.8
25.2
19.6
18.4
19.9
23.7
Single
no ch
100 (% AW)
23.2
33.2
39.8
25.1
7.0
0.0
10.5
19.6
35.4
17.1
30.8
27.8
37.7
22.4
33.5
28.0
26.7
19.7
29.6
22.3
15.3
26.5
36.5
31.9
10.2
27.5
19.4
27.6
24.2
28.0
23.8
34.5
21.1
24.5
17.9
29.4
23.7
22.6
24.6
28.7
Single
no ch
167 (% AW)
29.4
38.2
47.7
30.2
8.3
0.0
12.8
22.2
41.1
21.3
38.5
33.6
42.6
28.7
33.5
33.6
36.0
29.8
40.4
26.3
19.3
29.0
39.1
39.2
14.9
35.9
24.8
34.2
25.4
34.8
26.3
37.8
26.9
34.9
22.8
33.1
30.2
29.5
29.8
34.2
Single
2 ch
67 (% AW)
-6.4
1.2
10.7
-7.5
-24.4
-7.4
10.5
-12.1
5.3
-7.0
10.8
-3.0
13.7
7.6
10.4
11.4
-4.2
1.3
3.2
4.4
6.2
6.4
11.9
0.8
5.3
-7.1
-16.3
13.1
-14.7
6.8
6.3
3.6
1.8
11.1
-0.5
23.5
13.4
-8.5
2.1
2.9
Married
2 ch
100-0 (% AW)
14.8
15.7
20.3
13.0
-18.5
-5.0
10.5
-4.6
25.7
4.9
25.8
16.9
19.3
18.1
18.7
15.1
10.1
17.4
18.3
16.2
10.8
15.2
22.2
8.5
10.2
20.5
6.5
23.8
0.2
14.5
8.5
18.1
14.0
17.9
4.9
27.5
18.9
1.0
13.1
14.9
Married
2 ch
100-67 (% AW)
1
20.9
21.1
30.5
20.7
-8.6
-6.0
10.5
7.3
30.9
9.0
24.7
21.0
29.1
18.7
24.6
25.6
18.4
13.6
22.2
18.8
11.5
18.4
29.8
19.6
8.3
18.6
17.3
24.0
10.0
22.3
16.8
26.1
17.2
19.1
11.5
27.0
19.5
11.2
17.9
20.7
Married
2 ch
100-100 (% AW)
1
23.2
25.1
34.4
23.6
-5.8
-5.0
10.5
10.4
32.5
12.2
28.3
23.8
32.2
23.0
26.1
28.0
23.3
16.7
26.3
20.0
13.3
20.8
32.0
24.9
10.2
23.0
19.4
25.7
12.6
25.1
18.9
29.7
19.3
21.2
14.2
28.8
21.6
15.2
20.7
23.9
Married
no ch
100-67 (% AW)
1
20.9
30.8
36.6
23.6
-1.8
0.0
10.5
18.8
34.3
14.9
27.7
25.6
35.6
21.3
33.5
26.3
22.3
16.8
26.8
21.6
13.9
25.2
35.2
26.4
8.3
24.0
17.3
26.3
23.9
25.8
22.6
33.1
19.3
23.1
17.6
27.7
22.0
20.0
22.6
26.7
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
Note: ch = children
1. Two-earner couple.
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2675007_0073.png
71
Figure 3.3. Income tax plus employee contributions less cash benefits, 2021
As % of gross wage earnings, by household type
Single no child
Belgium
Germany
Lithuania
Denmark
Slovenia
Hungary
Austria
Luxembourg
Finland
Italy
Turkey
Portugal
Iceland
France
Norway
Netherlands
Ireland
Latvia
Canada
Sweden
Poland
Slovak Republic
United Kingdom
Australia
United States
Greece
Japan
Spain
Israel
Czech Republic
New Zealand
Switzerland
Estonia
Korea
Costa Rica
Mexico
Chile
Colombia
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
Married one-earner couple 2 children
Note: The household type ‘single no child’ corresponds to a wage level of 100% of average wage and ‘married one earner couple 2 children’
corresponds to a combined wage level of 100%-0% of average wage.
Sources: OECD calculations based on country submissions and OECD Economic Outlook, Volume 2021 issue 2.
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TAXING WAGES 2022 © OECD 2022
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2675007_0074.png
72
Table 3.4. Income tax, 2021
As % of gross wage earnings, by household type and wage level
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
Single
no ch
67 (% AW)
17.4
9.4
18.1
13.4
0.0
0.0
0.0
5.5
32.8
9.9
12.6
12.3
12.9
2.4
15.0
23.7
12.7
6.9
13.2
6.2
2.6
12.8
13.7
10.7
4.0
4.9
14.2
16.0
5.6
11.8
7.4
8.7
10.2
14.0
8.4
10.2
11.5
14.1
10.7
11.7
Single
no ch
100 (% AW)
23.2
15.2
25.8
18.6
0.0
0.0
0.0
8.6
35.5
15.5
20.3
16.5
17.5
8.3
15.0
27.9
22.7
11.4
20.1
7.8
6.2
16.0
17.0
19.6
8.9
15.6
19.4
19.4
6.4
17.0
10.4
12.4
14.7
17.5
11.5
14.4
14.3
17.2
14.9
16.7
Single
no ch
167 (% AW)
29.4
21.8
33.8
26.3
1.3
0.0
2.3
11.2
41.1
19.7
28.0
22.7
26.0
14.6
15.0
33.5
32.0
20.0
30.7
12.7
11.1
18.5
19.6
26.8
13.4
26.4
24.8
26.0
7.6
23.8
12.9
15.7
20.5
30.2
16.4
18.1
22.9
21.9
20.5
22.7
Single
2 ch
67 (% AW)
17.4
-1.5
12.4
6.6
0.0
0.0
0.0
-12.6
31.0
6.9
12.6
9.5
-6.3
1.5
1.7
23.7
7.9
0.0
6.4
6.2
0.9
1.0
13.7
5.5
4.0
3.0
15.3
13.4
-0.8
3.1
-0.6
3.3
-4.5
14.0
2.6
8.5
11.5
-6.2
5.6
4.9
Married
2 ch
100-0 (% AW)
23.2
7.9
14.2
15.2
0.0
0.0
0.0
-8.6
31.8
11.1
20.3
9.5
-0.7
8.8
6.1
21.9
12.7
11.4
14.0
6.5
4.2
8.1
17.0
7.6
8.9
15.4
19.4
19.4
2.1
6.7
-0.5
4.6
7.7
17.5
4.9
12.5
13.7
2.3
9.9
9.7
Married
2 ch
100-67 (% AW)
1
20.9
9.3
21.2
16.5
0.0
0.0
0.0
0.5
34.5
12.1
17.2
12.0
9.1
6.5
9.7
26.2
18.3
7.4
14.8
7.2
3.9
10.0
15.7
14.1
6.9
10.5
17.3
18.1
4.0
11.3
6.0
7.4
10.8
16.1
8.9
12.0
13.2
8.9
11.5
12.3
Married
2 ch
100-100 (% AW)
1
23.2
12.2
24.5
18.6
0.0
0.0
0.0
2.9
35.5
14.5
20.3
14.5
12.2
8.8
10.6
27.9
22.7
9.5
18.1
7.8
5.4
12.1
17.0
18.2
8.9
14.9
19.4
19.4
4.6
14.1
7.7
9.5
13.0
17.5
11.0
13.8
14.3
12.0
13.6
14.8
Married
no ch
100-67 (% AW)
1
20.9
12.9
22.7
16.5
0.0
0.0
0.0
7.8
34.5
13.3
17.2
14.3
15.4
7.2
15.0
26.2
18.3
9.2
17.3
7.2
4.7
14.7
15.7
14.1
6.9
11.3
17.3
18.1
6.0
14.8
9.2
11.0
12.9
16.1
11.2
12.7
13.2
15.0
13.2
14.6
Note: ch = children
1. Two-earner couple.
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2675007_0075.png
73
Figure 3.4. Income tax, by family-type, 2021
As % of gross wage earnings
Single no child
Denmark
Iceland
Belgium
Australia
Ireland
Finland
Italy
Luxembourg
New Zealand
Norway
Canada
Sweden
Germany
United States
Portugal
Lithuania
France
Latvia
Netherlands
Estonia
Austria
Hungary
Spain
Turkey
United Kingdom
Slovenia
Switzerland
Israel
Slovak Republic
Mexico
Czech Republic
Greece
Japan
Poland
Korea
Chile
Colombia
Costa Rica
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Married one-earner couple 2 children
Note: The household type ‘single no child’ corresponds to a wage level of 100% of average wage and ‘married one earner couple 2 children’
corresponds to a combined wage level of 100%-0% of average wage.
Sources: OECD calculations based on country submissions and OECD Economic Outlook, Volume 2021 issue 2.
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2675007_0076.png
74
Table 3.5. Employee contributions, 2021
As % of gross wage earnings, by household type and wage level
Single
no ch
67 (% AW)
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
0.0
18.0
13.9
7.9
7.0
0.0
10.5
11.0
0.0
1.6
10.3
11.3
20.2
14.1
18.5
0.2
4.0
6.5
9.5
14.5
9.1
10.5
19.5
12.2
1.3
13.8
0.0
8.2
17.8
11.0
13.4
22.1
6.4
7.0
6.4
15.0
8.1
7.7
9.7
12.1
Single
no ch
100 (% AW)
0.0
18.0
14.0
6.5
7.0
0.0
10.5
11.0
0.0
1.6
10.5
11.3
20.2
14.1
18.5
0.1
4.0
8.3
9.5
14.5
9.1
10.5
19.5
12.3
1.4
11.9
0.0
8.2
17.8
11.0
13.4
22.1
6.4
7.0
6.4
15.0
9.4
7.7
9.7
12.0
Single
no ch
167 (% AW)
0.0
16.4
13.9
3.9
7.0
0.0
10.5
11.0
0.0
1.6
10.5
11.0
16.6
14.1
18.5
0.1
4.0
9.8
9.7
13.6
8.2
10.5
19.5
12.4
1.5
9.6
0.0
8.2
17.8
11.0
13.4
22.1
6.4
4.8
6.4
15.0
7.3
7.7
9.3
11.6
Single
2 ch
67 (% AW)
0.0
18.0
13.9
7.9
7.0
0.0
10.5
11.0
0.0
1.6
10.3
11.3
20.0
14.1
18.5
0.2
4.0
6.5
9.5
14.5
9.1
10.5
19.5
12.2
1.3
8.1
0.0
8.2
17.8
11.0
13.4
22.1
6.4
7.0
6.4
15.0
8.1
7.7
9.5
11.8
Married
2 ch
100-0 (% AW)
0.0
18.0
14.0
6.5
7.0
0.0
10.5
11.0
0.0
1.6
10.5
11.3
20.0
14.1
18.5
0.1
4.0
8.3
9.5
14.5
9.1
10.5
19.5
12.3
1.4
11.4
0.0
8.2
17.8
11.0
13.4
22.1
6.4
7.0
6.4
15.0
9.4
7.7
9.7
12.0
Married
2 ch
100-67 (% AW)
1
0.0
18.0
13.9
7.0
7.0
0.0
10.5
11.0
0.0
1.6
10.4
11.3
20.0
14.1
18.5
0.1
4.0
7.6
9.5
14.5
9.1
10.5
19.5
12.3
1.3
10.4
0.0
8.2
17.8
11.0
13.4
22.1
6.4
7.0
6.4
15.0
8.9
7.7
9.6
11.9
Married
2 ch
100-100 (% AW)
1
0.0
18.0
13.8
6.5
7.0
0.0
10.5
11.0
0.0
1.6
10.5
11.3
20.0
14.1
18.5
0.1
4.0
8.3
9.5
14.5
9.1
10.5
19.5
12.3
1.4
10.0
0.0
8.2
17.8
11.0
13.4
22.1
6.4
7.0
6.4
15.0
9.4
7.7
9.6
11.9
Married
no ch
100-67 (% AW)
1
0.0
18.0
13.9
7.0
7.0
0.0
10.5
11.0
0.0
1.6
10.4
11.3
20.2
14.1
18.5
0.1
4.0
7.6
9.5
14.5
9.1
10.5
19.5
12.3
1.3
12.7
0.0
8.2
17.8
11.0
13.4
22.1
6.4
7.0
6.4
15.0
8.9
7.7
9.7
12.1
Note: ch = children
1. Two-earner couple.
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2675007_0077.png
75
Figure 3.5. Employee contributions, 2021
As % of gross wage earnings, by household type
Single no child
Slovenia
Germany
Lithuania
Hungary
Austria
Poland
Turkey
Japan
Greece
Belgium
Slovak Republic
Luxembourg
Netherlands
France
Czech Republic
Portugal
Costa Rica
Latvia
Finland
Italy
United Kingdom
Korea
Israel
Norway
United States
Chile
Sweden
Canada
Switzerland
Spain
Ireland
Estonia
Mexico
Iceland
Australia
Colombia
Denmark
New Zealand
0%
5%
10%
15%
20%
25%
Married one-earner couple 2 children
Note: The household type ‘single no child’ corresponds to a wage level of 100% of average wage and ‘married one earner couple 2 children’
corresponds to a combined wage level of 100%-0% of average wage.
Sources: OECD calculations based on country submissions and OECD Economic Outlook, Volume 2021 issue 2.
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2675007_0078.png
76
Table 3.6. Marginal rate of income tax plus employee and employer contributions less cash
benefits, 2021
As % of labour costs, by household type and wage level
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
Single
no ch
67 (% AW)
39.2
55.7
68.5
41.6
7.0
0.0
29.2
44.7
38.7
41.2
54.5
64.6
53.9
45.3
43.2
40.1
35.6
36.8
54.7
33.1
29.3
45.8
44.1
51.4
17.4
44.1
30.5
41.8
36.2
46.7
46.0
43.6
44.6
46.2
26.5
42.8
40.2
31.5
40.4
47.7
Single
no ch
100 (% AW)
40.7
59.5
65.1
31.9
7.0
0.0
29.2
44.7
41.7
49.5
56.1
58.2
58.0
46.7
43.2
40.1
53.6
47.0
64.0
37.3
30.8
45.8
44.1
57.2
23.4
51.2
30.0
49.9
36.2
51.1
46.0
50.3
48.3
49.3
32.5
47.8
40.2
40.8
43.4
50.9
Single
no ch
167 (% AW)
42.1
45.7
67.8
44.5
10.2
0.0
36.5
44.7
55.5
41.2
59.0
60.0
47.0
50.9
43.2
47.6
56.8
50.7
62.9
38.0
32.8
44.5
44.1
55.7
28.4
51.4
33.0
52.6
48.3
58.0
49.2
55.0
54.1
66.0
36.0
47.8
49.0
42.7
46.1
52.8
Single
2 ch
67 (% AW)
58.2
55.7
68.5
76.9
7.0
0.0
29.2
44.7
36.9
41.2
54.5
74.6
52.5
45.3
43.2
50.5
74.2
18.2
55.9
52.5
23.1
45.8
44.1
60.7
17.4
49.6
42.5
41.8
96.9
46.7
46.0
43.6
44.6
46.2
20.8
42.8
40.2
52.3
45.9
53.2
Married
2 ch
100-0 (% AW)
40.7
59.5
65.1
37.4
7.0
0.0
29.2
33.5
41.7
49.5
56.1
41.9
51.8
46.7
43.2
49.1
53.6
47.0
65.2
37.3
30.8
45.8
44.1
43.0
23.4
56.8
55.0
49.9
36.2
46.7
46.0
43.6
46.1
49.3
24.6
47.8
40.2
31.5
42.5
48.4
Married
2 ch
100-67 (% AW)
1
40.7
59.5
64.2
37.4
7.0
0.0
29.2
44.7
41.7
49.5
56.1
50.6
55.9
46.7
43.2
46.9
53.6
47.0
64.6
37.3
30.8
45.8
44.1
57.2
23.4
51.2
30.0
49.9
36.2
51.1
46.0
50.3
48.3
49.3
30.3
47.8
40.2
31.5
43.1
50.4
Married
2 ch
100-100 (% AW)
1
40.7
59.5
64.2
37.4
7.0
0.0
29.2
44.7
41.7
49.5
56.1
58.2
55.5
46.7
43.2
40.1
53.6
47.0
64.6
37.3
30.8
45.8
44.1
57.2
23.4
51.2
30.0
49.9
36.2
51.1
46.0
50.3
48.3
49.3
34.4
47.8
40.2
40.8
43.5
50.8
Married
no ch
100-67 (% AW)
1
40.7
59.5
64.2
31.9
7.0
0.0
29.2
44.7
41.7
49.5
56.1
47.9
56.0
46.7
43.2
40.1
53.6
47.0
64.0
37.3
30.8
45.8
44.1
57.2
23.4
51.2
30.0
49.9
36.2
51.1
46.0
50.3
48.3
49.3
32.8
47.8
40.2
31.5
42.8
50.3
Note: ch = children
It is assumed that gross earnings of the principal earner in the household rise. The outcome may differ if the wage of the spouse goes up, especially if
partners are taxed individually.
1. Two-earner couple.
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2675007_0079.png
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Figure 3.6. Marginal rate of income tax plus employee and employer contributions less cash
benefits, 2021
As % of labour costs, by household type
Single no child
Belgium
Italy
Austria
France
Germany
Luxembourg
Finland
Ireland
Netherlands
Portugal
Slovenia
Norway
Estonia
Sweden
Spain
Turkey
Israel
Greece
Slovak Republic
Latvia
Czech Republic
Lithuania
Hungary
Denmark
United States
Australia
United Kingdom
Iceland
Japan
Poland
Switzerland
Canada
Korea
New Zealand
Costa Rica
Mexico
Chile
Colombia
0%
10%
20%
30%
40%
50%
60%
70%
Married one-earner couple 2 children
Note: The household type ‘single no child’ corresponds to a wage level of 100% of average wage and ‘married one earner couple 2 children’
corresponds to a combined wage level of 100%-0% of average wage.
Sources: OECD calculations based on country submissions and OECD Economic Outlook, Volume 2021 issue 2.
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Table 3.7. Marginal rate of income tax plus employee contributions less cash benefits, 2021
As % of gross wage earnings, by household type and wage level
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
Single
no ch
67 (% AW)
36.0
43.3
55.6
35.2
7.0
0.0
10.5
26.0
38.7
21.3
45.0
32.6
44.7
33.0
33.5
36.4
28.5
32.0
40.4
22.8
21.6
33.0
43.1
44.6
12.1
37.4
30.5
34.2
25.8
34.0
29.9
34.6
28.1
29.3
21.8
32.8
32.0
26.3
30.9
35.6
Single
no ch
100 (% AW)
37.5
48.2
55.6
29.7
7.0
0.0
10.5
26.0
41.7
32.4
46.9
43.0
49.7
34.7
33.5
36.4
48.5
43.0
52.6
27.7
23.3
33.0
43.1
51.3
17.6
45.4
30.0
43.4
25.8
39.5
29.9
42.4
32.9
33.4
28.2
38.7
32.0
36.3
35.0
40.4
Single
no ch
167 (% AW)
39.0
42.0
59.0
43.4
10.2
0.0
19.7
26.0
55.5
21.3
50.5
42.2
47.0
39.9
33.5
44.4
52.0
47.0
51.2
34.1
28.5
31.4
43.1
49.6
22.9
51.4
33.0
46.4
39.8
48.0
34.0
47.8
40.4
55.3
32.2
38.7
42.0
38.3
39.0
43.7
Single
2 ch
67 (% AW)
56.0
43.3
55.6
74.3
7.0
0.0
10.5
26.0
36.9
21.3
45.0
51.6
43.1
33.0
33.5
47.5
71.4
12.0
42.0
45.2
14.8
33.0
43.1
55.2
12.1
43.7
42.5
34.2
96.3
34.0
29.9
34.6
28.1
29.3
15.8
32.8
32.0
48.6
37.2
42.3
Married
2 ch
100-0 (% AW)
37.5
48.2
55.6
35.4
7.0
0.0
10.5
11.0
41.7
32.4
46.9
20.8
42.1
34.7
33.5
46.0
48.5
43.0
54.2
27.7
23.3
33.0
43.1
35.1
17.6
51.7
55.0
43.4
25.8
34.0
29.9
34.6
30.0
33.4
19.8
38.7
32.0
26.3
33.8
37.3
Married
2 ch
100-67 (% AW)
1
37.5
48.2
54.4
35.4
7.0
0.0
10.5
26.0
41.7
32.4
46.9
32.6
47.0
34.7
33.5
43.6
48.5
43.0
53.4
27.7
23.3
33.0
43.1
51.3
17.6
45.4
30.0
43.4
25.8
39.5
29.9
42.4
32.9
33.4
25.9
38.7
32.0
26.3
34.7
39.8
Married
2 ch
100-100 (% AW)
1
37.5
48.2
54.4
35.4
7.0
0.0
10.5
26.0
41.7
32.4
46.9
43.0
46.6
34.7
33.5
36.4
48.5
43.0
53.4
27.7
23.3
33.0
43.1
51.3
17.6
45.4
30.0
43.4
25.8
39.5
29.9
42.4
32.9
33.4
30.2
38.7
32.0
36.3
35.1
40.3
Married
no ch
100-67 (% AW)
1
37.5
48.2
54.4
29.7
7.0
0.0
10.5
26.0
41.7
32.4
46.9
29.0
47.2
34.7
33.5
36.4
48.5
43.0
52.6
27.7
23.3
33.0
43.1
51.3
17.6
45.4
30.0
43.4
25.8
39.5
29.9
42.4
32.9
33.4
28.5
38.7
32.0
26.3
34.3
39.6
Note: ch = children
It is assumed that gross earnings of the principal earner in the household rise. The outcome may differ if the wage of the spouse goes up, especially if
partners are taxed individually.
1. Two-earner couple.
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79
Figure 3.7. Marginal rate of income tax plus employee contributions less cash benefits, 2021
As % of gross wage earnings, by household type
Single no child
Belgium
Italy
Luxembourg
Germany
Ireland
Austria
Finland
Netherlands
Norway
Lithuania
Israel
France
Slovenia
Denmark
Portugal
Turkey
Australia
Iceland
United States
Greece
Hungary
Sweden
Latvia
Spain
Estonia
United Kingdom
New Zealand
Slovak Republic
Canada
Switzerland
Japan
Czech Republic
Poland
Korea
Mexico
Costa Rica
Chile
Colombia
0%
10%
20%
30%
40%
50%
60%
Married one-earner couple 2 children
Note: The household type ‘single no child’ corresponds to a wage level of 100% of average wage and ‘married one earner couple 2 children’
corresponds to a combined wage level of 100%-0% of average wage.
Sources: OECD calculations based on country submissions and OECD Economic Outlook, Volume 2021 issue 2.
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Table 3.8. Percentage increase in net income relative to percentage increase in gross wages, 2021
After an increase of 1 currency unit in gross wages, by household type and wage level
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
Single
no ch
67 (% AW)
0.78
0.78
0.65
0.82
0.87
1.00
1.00
0.89
0.91
0.89
0.71
0.88
0.83
0.80
1.00
0.83
0.86
0.79
0.77
0.97
0.89
0.87
0.85
0.72
0.93
0.77
0.81
0.87
0.97
0.85
0.89
0.95
0.86
0.89
0.92
0.90
0.85
0.90
0.86
0.85
Single
no ch
100 (% AW)
0.81
0.78
0.74
0.94
1.00
1.00
1.00
0.92
0.90
0.82
0.77
0.79
0.81
0.84
1.00
0.88
0.70
0.71
0.67
0.93
0.91
0.91
0.90
0.72
0.92
0.75
0.87
0.78
0.98
0.84
0.92
0.88
0.85
0.88
0.87
0.87
0.89
0.82
0.86
0.83
Single
no ch
167 (% AW)
0.86
0.94
0.78
0.81
0.98
1.00
0.92
0.95
0.76
1.00
0.81
0.87
0.92
0.84
1.00
0.84
0.75
0.75
0.82
0.89
0.89
0.97
0.93
0.83
0.91
0.76
0.89
0.81
0.81
0.80
0.90
0.84
0.81
0.69
0.88
0.92
0.83
0.88
0.86
0.85
Single
2 ch
67 (% AW)
0.41
0.57
0.50
0.24
0.75
0.93
1.00
0.66
0.67
0.74
0.62
0.47
0.66
0.72
0.74
0.59
0.27
0.89
0.60
0.57
0.91
0.72
0.65
0.45
0.93
0.53
0.49
0.76
0.03
0.71
0.75
0.68
0.73
0.80
0.84
0.88
0.78
0.47
0.65
0.60
Married
2 ch
100-0 (% AW)
0.73
0.61
0.56
0.74
0.78
0.95
1.00
0.85
0.78
0.71
0.72
0.95
0.72
0.80
0.82
0.64
0.57
0.69
0.56
0.86
0.86
0.79
0.73
0.71
0.92
0.61
0.48
0.74
0.74
0.77
0.77
0.80
0.81
0.81
0.84
0.85
0.84
0.74
0.76
0.74
Married
2 ch
100-67 (% AW)
1
0.79
0.66
0.66
0.82
0.86
0.94
1.00
0.80
0.84
0.74
0.70
0.85
0.75
0.80
0.88
0.76
0.63
0.66
0.60
0.89
0.87
0.82
0.81
0.61
0.90
0.67
0.85
0.74
0.82
0.78
0.84
0.78
0.81
0.82
0.84
0.84
0.85
0.83
0.79
0.76
Married
2 ch
100-100 (% AW)
1
0.81
0.69
0.69
0.85
0.88
0.95
1.00
0.83
0.86
0.77
0.74
0.75
0.79
0.85
0.90
0.88
0.67
0.68
0.63
0.90
0.88
0.85
0.84
0.65
0.92
0.71
0.87
0.76
0.85
0.81
0.87
0.82
0.83
0.85
0.81
0.86
0.87
0.75
0.81
0.78
Married
no ch
100-67 (% AW)
1
0.79
0.75
0.72
0.92
0.91
1.00
1.00
0.91
0.89
0.79
0.73
0.95
0.82
0.83
1.00
0.86
0.66
0.68
0.65
0.92
0.89
0.90
0.88
0.66
0.90
0.72
0.85
0.77
0.97
0.81
0.91
0.86
0.83
0.87
0.87
0.85
0.87
0.92
0.85
0.82
Note: ch = children
Net income is calculated as gross earnings minus personal income tax and employees' social security contributions plus family benefits. The increase
reported in the Table represents a form of elasticity. In a proportional tax system the elasticity would equal 1. The more progressive the system at these
income levels, the lower is the elasticity. The reported elasticities in Table 3.8 are calculated as (100 - METR) / (100 - AETR), where METR is the marginal
rate of income tax plus employee social security contributions less cash benefits reported in Table 3.7 and AETR is the average rate plus employee social
security contributions less cash benefits reported in Table 3.3.
1. Two-earner couple. Assumes a rise in the labour costs associated with the principal earner in the household.
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Table 3.9. Percentage increase in net income relative to percentage increase in gross labour cost,
2021
After an increase of 1 currency unit in gross labour cost, by household type and wage level
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
Single
no ch
67 (% AW)
0.78
0.78
0.58
0.82
0.87
1.00
1.00
0.89
0.91
0.89
0.71
0.60
0.83
0.80
1.00
0.83
0.86
0.77
0.77
0.97
0.89
0.87
0.85
0.72
0.99
0.77
0.81
0.87
0.97
0.85
0.89
0.95
0.86
0.89
0.92
0.90
0.81
0.91
0.86
0.83
Single
no ch
100 (% AW)
0.81
0.78
0.74
0.99
1.00
1.00
1.00
0.92
0.90
0.82
0.77
0.79
0.81
0.84
1.00
0.88
0.70
0.70
0.67
0.93
0.91
0.91
0.90
0.72
0.95
0.75
0.87
0.78
0.98
0.84
0.92
0.88
0.85
0.88
0.87
0.87
0.87
0.83
0.87
0.84
Single
no ch
167 (% AW)
0.86
1.11
0.78
0.85
0.98
1.00
0.92
0.95
0.76
1.00
0.81
0.87
1.08
0.84
1.00
0.84
0.75
0.75
0.82
0.96
0.92
0.97
0.93
0.83
0.93
0.82
0.89
0.81
0.81
0.80
0.90
0.84
0.81
0.69
0.88
0.92
0.82
0.88
0.88
0.87
Single
2 ch
67 (% AW)
0.41
0.57
0.45
0.24
0.75
0.93
1.00
0.66
0.67
0.74
0.62
0.32
0.66
0.72
0.74
0.59
0.27
0.87
0.60
0.57
0.91
0.72
0.65
0.45
0.99
0.53
0.49
0.76
0.03
0.71
0.75
0.68
0.73
0.80
0.84
0.88
0.76
0.48
0.64
0.58
Married
2 ch
100-0 (% AW)
0.73
0.61
0.56
0.79
0.78
0.95
1.00
0.85
0.78
0.71
0.72
0.95
0.72
0.80
0.82
0.64
0.57
0.68
0.56
0.86
0.86
0.79
0.73
0.71
0.95
0.61
0.48
0.74
0.74
0.77
0.77
0.80
0.81
0.81
0.84
0.85
0.82
0.75
0.76
0.74
Married
2 ch
100-67 (% AW)
1
0.79
0.66
0.65
0.87
0.86
0.94
1.00
0.80
0.84
0.74
0.70
0.84
0.75
0.80
0.88
0.76
0.63
0.65
0.60
0.89
0.87
0.82
0.81
0.61
0.94
0.67
0.85
0.74
0.82
0.78
0.84
0.78
0.81
0.82
0.84
0.84
0.82
0.83
0.80
0.76
Married
2 ch
100-100 (% AW)
1
0.81
0.69
0.69
0.90
0.88
0.95
1.00
0.83
0.86
0.77
0.74
0.75
0.79
0.85
0.90
0.88
0.67
0.67
0.63
0.90
0.88
0.85
0.84
0.65
0.95
0.71
0.87
0.76
0.85
0.81
0.87
0.82
0.83
0.85
0.81
0.86
0.85
0.75
0.82
0.79
Married
no ch
100-67 (% AW)
1
0.79
0.75
0.72
0.98
0.91
1.00
1.00
0.91
0.89
0.79
0.73
0.94
0.82
0.83
1.00
0.86
0.66
0.67
0.65
0.92
0.89
0.90
0.88
0.66
0.94
0.72
0.85
0.77
0.97
0.81
0.91
0.86
0.83
0.87
0.87
0.85
0.85
0.93
0.85
0.82
Note: ch = children
Net income is calculated as gross earnings minus personal income tax and employees' social security contributions plus family benefits. The increase
reported in the Table represents a form of elasticity. In a proportional tax system the elasticity would equal 1. The more progressive the system at these
income levels, the lower is the elasticity. The reported elasticities in Table 3.9 are calculated as (100 - METR) / (100 - AETR), where METR is the marginal
rate of income tax plus employee and employer social security contributions less cash benefits reported in Table 3.6 and AETR is the average rate plus
employee and employer social security contributions less cash benefits reported in Table 3.1.
1. Two-earner couple. Assumes a rise in the labour costs associated with the principal earner in the household.
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2675007_0084.png
82
Table 3.10. Annual gross wage and net income, single person, 2021
In US dollars using PPP, by household type and wage level
Single
no ch
67 (% AW)
Total gross earnings
Net income
before taxes
after taxes
41 792
34 510
44 723
32 501
46 722
31 783
39 783
31 310
16 835
17 927
9 298
9 298
17 730
15 868
23 027
19 238
47 406
31 927
23 747
21 015
38 913
29 978
37 973
29 018
47 675
31 906
24 329
20 302
23 974
15 943
46 203
35 176
45 316
37 740
33 447
28 945
35 057
27 110
34 789
27 620
37 082
32 723
21 270
16 321
27 357
18 266
52 191
40 206
9 369
8 873
49 034
39 856
30 965
26 570
44 065
33 395
24 107
18 467
24 836
19 178
18 267
14 474
27 376
18 931
29 813
24 885
37 197
29 407
56 573
48 187
24 898
18 625
43 360
34 874
42 179
34 414
33 649
34 105
26 494
25 839
Single
no ch
100 (% AW)
Total gross earnings
Net income
before taxes
after taxes
62 376
47 884
66 751
44 605
69 734
42 006
59 377
44 492
25 127
23 369
13 877
13 877
26 462
23 684
34 369
27 631
70 755
45 685
35 444
29 378
58 079
40 189
56 677
40 934
71 157
44 312
36 311
28 168
35 782
23 795
68 960
49 642
67 635
49 602
49 921
40 080
52 324
36 820
51 923
40 346
55 346
46 891
31 747
23 338
40 831
25 933
77 897
53 025
13 984
12 554
73 185
53 070
46 216
37 233
65 769
47 596
35 981
27 276
37 068
26 680
27 264
20 785
40 860
26 752
44 497
35 112
55 518
41 903
84 437
69 359
37 161
26 242
64 716
49 396
62 954
48 737
50 223
50 903
37 063
35 773
Single
no ch
167 (% AW)
Total gross earnings
Net income
before taxes
after taxes
104 168
73 525
111 474
68 864
116 456
60 862
99 160
69 208
41 963
38 480
23 175
23 175
44 192
38 548
57 395
44 671
118 161
69 577
59 192
46 596
96 992
59 610
94 650
62 805
118 832
68 172
60 640
43 236
59 755
39 737
115 163
76 498
112 951
72 260
83 368
58 552
87 381
52 099
86 712
63 912
92 427
74 600
53 017
37 618
68 188
41 499
130 088
79 106
23 353
19 875
122 219
78 294
77 181
58 062
109 833
72 296
60 088
44 811
61 904
40 351
45 531
33 560
68 236
42 438
74 311
54 323
92 715
60 324
141 010
108 894
62 059
41 502
108 076
75 471
105 134
74 081
83 872
85 008
57 039
54 582
Single
2 ch
67 (% AW)
Total gross earnings
Net income
before taxes
after taxes
41 792
44 447
44 723
44 191
46 722
41 723
39 783
42 774
16 835
20 935
9 298
9 988
17 730
15 868
23 027
25 807
47 406
44 888
23 747
25 404
38 913
34 724
37 973
39 108
47 675
41 163
24 329
22 483
23 974
21 476
46 203
40 937
45 316
47 220
33 447
33 015
35 057
33 942
34 789
33 264
37 082
34 784
21 270
19 917
27 357
24 090
52 191
51 773
9 369
8 873
49 034
52 493
30 965
36 023
44 065
38 312
24 107
27 642
24 836
23 140
18 267
17 117
27 376
26 383
29 813
29 267
37 197
33 063
56 573
56 846
24 898
19 037
43 360
37 571
42 179
45 775
33 649
34 105
32 775
33 046
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
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2675007_0085.png
83
Table 3.11. Annual gross wage and net income, married couple, 2021
In US dollars using PPP, by household type and wage level
Married
2 ch
100-0 (% AW)
Total gross earnings
Net income
before taxes
after taxes
62 376
53 141
66 751
56 295
69 734
55 598
59 377
51 638
25 127
29 780
13 877
14 567
26 462
23 684
34 369
35 957
70 755
52 573
35 444
33 713
58 079
43 094
56 677
47 112
71 157
57 414
39 942
32 719
35 782
29 090
68 960
58 518
67 635
60 835
49 921
41 251
52 324
42 754
51 923
43 492
55 346
49 372
31 747
26 934
40 831
31 757
77 897
71 239
13 984
12 554
73 185
58 207
46 216
43 212
65 769
50 117
35 981
35 893
37 068
31 707
27 264
24 946
40 860
33 464
44 497
38 249
55 518
45 559
84 437
80 283
37 161
26 928
64 716
52 464
62 954
62 298
50 319
51 068
43 116
42 959
Married
2 ch
100-67 (% AW)
1
Total gross earnings
Net income
before taxes
after taxes
104 168
82 394
111 474
87 911
116 456
80 980
99 160
78 656
41 963
45 586
23 175
24 555
44 192
39 552
57 395
53 201
118 161
81 699
59 192
53 892
96 992
73 072
94 650
74 812
118 832
84 231
66 704
54 239
59 755
45 033
115 163
85 630
112 951
92 197
83 368
72 050
87 381
68 004
86 712
70 388
92 427
81 803
53 017
43 255
68 188
47 865
130 088
104 528
23 353
21 426
122 219
99 539
77 181
63 804
109 833
83 512
60 088
54 064
61 904
48 119
45 531
37 902
68 236
50 411
74 311
61 562
92 715
74 966
141 010
124 773
62 059
45 279
108 076
86 967
105 134
93 384
84 032
85 283
67 664
66 886
Married
2 ch
100-100 (% AW)
1
Total gross earnings
Net income
before taxes
after taxes
124 752
95 769
133 501
100 015
139 468
91 463
118 755
90 724
50 255
53 149
27 755
29 135
52 925
47 368
68 737
61 594
141 510
95 457
70 888
62 255
116 158
83 283
113 353
86 372
142 313
96 540
79 885
61 550
71 563
52 885
137 920
99 285
135 270
103 691
99 842
83 185
104 648
77 169
103 847
83 114
110 692
95 971
63 494
50 272
81 662
55 532
155 794
117 042
27 968
25 107
146 370
112 753
92 432
74 467
131 537
97 714
71 961
62 874
74 136
55 520
54 528
44 213
81 719
57 438
88 995
71 789
111 036
87 462
168 875
144 923
74 322
52 895
129 432
101 489
125 909
106 719
100 637
102 136
78 110
76 689
Married
no ch
100-67 (% AW)
1
Total gross earnings
Net income
before taxes
after taxes
104 168
82 394
111 474
77 106
116 456
73 822
99 160
75 801
41 963
42 706
23 175
23 175
44 192
39 552
57 395
46 632
118 161
77 612
59 192
50 393
96 992
70 167
94 650
70 430
118 832
76 509
66 704
52 469
59 755
39 737
115 163
84 819
112 951
87 709
83 368
69 396
87 381
63 930
86 712
67 967
92 427
79 614
53 017
39 659
68 188
44 199
130 088
95 711
23 353
21 426
122 219
92 925
77 181
63 804
109 833
80 991
60 088
45 743
61 904
45 960
45 531
35 259
68 236
45 683
74 311
59 997
92 715
71 310
141 010
116 220
62 059
44 867
108 076
84 270
105 134
84 139
84 032
85 283
63 792
61 953
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
1. Two-earner couple.
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2675007_0086.png
84
Table 3.12. Annual labour costs and net income, single person, 2021
In US dollars using PPP, by household type and wage level
Single
no ch
67 (% AW)
Total gross labour
Net income
costs before taxes
after taxes
44 012
34 510
57 272
32 501
59 058
31 783
44 011
31 310
16 835
17 927
9 298
9 298
22 428
15 868
30 810
19 238
47 406
31 927
31 774
21 015
46 999
29 978
49 274
29 018
57 198
31 906
29 812
20 302
28 049
15 943
49 022
35 176
50 323
37 740
35 117
28 945
46 128
27 110
40 132
27 620
41 125
32 723
26 297
16 321
27 846
18 266
59 414
40 206
10 662
8 873
55 038
39 856
30 965
26 570
49 793
33 395
28 051
18 467
30 734
19 178
23 738
14 474
31 783
18 931
38 727
24 885
48 884
29 407
60 194
48 187
29 255
18 625
47 548
34 874
45 713
34 414
38 966
41 119
26 494
25 839
Single
no ch
100 (% AW)
Total gross labour
Net income
costs before taxes
after taxes
65 689
47 884
85 480
44 605
88 663
42 006
64 905
44 492
25 127
23 369
13 877
13 877
33 475
23 684
45 985
27 631
70 755
45 685
47 424
29 378
70 148
40 189
77 248
40 934
85 370
44 312
44 496
28 168
41 865
23 795
73 167
49 642
75 109
49 602
52 843
40 080
68 848
36 820
59 899
40 346
61 381
46 891
39 245
23 338
41 562
25 933
88 678
53 025
15 619
12 554
82 060
53 070
46 216
37 233
74 318
47 596
41 867
27 276
45 872
26 680
35 430
20 785
47 438
26 752
57 802
35 112
72 961
41 903
89 841
69 359
43 664
26 242
71 852
49 396
68 077
48 737
58 270
61 559
37 063
35 773
Single
no ch
167 (% AW)
Total gross labour
Net income
costs before taxes
after taxes
109 700
73 525
140 717
68 864
148 068
60 862
105 725
69 208
41 963
38 480
23 175
23 175
55 903
38 548
76 795
44 671
118 161
69 577
79 198
46 596
117 147
59 610
136 589
62 805
138 391
68 172
74 308
43 236
69 914
39 737
122 188
76 498
125 432
72 260
88 832
58 552
114 976
52 099
99 297
63 912
101 611
74 600
65 533
37 618
69 408
41 499
148 092
79 106
25 699
19 875
132 121
78 294
77 181
58 062
124 112
72 296
69 918
44 811
76 606
40 351
59 167
33 560
79 221
42 438
96 529
54 323
121 846
60 324
149 984
108 894
72 920
41 502
121 195
75 471
113 483
74 081
97 134
102 643
57 039
54 582
Single
2 ch
67 (% AW)
Total gross labour
Net income
costs before taxes
after taxes
44 012
44 447
57 272
44 191
59 058
41 723
44 011
42 774
16 835
20 935
9 298
9 988
22 428
15 868
30 810
25 807
47 406
44 888
31 774
25 404
46 999
34 724
49 274
39 108
57 198
41 163
29 812
22 483
28 049
21 476
49 022
40 937
50 323
47 220
35 117
33 015
46 128
33 942
40 132
33 264
41 125
34 784
26 297
19 917
27 846
24 090
59 414
51 773
10 662
8 873
55 038
52 493
30 965
36 023
49 793
38 312
28 051
27 642
30 734
23 140
23 738
17 117
31 783
26 383
38 727
29 267
48 884
33 063
60 194
56 846
29 255
19 037
47 548
37 571
45 713
45 775
38 966
41 119
32 775
33 046
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
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2675007_0087.png
85
Table 3.13. Annual labour costs and net income, married couple, 2021
In US dollars using PPP, by household type and wage level
Married
2 ch
100-0 (% AW)
Total gross labour
Net income
costs before taxes
after taxes
65 689
53 141
85 480
56 295
88 663
55 598
64 905
51 638
25 127
29 780
13 877
14 567
33 475
23 684
45 985
35 957
70 755
52 573
47 424
33 713
70 148
43 094
77 248
47 112
85 370
57 414
48 945
32 719
41 865
29 090
73 167
58 518
75 109
60 835
52 843
41 251
68 848
42 754
59 899
43 492
61 381
49 372
39 245
26 934
41 562
31 757
88 678
71 239
15 619
12 554
82 060
58 207
46 216
43 212
74 318
50 117
41 867
35 893
45 872
31 707
35 430
24 946
47 438
33 464
57 802
38 249
72 961
45 559
89 841
80 283
43 664
26 928
71 852
52 464
68 077
62 298
58 387
61 762
43 116
42 959
Married
2 ch
100-67 (% AW)
1
Total gross labour
Net income
costs before taxes
after taxes
109 700
82 394
142 752
87 911
147 721
80 980
108 916
78 656
41 963
45 586
23 175
24 555
55 903
39 552
76 795
53 201
118 161
81 699
79 198
53 892
117 147
73 072
126 522
74 812
142 568
84 231
81 739
54 239
69 914
45 033
122 188
85 630
125 432
92 197
87 959
72 050
114 976
68 004
100 031
70 388
102 507
81 803
65 542
43 255
69 408
47 865
148 092
104 528
26 281
21 426
137 098
99 539
77 181
63 804
124 112
83 512
69 918
54 064
76 606
48 119
59 167
37 902
79 221
50 411
96 529
61 562
121 846
74 966
150 035
124 773
72 920
45 279
119 400
86 967
113 790
93 384
97 432
103 016
67 664
66 886
Married
2 ch
100-100 (% AW)
1
Total gross labour
Net income
costs before taxes
after taxes
131 378
95 769
170 960
100 015
177 327
91 463
129 810
90 724
50 255
53 149
27 755
29 135
66 950
47 368
91 970
61 594
141 510
95 457
94 848
62 255
140 296
83 283
154 496
86 372
170 740
96 540
97 891
61 550
83 729
52 885
146 333
99 285
150 218
103 691
105 685
83 185
137 696
77 169
119 798
83 114
122 763
95 971
78 490
50 272
83 124
55 532
177 356
117 042
31 238
25 107
164 120
112 753
92 432
74 467
148 637
97 714
83 734
62 874
91 744
55 520
70 859
44 213
94 876
57 438
115 604
71 789
145 923
87 462
179 683
144 923
87 329
52 895
143 704
101 489
136 154
106 719
116 774
123 523
78 110
76 689
Married
no ch
100-67 (% AW)
1
Total gross labour
Net income
costs before taxes
after taxes
109 700
82 394
142 752
77 106
147 721
73 822
108 916
75 801
41 963
42 706
23 175
23 175
55 903
39 552
76 795
46 632
118 161
77 612
79 198
50 393
117 147
70 167
126 522
70 430
142 568
76 509
81 739
52 469
69 914
39 737
122 188
84 819
125 432
87 709
87 959
69 396
114 976
63 930
100 031
67 967
102 507
79 614
65 542
39 659
69 408
44 199
148 092
95 711
26 281
21 426
137 098
92 925
77 181
63 804
124 112
80 991
69 918
45 743
76 606
45 960
59 167
35 259
79 221
45 683
96 529
59 997
121 846
71 310
150 035
116 220
72 920
44 867
119 400
84 270
113 790
84 139
97 432
103 016
63 792
61 953
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
1. Two-earner couple.
StatLink 2
https://stat.link/q5ngjv
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Notes
1
Tables 3.1 to 3.7 show figures rounded to the first decimal. Due to rounding, changes in percentage
points that are presented in the text may differ by one-tenth of a percentage point relative to those in the
Tables.
2
In Colombia, the general social security system for healthcare is financed by public and private funds.
The pension system is a hybrid of two different systems: a defined-contribution, fully-funded pension
system; and a pay-as-you-go system. Each of those contributions are mandatory and more than 50% of
total contributions are made to privately managed funds. Therefore, they are considered to be non-tax
compulsory payments (NTCPs) (further information is available in the country details in Part II of the report).
In addition, in Colombia, all payments for employment risk are made to privately managed funds and are
considered to be NTCPs. Other countries also have NTCPs (please see
https://www.oecd.org/tax/tax-
policy/tax-database/
).
3
The reported elasticities in Table 3.8 are calculated as (100 - METR) / (100 - AETR), where METR is the
marginal rate of income tax plus employee social security contributions less cash benefits reported in
Table 3.7 and AETR is the average rate of income tax plus employee social security contributions less
cash benefits reported in Table 3.3.
4
The reported elasticities in Table 3.9 are calculated as (100 - METR) / (100 - AETR), where METR is the
marginal rate of income tax plus employee and employer social security contributions less cash benefits
reported in Table 3.6 and AETR is the average rate of income tax plus employee and employer social
security contributions less cash benefits reported in Table 3.1.
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4
Graphical exposition of the 2021 tax
burden
The chapter presents a graphical exposition of the tax burdens on labour
income in 2021 for gross wage earnings ranging from 50% to 250% of the
average wage. These are illustrated in separate graphs for each of four
household types and for each OECD member country. The household
types are single taxpayers without children; single parents with two
children; one-earner married couples without children and one-earner
married couples with two children.
The graphs are divided into two sets showing the components of the
average and marginal tax wedge as percentage of total labour costs
(central and local income taxes; employee and employer social security
contributions and cash benefits). The graphs also show the net personal
average and marginal tax rates.
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The graphs in this section show the tax burden on labour income in 2021 for gross wage earnings
between 50% and 250% of the average wage (AW). For each OECD member country, there are separate
graphs for four household types: single taxpayers without children, single parents with two children, one-
earner married couples without children and one-earner married couples with two children. The net
personal average and marginal tax rates ([the change in] personal income taxes and employee social
security contributions [SSCs] net of cash benefits as a percentage of [the change in] gross wage earnings)
are included in the graphs that show respectively the average and the marginal tax wedge.
1
The graphs illustrate the relative importance of the different components of the tax wedge: central
government income taxes, local government income taxes, employee SSCs, employer SSCs (including
payroll taxes where applicable) and cash benefits as a percentage of total labour costs. It should be noted
that a decreasing share in total labour costs implies that the value of tax payments less benefits is not
increasing as rapidly as the corresponding total labour costs. It does not necessarily imply that the value
of payments less benefits is decreasing in cash terms.
Low-income households are treated favourably by the tax and benefit systems of many OECD countries.
Negative central government income taxes are observed in Belgium because of the non-wastable tax
credits for low-income workers and for dependent children; in Canada
2
because of the non-wastable
working income tax benefit; in Austria, the Czech Republic, Germany and the Slovak Republic because of
non-wastable child tax credits; in the United Kingdom because of the non-wastable Universal Credit (UC)
paid to low-income households; in Israel because of the non-wastable earned income tax credit (EITC) for
families with children (since 2016, single parents have been eligible for the EITC for a wider income range);
in Italy because of a payable tax credit targeting low-income workers; in Luxembourg because of a tax
credit for social minimum wage earners introduced in 2019; in Poland because of a conditional refundable
child tax credit since 2015; in Spain because of non-wastable tax credits for single parents; and in the
United States because of the non-wastable EITC and the child tax credit. In Germany, the tax credits that
are paid to families with dependent children were increased in response to the COVID-19 crisis in 2021.
In the United Kingdom, the UC was increased from April to September 2021 in response to the pandemic.
In Sweden, the charts show negative central government income taxes for the four household types due
to an EITC; however,
the tax credit is wastable in the sense that it cannot reduce the individual’s total
income tax payments to less than zero. The EITC is also deducted from the local government income tax.
In some OECD countries, the net personal average tax rate is negative for single parents or one-earner
married couples at lower income levels, meaning that these household types do not pay income taxes or
SSCs, or these payments are fully offset by cash benefits. For example, the net personal average tax rate
becomes positive at more than 90% of the AW in the Czech Republic (at 99% of the AW for the single
parent), in Poland (at 100% of the AW for the single parent and the one-earner married couple) and in the
United States (at 97% of the AW for the one-earner married couple). In Austria, the Czech Republic, Israel,
the Slovak Republic, the United Kingdom and the United States, the negative net personal average tax
rates resulted from the combined effect of refundable tax credits and cash benefit payments. In contrast,
the net personal average tax rate for single parents was negative mainly due to refundable tax credits in
Spain (up to 64% of the AW). There are large variations in cash benefit levels across OECD countries.
They represent about a quarter or more of total labour costs for low-income single parents and/or one-
earner married couples with two children in Australia, Canada, Chile, Denmark, Ireland, Lithuania,
New Zealand and Poland.
The marginal tax wedge is relatively flat across the earnings distribution in some countries because of flat
SSC and personal income tax rates. Single taxpayers without children face a flat marginal tax wedge on
incomes between 50% to 250% of AW in the Czech Republic (44.7%) and Hungary (43.2%). For Colombia,
the marginal tax wedge for the single worker without children and for the other three household types was
equal to zero across the whole income range, as no personal income taxes were paid at these levels of
earnings. Moreover, their contributions to pension, health and employment risk insurances are considered
to be non-tax compulsory payments (NTCPs)
3
and therefore are not counted as taxes in the
Taxing Wages
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89
calculations. The marginal tax wedge is also relatively constant in Iceland and Lithuania. In Iceland, the
marginal tax wedge is 40.1% on earnings below 121% of the AW, 45.9% on earnings at 122% and then
47.6% on earnings from 128% of the AW to 250% of the AW. In Lithuania, it is 44.1% on earnings below
182% of the AW, 43.0% on earnings at 183% of the AW and 40.6% between 184% and 250% of the AW.
SSCs are levied at flat rates in many OECD countries. Some countries have an earnings ceiling above
which no additional SSCs have to be paid. The variations in the marginal SSCs are in general the same
for the four family types, since the contribution rates or income ceilings do not vary depending on the
marital status or the number of dependent children. Nevertheless, in Hungary, the marginal employee
SSCs are higher for families with children at low-income levels due to the impact of the withdrawal of the
child tax allowance with increasing earnings. Families whose combined personal income tax base is not
sufficient to claim the maximum amount of the family tax allowance can deduct the remaining sum from
the health insurance and pension contributions. In contrast, in the Netherlands, the marginal employee
SSCs were lower for single parents at low-income levels, as these households were eligible for a single
parent tax credit that reached its maximum at 51.9% of the AW in 2021.
Within the income range of 50% to 250% of the AW, the marginal employer SSC rates fall to zero as a
result of income ceilings in Germany (at 163% of the AW), Luxembourg (at 197% of the AW), the
Netherlands (at 112%) and Spain (at 183%). The marginal employee SSC rates fall to zero in Austria (at
156% of the AW), Germany (at 163%), the Netherlands (at 205%), Spain (at 183%) and Sweden (at 114%).
In Canada, the marginal employee SSC rate falls to zero at 103% of the AW. However, a spike is observed
at 99% of the AW. The Ontario Health premium, which is calculated on an income schedule, is a fixed
payment that is adjusted when a taxpayer moves to a higher income bracket.
In addition, taxpayers may experience declining marginal employee and/or employer SSC rates as a
percentage of total labour costs over some parts of the earnings range as income increases. This can be
observed in Austria, Belgium, Canada, France, Germany, Japan, Korea, Luxembourg, the Netherlands,
Switzerland, the United Kingdom and the United States. Large decreases in marginal rates as a
percentage of total labour costs were observed in Japan, where the marginal employee and employer SSC
rates drop from 12.53% to 4.99% and from 13.31% to 5.85% respectively on earnings above 151% of the
AW; in Luxembourg, where the marginal employee SSC rate drops from 10.94% to 1.40% on earnings
above 196% of the AW; in the United Kingdom, where the marginal employee SSC rate drops from 10.54%
to 1.76% of earnings above 114% of the AW; and in the United States, where the marginal employer and
employee SSC rates drop from 7.11% to 1.43% on earnings above 226% of the AW.
In Slovenia, the marginal employer SSCs are negative up to 59% of the AW. This is because the employer
pays additional contributions on earnings that are below the social security minimum income threshold.
This penalty decreases as earnings increase and is completely exhausted once the employee’s earnings
reach the social security minimum income threshold. The negative marginal employer SSC rates derive
from the decreasing additional contributions.
Taxpayers face net personal marginal tax rates and wedges of about 70% or more in several of OECD
countries at particular earnings levels. This is the case for taxpayers without children in Austria, Belgium,
Chile, Italy, Luxembourg, Mexico and Portugal. They also apply to families with children in Australia,
Austria, Belgium, Canada, Chile, Greece, Iceland, Ireland, Italy, Japan, Lithuania, Mexico, New Zealand,
Poland, Portugal, Slovenia, Spain, Turkey and the United Kingdom. In many countries, these high marginal
tax rates are partly the result of reductions in benefits, allowances or tax credits that are targeted at low-
income taxpayers as income rises.
The zigzag movement in the marginal tax burdens observed in some of the graphs arises when the
changes in taxes, SSCs, and/or cash benefits for small rises in income vary over the income range in a
non-continuous way. This is the case because of rounding rules in Germany, Luxembourg, Sweden and
Switzerland; and the discrete characteristics of the PAYE (Pay As You Earn) tax credit, the spouse tax
credit and the child transfers in Italy.
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90
Australia 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
40
30
20
10
0
-10
-20
-30
-40
-50
-60
%
40
30
20
10
0
-10
-20
-30
-40
-50
-60
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
40
30
20
10
0
-10
-20
-30
-40
-50
-60
%
40
30
20
10
0
-10
-20
-30
-40
-50
-60
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/0ezfvq
Australia 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/4rhk8u
TAXING WAGES 2022 © OECD 2022
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2675007_0093.png
91
Austria 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
60
50
40
30
20
10
0
-10
-20
-30
%
60
50
40
30
20
10
0
-10
-20
-30
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
60
50
40
30
20
10
0
-10
-20
-30
%
60
50
40
30
20
10
0
-10
-20
-30
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/dn7xsv
Austria 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/85cwmg
TAXING WAGES 2022 © OECD 2022
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2675007_0094.png
92
Belgium 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
70
60
50
40
30
20
10
0
-10
-20
-30
%
70
60
50
40
30
20
10
0
-10
-20
-30
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
70
60
50
40
30
20
10
0
-10
-20
-30
%
70
60
50
40
30
20
10
0
-10
-20
-30
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/jowfqc
Belgium 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/6udelf
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2675007_0095.png
93
Canada 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
40
30
20
10
0
-10
-20
-30
-40
%
40
30
20
10
0
-10
-20
-30
-40
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
40
30
20
10
0
-10
-20
-30
-40
%
40
30
20
10
0
-10
-20
-30
-40
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/e9at5v
Canada 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/bsztd7
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94
Chile 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
20
10
0
-10
-20
-30
-40
-50
-60
%
20
10
0
-10
-20
-30
-40
-50
-60
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
20
10
0
-10
-20
-30
-40
-50
-60
%
20
10
0
-10
-20
-30
-40
-50
-60
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/eqb3p0
Chile 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/ysegri
TAXING WAGES 2022 © OECD 2022
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2675007_0097.png
95
Colombia 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
5
0
-5
-10
-15
%
5
0
-5
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
5
0
-5
-10
-15
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
%
5
0
-5
one-earner married couple, 2 children
-10
-15
-10
-15
StatLink 2
https://stat.link/res542
Colombia 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/q0dvkp
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2675007_0098.png
96
Costa Rica 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
40
35
30
25
20
15
10
5
0
%
40
35
30
25
20
15
10
5
0
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
40
35
30
25
20
15
10
5
0
%
40
35
30
25
20
15
10
5
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/5ju30a
Costa Rica 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/3tm2pj
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0099.png
97
Czech Republic 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
50
40
30
20
10
0
-10
-20
-30
%
50
40
30
20
10
0
-10
-20
-30
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
50
40
30
20
10
0
-10
-20
-30
%
50
40
30
20
10
0
-10
-20
-30
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/4ore3y
Czech Republic 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/rsae4g
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0100.png
98
Denmark 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
50
40
30
20
10
0
-10
-20
-30
-40
%
50
40
30
20
10
0
-10
-20
-30
-40
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
50
40
30
20
10
0
-10
-20
-30
-40
%
50
40
30
20
10
0
-10
-20
-30
-40
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/glyafn
Denmark 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/b2vn45
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0101.png
99
Estonia 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
50
40
30
20
10
0
-10
-20
-30
%
50
40
30
20
10
0
-10
-20
-30
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
50
40
30
20
10
0
-10
-20
-30
%
50
40
30
20
10
0
-10
-20
-30
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/2hbzay
Estonia 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/ijtpza
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0102.png
100
Finland 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
60
50
40
30
20
10
0
-10
-20
%
60
50
40
30
20
10
0
-10
-20
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
60
50
40
30
20
10
0
-10
-20
%
60
50
40
30
20
10
0
-10
-20
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/tqyr3f
Finland 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/eh14mj
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0103.png
101
France 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
single person, 0 children
60
50
40
30
20
10
0
-10
-20
-30
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
60
50
40
30
20
10
0
-10
-20
-30
%
60
50
40
30
20
10
0
-10
-20
-30
single parent, 2 children
one-earner married couple, 0 children
%
60
50
40
30
20
10
0
-10
-20
-30
one-earner married couple, 2 children
StatLink 2
https://stat.link/ubwo3z
France 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/zu46hm
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0104.png
102
Germany 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
60
50
40
30
20
10
0
-10
-20
%
60
50
40
30
20
10
0
-10
-20
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
60
50
40
30
20
10
0
-10
-20
%
60
50
40
30
20
10
0
-10
-20
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/xarjp4
Germany 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/7axe4h
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0105.png
103
Greece 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
50
40
30
20
10
0
-10
-20
%
50
40
30
20
10
0
-10
-20
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
50
40
30
20
10
0
-10
-20
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
%
50
40
30
20
10
0
-10
-20
one-earner married couple, 2 children
StatLink 2
https://stat.link/sn06mz
Greece 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/ka7l48
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0106.png
104
Hungary 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
50
40
30
20
10
0
-10
-20
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
50
40
30
20
10
0
-10
-20
single person, 0 children
single parent, 2 children
%
50
40
30
20
10
0
-10
-20
one-earner married couple, 0 children
%
50
40
30
20
10
0
-10
-20
one-earner married couple, 2 children
StatLink 2
https://stat.link/ue5otb
Hungary 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/2jfyin
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0107.png
105
Iceland 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
50
40
30
20
10
0
-10
-20
%
50
40
30
20
10
0
-10
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
50
40
30
20
10
0
-10
-20
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
%
50
40
30
20
10
0
-10
one-earner married couple, 2 children
-20
-20
StatLink 2
https://stat.link/weofs8
Iceland 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/btgro8
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0108.png
106
Ireland 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
50
40
30
20
10
0
-10
-20
-30
-40
-50
%
50
40
30
20
10
0
-10
-20
-30
-40
-50
single person, 0 children
%
50
40
30
20
10
0
-10
-20
-30
-40
-50
%
50
40
30
20
10
0
-10
-20
-30
-40
-50
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/pu5b7q
Ireland 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/blqnpf
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0109.png
107
Israel 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
50
40
30
20
10
0
-10
-20
%
50
40
30
20
10
0
-10
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
50
40
30
20
10
0
-10
-20
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
%
50
40
30
20
10
0
-10
one-earner married couple, 2 children
-20
-20
StatLink 2
https://stat.link/fsbein
Israel 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/v7r9bg
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0110.png
108
Italy 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
60
50
40
30
20
10
0
-10
-20
-30
%
60
50
40
30
20
10
0
-10
-20
-30
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
60
50
40
30
20
10
0
-10
-20
-30
%
60
50
40
30
20
10
0
-10
-20
-30
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/y3a2vc
Italy 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/4xjhdm
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0111.png
109
Japan 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
40
30
20
10
0
-10
-20
-30
%
40
30
20
10
0
-10
-20
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
40
30
20
10
0
-10
-20
-30
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
%
40
30
20
10
0
-10
-20
one-earner married couple, 2 children
-30
-30
StatLink 2
https://stat.link/6sw824
Japan 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/20ughv
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0112.png
110
Korea 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
30
25
20
15
10
5
0
-5
-10
%
30
25
20
15
10
5
0
-5
-10
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
30
25
20
15
10
5
0
-5
-10
%
30
25
20
15
10
5
0
-5
-10
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/p50lt8
Korea 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/d2urso
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0113.png
111
Latvia 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
50
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
50
single person, 0 children
single parent, 2 children
40
30
20
10
40
30
20
10
0
-10
%
50
0
-10
one-earner married couple, 0 children
%
50
one-earner married couple, 2 children
40
30
20
10
0
40
30
20
10
0
-10
-10
StatLink 2
https://stat.link/6jldwr
Latvia 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/1zquan
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0114.png
112
Lithuania 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
50
40
30
20
10
0
-10
-20
-30
%
50
40
30
20
10
0
-10
-20
-30
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
50
40
30
20
10
0
-10
-20
-30
%
50
40
30
20
10
0
-10
-20
-30
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/2ck4fq
Lithuania 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/g0z328
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0115.png
113
Luxembourg 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
50
40
30
20
10
0
-10
-20
-30
%
50
40
30
20
10
0
-10
-20
-30
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
50
40
30
20
10
0
-10
-20
-30
%
50
40
30
20
10
0
-10
-20
-30
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/8qnidv
Luxembourg 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/ndilar
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0116.png
114
Mexico 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
30
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
30
single person, 0 children
single parent, 2 children
25
20
15
10
25
20
15
10
5
0
%
30
5
0
one-earner married couple, 0 children
%
30
one-earner married couple, 2 children
25
20
15
10
5
25
20
15
10
5
0
0
StatLink 2
https://stat.link/bj3u6k
Mexico 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/o1ek2y
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0117.png
115
Netherlands 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
50
40
30
20
10
0
-10
-20
-30
%
50
40
30
20
10
0
-10
-20
-30
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
50
40
30
20
10
0
-10
-20
-30
%
50
40
30
20
10
0
-10
-20
-30
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/1kxjm6
Netherlands 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/1aglxv
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0118.png
116
New Zealand 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
30
20
10
0
-10
-20
-30
-40
-50
-60
%
30
20
10
0
-10
-20
-30
-40
-50
-60
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
30
20
10
0
-10
-20
-30
-40
-50
-60
%
30
20
10
0
-10
-20
-30
-40
-50
-60
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/l3hif7
New Zealand 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/j4l5a8
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0119.png
117
Norway 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
50
40
30
20
10
0
-10
-20
%
50
40
30
20
10
0
-10
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
50
40
30
20
10
0
-10
-20
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
%
50
40
30
20
10
0
-10
one-earner married couple, 2 children
-20
-20
StatLink 2
https://stat.link/67za81
Norway 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/2s8a3h
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0120.png
118
Poland 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
50
40
30
20
10
0
-10
-20
-30
-40
-50
-60
%
50
40
30
20
10
0
-10
-20
-30
-40
-50
-60
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
50
40
30
20
10
0
-10
-20
-30
-40
-50
-60
%
50
40
30
20
10
0
-10
-20
-30
-40
-50
-60
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/nc64z7
Poland 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/z57x4k
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0121.png
119
Portugal 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
60
50
40
30
20
10
0
-10
%
60
50
40
30
20
10
0
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
60
50
40
30
20
10
0
-10
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
%
60
50
40
30
20
10
0
one-earner married couple, 2 children
-10
-10
StatLink 2
https://stat.link/lon4jb
Portugal 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/n90kxl
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0122.png
120
Slovak Republic 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
50
40
30
20
10
0
-10
-20
%
50
40
30
20
10
0
-10
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
50
40
30
20
10
0
-10
-20
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
%
50
40
30
20
10
0
-10
one-earner married couple, 2 children
-20
-20
StatLink 2
https://stat.link/jznv7i
Slovak Republic 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/n94axj
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Slovenia 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
60
50
40
30
20
10
0
-10
-20
-30
%
60
50
40
30
20
10
0
-10
-20
-30
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
60
50
40
30
20
10
0
-10
-20
-30
%
60
50
40
30
20
10
0
-10
-20
-30
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/pq8kgo
Slovenia 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
-10
-20
-30
-40
%
100
90
80
70
60
50
40
30
20
10
0
-10
-20
-30
-40
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
-10
-20
-30
-40
%
100
90
80
70
60
50
40
30
20
10
0
-10
-20
-30
-40
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/21z0mn
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122
Spain 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
single person, 0 children
70
60
50
40
30
20
10
0
-10
-20
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
70
60
50
40
30
20
10
0
-10
-20
%
70
60
50
40
30
20
10
0
-10
-20
single parent, 2 children
one-earner married couple, 0 children
%
70
60
50
40
30
20
10
0
-10
-20
one-earner married couple, 2 children
StatLink 2
https://stat.link/yfpv4q
Spain 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/cy7qu8
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123
Sweden 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
60
50
40
30
20
10
0
-10
-20
-30
%
60
50
40
30
20
10
0
-10
-20
-30
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
60
50
40
30
20
10
0
-10
-20
-30
%
60
50
40
30
20
10
0
-10
-20
-30
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/vp0872
Sweden 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
80
70
60
50
40
30
20
10
0
-10
-20
%
80
70
60
50
40
30
20
10
0
-10
-20
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
80
70
60
50
40
30
20
10
0
-10
-20
%
80
70
60
50
40
30
20
10
0
-10
-20
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/8m9vg1
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124
Switzerland 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
40
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
40
single person, 0 children
single parent, 2 children
30
20
10
0
30
20
10
0
-10
-20
%
40
-10
-20
one-earner married couple, 0 children
%
40
one-earner married couple, 2 children
30
20
10
0
-10
30
20
10
0
-10
-20
-20
StatLink 2
https://stat.link/ks82ph
Switzerland 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/5n9i7z
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125
Turkey 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
50
40
30
20
10
0
%
50
40
30
20
10
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
%
50
40
30
20
10
one-earner married couple, 2 children
0
0
StatLink 2
https://stat.link/jshz0f
Turkey 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/nwyvx4
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126
United Kingdom 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
50
40
30
20
10
0
-10
-20
-30
%
50
40
30
20
10
0
-10
-20
-30
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
50
40
30
20
10
0
-10
-20
-30
%
50
40
30
20
10
0
-10
-20
-30
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/exv1ou
United Kingdom 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/2vp3j8
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127
United States 2021: average tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
employer SSC as % of total labour costs
average local income tax as % of total labour costs
cash benefits as % of total labour costs
net personal average tax rate as % of gross wage earnings
%
40
30
20
10
0
-10
-20
-30
-40
-50
%
40
30
20
10
0
-10
-20
-30
-40
-50
employee SSC as % of total labour costs
average central income tax as % of total labour costs
average tax wedge (sum of the components)
%
40
30
20
10
0
-10
-20
-30
-40
-50
%
40
30
20
10
0
-10
-20
-30
-40
-50
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/w6jf87
United States 2021: marginal tax wedge decomposition
by level of gross earnings expressed as a % of the average wage
marginal employer SSC as % of total labour costs
marginal local income tax as % of total labour costs
marginal cash benefits as % of total labour costs
net personal marginal tax rate
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
marginal employee SSC as % of total labour costs
marginal central income tax as % of total labour costs
marginal tax wedge (sum of the components)
%
100
90
80
70
60
50
40
30
20
10
0
%
100
90
80
70
60
50
40
30
20
10
0
single person, 0 children
single parent, 2 children
one-earner married couple, 0 children
one-earner married couple, 2 children
StatLink 2
https://stat.link/g0d9ur
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128
Notes
1
The marginal tax wedges in the graphs are calculated in a slightly different manner than the marginal tax
rates that are included in the rest of the
Taxing Wages
publication. In
Taxing Wages,
marginal rates are
usually calculated by increasing gross earnings by one currency unit (except for the spouse in the one-
earner married couple whose earnings increase by 67%
of the average wage). However, the ‘+1 currency
unit’ approach requires the calculation of marginal rates for every single currency unit within the income
range included in the graphs. It otherwise would not be correct to draw a line through the different data
points because the data for the income levels in between the different points would be missing. In order to
reduce the required number of calculations, the marginal rates that are shown in the graphs are calculated
by increasing gross earnings by 1 percentage point
–
each line in the graph therefore consists of 200 data
points
–
instead of 1 currency unit.
2
Although it is not visible on the charts, the central government income tax was negative for income levels
below 58% of the AW for the single parent and the couple with or without children.
3
In Colombia, the general social security system for healthcare is financed by public and private funds.
The pension system is a hybrid of two different systems: a defined contribution, fully-funded pension
system; and a pay-as-you-go system. Each of those contributions is mandatory and more than 50% of
total contributions are made to privately managed funds. Therefore, they are considered to be non-tax
compulsory payments (NTCPs) (further information is available in the country details in Part II of the report).
In addition, in Colombia, all payments for employment risk are made to privately managed funds and are
considered to be NTCPs. Other countries also have NTCPs (please see
http://www.oecd.org/tax/tax-
policy/tax-database.htm#NTCP).
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129
5
2020 tax burdens (and changes to
2021)
The chapter presents the results of tax burden measures on labour income
for the eight model household types for 2020. The chapter includes Tables
5.1 to 5.13 that show a number of measures of the average tax burdens
(tax wedge, personal tax rate, net personal tax rate, personal income tax
rate and employee social security contribution rate) and the marginal rates
(tax wedge and net personal tax rate). The results for two measures of tax
progressivity are also considered: tax elasticity on gross earnings and
labour costs.
The table formats are identical to Tables 3.1 to 3.13 which are discussed in
Chapter 3 on tax burden results on labour income for 2021. This chapter
compares the two sets of tables and analyses changes in the tax burdens
between 2020 and 2021.
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130
The following commentary on the changes in tax burdens and marginal tax rates between 2020 and 2021
focuses on two of the eight household types covered by the
Taxing Wages
models: single employees,
without children, at the average wage (column 2 of the tables) and one-earner married couples, with two
children, at the average wage (column 5). Comparisons with columns 1, 3-4 and 6-8 of the tables give
corresponding results for the six other household types. Generally, only those changes exceeding one
percentage point for average effective rates and five percentage points for marginal effective rates are
flagged in this chapter. Most of these were due to tax reforms or changes in the tax systems. Further
information on countries’ tax systems is given in Part II of the Report, entitled “Country details,
2021”.
Table 5.1 presents the total tax wedge (calculated as personal
income tax plus employee and employer’s
social security contributions [SSCs] less cash benefits) by household type as a percentage of labour costs
(gross wage plus employers’
SSCs [including payroll taxes]) in 2020. In the majority of countries, changes
in the gap between total labour costs and the corresponding net take-home pay in 2021 as compared
with 2020 were within plus or minus one percentage point.
Comparing column 2 in Tables 3.1 and Table 5.1, the OECD average tax wedge remained unchanged at
34.6% in 2020 and 2021 for a single average worker. It fell by more than one percentage point in the
Czech Republic (4.1 percentage points), Greece (2.2 percentage points), Latvia (1.7 percentage points)
and Australia (1.3 percentage points). In the Czech Republic, the decrease was the result of the change
in the PIT tax base in 2021, from employment income including employer SSCs to gross income only. In
Greece, the decrease was mainly due the suspension of the Solidarity contribution payments for workers
in the private sector in response to the COVID-19 crisis and due to lower employer and employee SSC
rates. In Latvia, the decrease was driven by an increase in tax allowances and lower personal income
taxes as well as reduced employer and employee SSC rates. In Australia, the decrease was due to an
increase in income thresholds within the income tax brackets, leading to a larger proportion of income
being taxed at a lower rate compared to 2020, and lower payroll taxes in 2021 than in 2020. The average
tax wedge increased by one percentage point or more in Finland (1.3 percentage points), the United States
(1.2 percentage points) and Israel (1.0 percentage point). In Finland, the increase was due to an increase
in the SSC rate and higher income taxes. In the United States, the average tax wedge increased due to
the combined effect of higher PIT and lower cash benefits. In Israel, the tax wedge increased as result of
the removal of the one-time earned income tax credit (EITC) bonus delivered in 2020 as a response to the
COVID-19 crisis.
For one-earner married couples (comparing column 5 of Tables 3.1 and 5.1), the OECD average tax wedge
decreased by 0.4 percentage points between 2020 and 2021, from 25.0% to 24.6%. Decreases of more
than one percentage point were observed in five countries
–
Australia, Chile, the Czech Republic, Greece
and the United States. In Chile (-25.5 percentage points), the tax wedge decreased due to the introduction
of the temporary Emergency Family Income (Ingreso
Familiar de Emergencia)
cash transfer, which
increases with the number of household members. In the Czech Republic (5.0 percentage points), the tax
wedge decreased due to the change in the personal income tax base. In Greece (2.4 percentage points),
the removal of the Solidarity contribution payments for workers in the private sector and lower SSC rates,
as already mentioned, led to the decrease in the tax wedge. In Australia (1.7 percentage points), the tax
wedge decreased due to the increase in income thresholds within the income tax brackets as well as lower
payroll taxes. In the United States (1.6 percentage points), the average tax wedge decreased as a result
of higher refundable child tax credits and a reduction of the employer Michigan unemployment insurance
contribution rate (from 3.06% in 2020 to 2.9% in 2021).
Table 5.2 shows the combined burden of personal income tax and employee SSCs in the form of personal
average tax rates as a percentage of gross wage earnings in 2020. For single workers on the average
wage, it decreased by more than one percentage point between 2020 and 2021 in Mexico (1.02
1
percentage points), in Greece (1.51 percentage points), Latvia (1.85 percentage points) and the
Czech Republic (5.51 percentage points). For one-earner couples with two children, personal average tax
rates decreased by more than one percentage point in Mexico (1.02 percentage points), Greece (1.64
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131
percentage points), the United States (2.52 percentage points) and the Czech Republic (4.98 percentage
points). In Mexico, the personal average rate decreased as result of changes in the income tax schedule.
In Greece, decreases were the result of the suspension of the Solidarity contribution payments and lower
employee SSC rates already mentioned. In the United States, decreases were mostly due to the higher
refundable child tax credits. In the Czech Republic, the decrease occurred due to the change of the
personal tax base in 2021 from employment income including employer SSCs to gross income only. The
personal average tax rate as percentage of wage earnings increased by 1.0 percentage point in Israel for
the average worker earning 100% of the average wage as well as for the one-earner married couple with
two children due to the removal of the one-time EITC. It also increased by 1.26 percentage points for the
one-earner married couple in Estonia due to lower tax allowances as a result of higher income.
Table 5.3 provides the combined burden of personal income tax and employee SSCs less the amount of
cash benefits as a percentage of gross wage earnings in 2021. This is the measure of the net personal
average tax rate. Comparing column 2 of Tables 3.3 and 5.3 for single workers on average wage, the net
personal average tax rate decreased by more than one percentage point between 2020 and 2021 in Mexico
(1.02 percentage points), Greece (1.51 percentage points), Latvia (1.85 percentage points) and the
Czech Republic (5.51 percentage points). For one-earner couples with two children, the net personal
average tax rates decreased by more than one percentage point in six countries: Mexico (1.02 percentage
points), Australia (1.30 percentage points), Greece (1.64 percentage points), the United States (1.67
percentage points), the Czech Republic (6.74 percentage points) and Chile (25.52 percentage points).
The reasons for these changes are discussed above.
Table 5.4 presents information on personal income tax as a percentage of gross wage earnings in 2020.
Comparing column 2 of Tables 3.4 and 5.4, in most OECD member countries, the average personal income
tax rates for single workers on average wage changed only slightly between 2020 and 2021 for most OECD
member countries. The OECD average personal income tax rate decreased by 0.06 percentage points to
14.94%. For the single worker on average wage, the average personal income tax rate decreased by more
than one percentage point in Mexico and Germany (both by 1.01 percentage points), Latvia (1.35
percentage points) and the Czech Republic (5.51 percentage points). In Germany, the decrease was the
result of higher thresholds for the payment of the solidarity tax, as a result of which 90% of tax payers no
longer paid this tax. The personal income tax rate decreased in Mexico, Latvia and the Czech Republic for
the reasons already mentioned.
For the one-earner couples with two children, changes to the average personal income tax rate were also
minor in most OECD countries between 2020 and 2021. The OECD average dropped by 0.03 percentage
points to 9.92%. Nevertheless, there were decreases of more than one percentage point for this household
in three countries
–
Mexico (1.01 percentage points), the United States (2.52 percentage points) and the
Czech Republic (4.98 percentage points). Decreases in Mexico and the United States were due to the
reasons mentioned previously.
Table 5.5 provides information on employee SSCs as a percentage of gross wage earnings in 2020.
Comparing columns 2 and 5 of Tables 3.5 and 5.5, there was only one change larger than one percentage
point for both the single worker and the one-earner married couple between 2020 and 2021; this occurred
in Greece (1.39 percentage points) and was a result of the reduction in employee SSC rates between 2020
and 2021. No changes were recorded in 25 out of the 38 OECD countries, and changes ranged from -0.55
to 0.44 percentage points in the remaining countries.
Table 5.6 shows the marginal tax wedge (rate of personal income tax plus employee and employer SSCs
and payroll taxes where applicable minus cash benefits) as a percentage of labour costs, when the gross
wage earnings of the principal earner rose by 1 currency unit in 2020. Comparing columns 2 and 5
respectively in Tables 3.6 and 5.6, changes between 2020 and 2021 in the marginal tax wedge were
generally smaller than 5 percentage points, the exceptions being Norway (8.02 percentage points for both
household types), Israel (10.22 percentage points for both household types), the Czech Republic (-15.00
TAXING WAGES 2022 © OECD 2022
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132
percentage points for the one-earner married couple) and France (-22.53 percentage points for the one-
earner married couple).
In Norway, the marginal tax wedge increased because income thresholds for the personal income tax
increased less in 2021 than they did in 2020. In Israel, taxable income at the average wage was in a higher
income tax bracket, resulting in a higher marginal personal income tax rate in 2021. In the Czech Republic,
the marginal tax wedge decreased because the principal earner received the full amount of the refundable
child credit in 2021 as the tax liability was fully exhausted by other wastable tax credits; the principal earner
only received a residual of the refundable child tax credit in 2020. In France, the marginal tax wedge
decreased as the in-work
benefit, which was equal to 0 in 2021, remains unchanged when the worker’s
income is increased by 1 EUR while the in-work benefit decreased in 2020 when income increased.
Table 5.7 presents the marginal rate of personal income tax plus employee SSCs minus cash benefits (the
net personal marginal tax rate) by household type and wage level, when the gross wage earnings of the
principal earner rose by 1 currency unit in 2020. Comparing columns 2 and 5 respectively in Tables 3.7
and 5.7, the pattern of changes between 2020 and 2021 in the net personal marginal tax rates was similar
to that for the marginal tax wedge discussed above. Changes outside the range of plus or minus five
percentage points were observed in Israel (+11.00 percentage points for both household types), Norway
(+9.00 percentage points, both household types), Canada (-5.0 percentage points for the one-earner
married couple), the Czech Republic (-20.07 percentage points for the one-earner married couple and -
5.07 percentage points for the single worker) and France (-30.72 percentage points for the one-earner
married couple). The changes in the net personal marginal tax rates for the Czech Republic, Israel, France
and Norway resulted from changes to the marginal personal income tax rates explained in the previous
paragraph. In Canada, the net personal marginal tax rate decreased because the one-earner married
household no longer received an additional cash benefit, which was paid in 2020 but not in 2021; as a
result, the marginal rate did not capture the withdrawal effect of the additional benefit.
Table 5.8 shows the percentage increase in net income relative to the percentage increase in gross wages
when the latter increased by 1 currency unit in 2020.
2
Table 5.9 shows the percentage increase in net
income relative to the percentage increase in labour costs (i.e. gross wage earnings plus employer social
security contributions and payroll taxes) when the latter rises by 1 currency unit.
3
The results shown in
these two tables are directly dependent upon the marginal and average tax rates discussed in the
paragraphs above Table 5.10 to Table 5.13 report background information on levels of labour costs plus
gross and net wages in 2020.
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0135.png
133
Table 5.1. Income tax plus employee and employer contributions less cash benefits, 2020
As % of labour costs, by household type and wage level
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
Single
no ch
67 (% AW)
23.3
42.9
45.4
27.5
7.0
0.0
29.2
41.8
32.5
33.4
34.8
39.7
44.7
33.9
43.6
29.1
24.9
16.2
40.9
31.2
20.2
38.7
33.5
31.7
19.4
28.7
14.1
32.7
34.1
37.3
39.0
40.2
34.7
40.5
19.7
36.2
26.0
23.5
30.8
37.1
Single
no ch
100 (% AW)
28.4
47.5
52.2
30.9
7.0
0.0
29.2
44.0
35.3
37.3
41.4
46.6
48.8
38.9
43.6
32.5
33.7
23.1
46.9
32.6
23.4
42.3
37.1
39.5
20.4
36.1
19.3
35.8
34.8
41.5
41.3
43.1
39.0
42.7
22.5
39.5
30.9
27.2
34.6
41.5
Single
no ch
167 (% AW)
34.7
50.9
58.6
34.1
8.3
0.0
30.8
45.8
40.9
41.2
47.9
53.2
51.3
44.8
43.6
37.4
42.2
32.9
54.2
35.2
26.2
42.9
40.0
46.2
23.4
41.2
24.6
41.5
35.4
47.0
43.2
46.0
43.4
50.3
27.1
42.8
37.2
33.8
39.0
45.9
Single
2 ch
67 (% AW)
1.2
20.2
27.9
-1.4
6.1
-7.0
29.2
22.8
4.3
18.7
24.2
16.7
27.6
26.7
22.7
17.1
6.0
3.6
24.8
16.7
14.0
23.6
9.1
10.9
19.4
5.5
-17.2
22.4
-3.8
24.0
29.2
15.2
23.3
32.7
5.1
34.9
9.4
2.3
14.9
18.7
Married
2 ch
100-0 (% AW)
20.8
32.2
36.4
18.7
7.0
-4.7
29.2
26.8
25.2
27.6
37.0
37.7
32.5
35.5
30.2
19.5
18.5
20.8
37.4
27.3
18.5
32.1
20.7
18.6
20.4
29.6
5.8
32.2
13.1
30.4
30.4
28.5
33.4
37.4
10.1
37.9
26.4
10.1
25.0
29.6
Married
2 ch
100-67 (% AW)
1
26.3
37.1
44.5
26.6
6.6
-5.6
29.2
35.5
30.6
31.0
36.1
40.1
41.2
35.8
35.6
30.4
26.1
16.7
40.6
29.6
19.5
34.7
29.8
28.3
20.0
28.2
17.2
32.4
21.9
36.7
36.5
35.8
35.6
38.7
16.4
37.6
26.6
18.9
29.2
34.6
Married
2 ch
100-100 (% AW)
1
28.4
40.4
48.0
29.0
7.0
-4.7
29.2
37.7
32.3
33.4
39.2
43.5
43.9
39.4
36.9
32.2
30.6
20.1
44.1
30.5
21.2
37.2
32.2
33.0
20.4
32.0
19.3
34.0
24.3
39.1
38.0
38.9
37.6
40.0
18.9
39.0
28.9
22.1
31.5
37.3
Married
no ch
100-67 (% AW)
1
26.3
45.6
49.5
29.8
7.0
0.0
29.2
43.2
34.1
35.7
38.7
43.8
47.0
38.0
43.6
31.1
29.7
19.9
44.5
32.0
22.1
40.8
35.7
34.5
20.0
33.1
17.2
34.5
34.5
39.6
40.4
42.0
37.3
41.8
22.3
38.2
28.9
25.1
33.1
39.7
Note: ch = children
1. Two-earner couple.
StatLink 2
https://stat.link/7qa41o
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0136.png
134
Table 5.2. Income tax plus employee contributions, 2020
As % of gross wage earnings, by household type and wage level
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
Single
no ch
67 (% AW)
18.7
26.8
31.3
20.8
7.0
0.0
10.5
22.2
32.6
10.9
22.6
23.2
33.7
17.6
33.5
24.5
16.6
12.2
22.3
20.6
11.6
23.9
32.3
22.3
8.6
20.0
14.1
24.1
23.3
22.4
20.5
30.6
15.2
21.8
14.6
25.1
19.0
21.5
20.5
23.9
Single
no ch
100 (% AW)
24.1
32.7
39.3
24.6
7.0
0.0
10.5
25.1
35.4
16.1
30.4
27.2
38.6
23.9
33.5
28.2
26.3
18.7
30.2
22.2
15.1
28.3
36.0
31.1
11.2
28.4
19.3
27.5
24.1
27.7
23.6
34.0
20.7
24.6
17.5
28.9
23.3
24.3
24.7
29.0
Single
no ch
167 (% AW)
30.8
38.0
47.4
29.9
8.3
0.0
12.4
27.5
40.9
21.3
38.2
33.3
43.3
31.3
33.5
33.5
35.8
28.5
39.8
25.9
19.0
29.2
38.9
38.7
15.8
36.4
24.6
33.9
24.8
34.4
26.1
37.3
26.5
34.7
22.5
32.8
29.7
29.1
29.8
34.4
Single
2 ch
67 (% AW)
18.7
15.7
25.4
13.9
7.0
0.0
10.5
4.6
30.9
7.7
22.6
20.8
13.2
16.7
19.3
24.5
11.6
4.5
15.0
20.6
9.8
11.0
32.3
16.3
8.6
12.1
15.3
21.4
16.5
13.4
14.5
24.8
0.3
21.8
8.8
23.5
7.3
4.1
14.9
16.7
Married
2 ch
100-0 (% AW)
24.1
25.2
27.3
21.2
7.0
0.0
10.5
7.4
31.5
11.5
30.4
20.8
19.1
24.6
24.0
21.3
16.2
18.7
23.6
20.8
13.2
19.5
36.0
19.3
11.2
27.4
19.3
27.5
19.6
17.2
13.8
26.2
13.5
24.6
11.0
27.1
22.7
12.5
19.7
21.8
Married
2 ch
100-67 (% AW)
1
21.9
26.7
34.5
23.1
7.0
0.0
10.5
16.9
34.3
12.7
27.3
23.0
29.5
22.0
27.8
26.8
22.0
13.7
24.2
21.6
12.8
21.3
34.5
25.5
10.2
21.9
17.2
26.1
21.6
21.7
19.9
29.1
16.3
23.5
15.0
26.7
21.6
18.0
21.3
24.4
Married
2 ch
100-100 (% AW)
1
24.1
29.7
37.8
24.6
7.0
0.0
10.5
19.2
35.4
15.1
30.4
25.1
32.8
24.6
28.7
28.2
26.3
16.7
28.0
22.2
14.4
23.9
36.0
29.7
11.2
25.7
19.3
27.5
22.3
24.6
21.6
31.0
18.9
24.6
17.0
28.3
23.3
20.6
23.3
26.9
Married
no ch
100-67 (% AW)
1
21.9
30.3
36.1
23.1
7.0
0.0
10.5
23.9
34.3
14.0
27.3
25.5
36.4
22.8
33.5
26.8
22.0
15.6
27.0
21.6
13.7
26.5
34.5
25.5
10.2
25.0
17.2
26.1
23.8
25.3
22.4
32.6
18.5
23.5
17.3
27.4
21.6
22.5
23.0
26.9
Note: ch = children
1. Two-earner couple.
StatLink 2
https://stat.link/v5emt7
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0137.png
135
Table 5.3. Income tax plus employee contributions less cash benefits, 2020
As % of gross wage earnings, by household type and wage level
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
Single
no ch
67 (% AW)
18.7
26.8
31.3
19.9
7.0
0.0
10.5
22.2
32.5
10.9
22.6
23.2
33.7
17.6
33.5
24.5
16.6
12.2
22.3
20.6
11.6
23.9
32.3
22.3
8.6
20.0
14.1
24.1
23.3
22.4
20.5
30.6
15.2
21.8
14.6
25.1
19.0
17.0
20.3
23.9
Single
no ch
100 (% AW)
24.1
32.7
39.3
24.6
7.0
0.0
10.5
25.1
35.3
16.1
30.4
27.2
38.6
23.9
33.5
28.2
26.3
18.7
30.2
22.2
15.1
28.3
36.0
31.1
11.2
28.4
19.3
27.5
24.1
27.7
23.6
34.0
20.7
24.6
17.5
28.9
23.3
21.3
24.6
29.0
Single
no ch
167 (% AW)
30.8
38.0
47.4
29.9
8.3
0.0
12.4
27.5
40.9
21.3
38.2
33.3
43.3
31.3
33.5
33.5
35.8
28.5
39.8
25.9
19.0
29.2
38.9
38.7
15.8
36.4
24.6
33.9
24.8
34.4
26.1
37.3
26.5
34.7
22.5
32.8
29.7
28.5
29.8
34.4
Single
2 ch
67 (% AW)
-4.7
-2.2
9.3
-12.0
6.1
-7.0
10.5
-3.3
4.3
-8.8
10.0
-6.1
13.2
8.7
8.8
11.8
-4.4
-1.1
1.1
3.9
4.7
5.2
7.5
-1.4
8.6
-6.0
-17.2
12.3
-20.8
6.0
7.8
1.5
0.3
11.6
-1.0
23.5
0.8
-5.9
2.0
1.9
Married
2 ch
100-0 (% AW)
16.1
13.2
19.2
11.3
7.0
-4.7
10.5
2.1
25.2
3.1
25.3
15.1
19.1
19.7
17.7
14.4
9.5
16.2
17.6
16.1
9.7
15.7
19.3
7.4
11.2
21.1
5.8
23.4
-1.2
13.8
9.4
17.0
13.5
17.8
4.4
27.1
18.4
2.7
13.4
14.6
Married
2 ch
100-67 (% AW)
1
21.9
19.5
29.8
19.6
6.6
-5.6
10.5
13.7
30.6
7.7
24.2
20.5
29.5
20.1
24.0
26.0
17.9
12.2
21.9
18.7
10.8
19.0
28.5
18.4
10.2
19.5
17.2
23.7
9.1
21.7
17.3
25.4
16.3
19.4
11.0
26.7
19.0
12.2
18.3
20.6
Married
2 ch
100-100 (% AW)
1
24.1
23.7
33.9
22.6
7.0
-4.7
10.5
16.6
32.3
10.9
27.8
23.0
32.8
24.6
25.6
27.9
23.0
15.5
26.4
19.9
12.7
22.0
31.0
23.8
11.2
23.8
19.3
25.5
11.9
24.6
19.3
29.0
18.9
21.2
13.7
28.3
21.1
15.7
21.0
23.9
Married
no ch
100-67 (% AW)
1
21.9
30.3
36.1
23.1
7.0
0.0
10.5
23.9
34.1
14.0
27.3
25.5
36.4
22.8
33.5
26.8
22.0
15.6
27.0
21.6
13.7
26.5
34.5
25.5
10.2
25.0
17.2
26.1
23.8
25.3
22.4
32.6
18.5
23.5
17.3
27.4
21.6
18.9
22.9
26.8
Note: ch = children
1. Two-earner couple.
StatLink 2
https://stat.link/vz4soe
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0138.png
136
Table 5.4. Income tax, 2020
As % of gross wage earnings, by household type and wage level
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
Single
no ch
67 (% AW)
18.7
8.8
17.4
13.4
0.0
0.0
0.0
11.2
32.6
9.3
12.6
11.9
13.6
2.1
15.0
24.4
12.6
6.0
12.8
6.1
2.6
12.9
12.8
10.0
7.3
5.3
14.1
15.9
5.4
11.4
7.1
8.5
8.8
14.8
8.2
10.1
11.1
13.9
10.8
11.7
Single
no ch
100 (% AW)
24.1
14.7
25.3
18.6
0.0
0.0
0.0
14.1
35.4
14.5
20.3
15.9
18.5
8.4
15.0
28.1
22.3
10.6
20.7
7.8
6.1
17.3
16.5
18.8
9.9
15.9
19.3
19.3
6.3
16.7
10.2
11.9
14.4
17.6
11.2
13.9
14.0
16.6
15.0
16.9
Single
no ch
167 (% AW)
30.8
21.5
33.5
26.1
1.3
0.0
1.9
16.5
40.9
19.7
28.0
22.3
26.7
15.8
15.0
33.4
31.8
18.9
30.2
12.6
11.1
18.2
19.4
26.4
14.3
26.5
24.6
25.7
7.0
23.4
12.7
15.2
20.1
29.9
16.1
17.8
22.1
21.5
20.5
22.8
Single
2 ch
67 (% AW)
18.7
-2.3
11.5
6.4
0.0
0.0
0.0
-6.4
30.9
6.1
12.6
9.5
-6.7
1.2
0.8
24.4
7.6
-1.7
5.5
6.1
0.9
0.0
12.8
4.0
7.3
3.3
15.3
13.2
-1.3
2.4
1.1
2.7
-6.0
14.8
2.4
8.5
-0.7
-3.6
5.3
4.7
Married
2 ch
100-0 (% AW)
24.1
7.3
13.3
15.2
0.0
0.0
0.0
-3.6
31.5
9.9
20.3
9.5
-0.8
9.1
5.5
21.2
12.2
10.6
14.1
6.4
4.2
8.5
16.5
7.0
9.9
15.7
19.3
19.3
1.7
6.2
0.4
4.1
7.2
17.6
4.6
12.1
13.4
4.8
10.0
9.7
Married
2 ch
100-67 (% AW)
1
21.9
8.7
20.6
16.5
0.0
0.0
0.0
5.9
34.3
11.1
17.2
11.7
9.6
6.5
9.3
26.6
18.0
6.4
14.8
7.1
3.9
10.3
15.0
13.2
8.9
10.8
17.2
17.9
3.7
10.7
6.5
7.0
10.0
16.5
8.6
11.7
12.9
10.4
11.6
12.3
Married
2 ch
100-100 (% AW)
1
24.1
11.7
24.0
18.6
0.0
0.0
0.0
8.2
35.4
13.5
20.3
13.8
12.9
9.1
10.2
28.1
22.3
8.6
18.5
7.8
5.4
12.9
16.5
17.4
9.9
15.2
19.3
19.3
4.4
13.6
8.2
8.9
12.6
17.6
10.6
13.3
14.0
12.9
13.7
14.9
Married
no ch
100-67 (% AW)
1
21.9
12.4
22.1
16.5
0.0
0.0
0.0
12.9
34.3
12.4
17.2
14.1
16.3
7.3
15.0
26.6
18.0
8.3
17.5
7.1
4.7
15.5
15.0
13.2
8.9
11.7
17.2
17.9
5.9
14.3
9.0
10.5
12.2
16.5
10.9
12.4
12.9
14.8
13.2
14.7
Note: ch = children
1. Two-earner couple.
StatLink 2
https://stat.link/zjaosc
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0139.png
137
Table 5.5. Employee contributions, 2020
As % of gross wage earnings, by household type and wage level
Single
no ch
67 (% AW)
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
0.0
18.0
13.9
7.4
7.0
0.0
10.5
11.0
0.0
1.6
10.0
11.3
20.1
15.5
18.5
0.2
4.0
6.2
9.5
14.5
9.0
11.0
19.5
12.2
1.3
14.7
0.0
8.2
17.8
11.0
13.4
22.1
6.4
7.0
6.4
15.0
7.9
7.7
9.7
12.2
Single
no ch
100 (% AW)
0.0
18.0
14.0
6.0
7.0
0.0
10.5
11.0
0.0
1.6
10.2
11.3
20.1
15.5
18.5
0.1
4.0
8.1
9.5
14.5
9.0
11.0
19.5
12.3
1.4
12.5
0.0
8.2
17.8
11.0
13.4
22.1
6.4
7.0
6.4
15.0
9.3
7.7
9.7
12.1
Single
no ch
167 (% AW)
0.0
16.5
13.9
3.7
7.0
0.0
10.5
11.0
0.0
1.6
10.2
11.0
16.6
15.5
18.5
0.1
4.0
9.7
9.6
13.3
7.9
11.0
19.5
12.4
1.5
9.9
0.0
8.2
17.8
11.0
13.4
22.1
6.4
4.9
6.4
15.0
7.5
7.7
9.3
11.7
Single
2 ch
67 (% AW)
0.0
18.0
13.9
7.4
7.0
0.0
10.5
11.0
0.0
1.6
10.0
11.3
19.9
15.5
18.5
0.2
4.0
6.2
9.5
14.5
9.0
11.0
19.5
12.2
1.3
8.8
0.0
8.2
17.8
11.0
13.4
22.1
6.4
7.0
6.4
15.0
7.9
7.7
9.6
11.9
Married
2 ch
100-0 (% AW)
0.0
18.0
14.0
6.0
7.0
0.0
10.5
11.0
0.0
1.6
10.2
11.3
19.9
15.5
18.5
0.1
4.0
8.1
9.5
14.5
9.0
11.0
19.5
12.3
1.4
11.7
0.0
8.2
17.8
11.0
13.4
22.1
6.4
7.0
6.4
15.0
9.3
7.7
9.7
12.1
Married
2 ch
100-67 (% AW)
1
0.0
18.0
13.9
6.6
7.0
0.0
10.5
11.0
0.0
1.6
10.1
11.3
19.9
15.5
18.5
0.2
4.0
7.3
9.5
14.5
9.0
11.0
19.5
12.3
1.3
11.0
0.0
8.2
17.8
11.0
13.4
22.1
6.4
7.0
6.4
15.0
8.7
7.7
9.7
12.0
Married
2 ch
100-100 (% AW)
1
0.0
18.0
13.8
6.0
7.0
0.0
10.5
11.0
0.0
1.6
10.2
11.3
19.9
15.5
18.5
0.1
4.0
8.1
9.5
14.5
9.0
11.0
19.5
12.3
1.4
10.5
0.0
8.2
17.8
11.0
13.4
22.1
6.4
7.0
6.4
15.0
9.3
7.7
9.7
12.0
Married
no ch
100-67 (% AW)
1
0.0
18.0
13.9
6.6
7.0
0.0
10.5
11.0
0.0
1.6
10.1
11.3
20.1
15.5
18.5
0.2
4.0
7.3
9.5
14.5
9.0
11.0
19.5
12.3
1.3
13.4
0.0
8.2
17.8
11.0
13.4
22.1
6.4
7.0
6.4
15.0
8.7
7.7
9.7
12.2
Note: ch = children
1. Two-earner couple.
StatLink 2
https://stat.link/g98lqe
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0140.png
138
Table 5.6. Marginal rate of income tax plus employee and employer contributions less cash
benefits, 2020
As % of labour costs, by household type and wage level
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
Single
no ch
67 (% AW)
39.6
55.7
68.5
63.5
7.0
0.0
29.2
48.5
38.7
41.2
53.5
64.6
54.9
47.1
43.6
39.5
35.6
36.8
54.7
33.1
29.2
49.5
44.3
49.5
17.4
44.9
17.5
41.9
36.2
46.7
46.1
43.6
69.7
45.3
26.5
42.8
40.2
31.5
41.5
49.2
Single
no ch
100 (% AW)
45.3
59.5
65.1
31.9
10.2
0.0
29.2
48.5
41.7
49.5
55.0
58.2
59.3
49.9
43.6
39.5
53.6
36.8
62.8
37.3
30.7
49.5
44.3
57.0
25.2
51.2
30.0
41.9
36.2
51.1
46.1
50.3
48.3
48.5
32.0
47.8
40.2
40.8
43.4
51.3
Single
no ch
167 (% AW)
42.4
40.9
67.8
44.5
10.2
0.0
36.5
48.5
55.5
41.2
58.1
59.4
44.3
55.9
43.6
47.7
56.8
50.7
62.9
35.1
32.6
45.0
44.3
55.7
28.4
51.5
33.0
52.5
36.2
58.0
46.1
50.3
54.1
66.0
36.0
47.8
49.0
47.3
45.7
51.9
Single
2 ch
67 (% AW)
58.5
55.7
68.5
94.3
7.0
0.0
29.2
48.5
36.9
41.2
53.5
74.6
52.4
47.1
43.6
49.9
74.2
34.4
55.9
52.5
22.9
28.3
44.3
57.9
17.4
50.5
42.5
41.9
96.9
46.7
46.1
43.6
61.2
45.3
19.0
42.8
76.3
52.3
47.7
53.3
Married
2 ch
100-0 (% AW)
45.3
59.5
65.1
42.3
7.0
0.0
29.2
48.5
41.7
49.5
55.0
64.5
51.7
49.9
43.6
48.6
53.6
36.8
64.0
37.3
30.7
49.5
44.3
41.1
25.2
56.8
55.0
41.9
36.2
46.7
46.1
43.6
46.1
48.5
24.6
47.8
40.2
31.5
43.4
50.3
Married
2 ch
100-67 (% AW)
1
45.3
59.5
64.2
37.4
7.0
0.0
29.2
48.5
41.7
49.5
55.0
50.6
56.9
49.9
43.6
46.3
53.6
36.8
63.4
37.3
30.7
49.5
44.3
56.2
25.2
51.2
30.0
41.9
36.2
51.1
46.1
43.6
48.3
48.5
29.5
47.8
40.2
31.5
42.8
50.5
Married
2 ch
100-100 (% AW)
1
45.3
59.5
64.2
37.4
7.0
0.0
29.2
48.5
41.7
49.5
55.0
58.2
59.1
49.9
43.6
39.5
53.6
36.8
63.4
37.3
30.7
49.5
44.3
57.0
25.2
51.2
30.0
41.9
36.2
51.1
46.1
43.6
48.3
48.5
33.6
47.8
40.2
40.8
43.3
51.0
Married
no ch
100-67 (% AW)
1
45.3
59.5
64.2
31.9
10.2
0.0
29.2
48.5
41.7
49.5
55.0
47.9
57.1
49.9
43.6
39.5
53.6
36.8
62.8
37.3
30.7
49.5
44.3
56.2
25.2
51.2
30.0
41.9
36.2
51.1
46.1
50.3
48.3
48.5
30.3
47.8
40.2
31.5
42.7
50.7
Note: ch = children
It is assumed that gross earnings of the principal earner in the household rise. The outcome may differ if the wage of the spouse goes up, especially if
partners are taxed individually.
1. Two-earner couple.
StatLink 2
https://stat.link/vayt3x
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0141.png
139
Table 5.7. Marginal rate of income tax plus employee contributions less cash benefits, 2020
As % of gross wage earnings, by household type and wage level
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
Single
no ch
67 (% AW)
36.0
43.3
55.6
59.5
7.0
0.0
10.5
31.1
38.7
21.3
44.8
32.6
46.0
34.1
33.5
35.7
28.5
32.0
40.4
22.8
21.5
37.4
43.3
42.5
12.1
38.4
17.5
34.4
25.8
34.0
29.9
34.6
60.7
28.1
21.8
32.8
32.0
26.3
32.3
37.5
Single
no ch
100 (% AW)
42.0
48.2
55.6
29.7
10.2
0.0
10.5
31.1
41.7
32.4
46.6
43.0
51.2
37.6
33.5
35.7
48.5
32.0
51.1
27.7
23.2
37.4
43.3
51.1
19.5
45.5
30.0
34.4
25.8
39.5
29.9
42.4
32.9
32.3
27.6
38.7
32.0
36.3
35.0
40.9
Single
no ch
167 (% AW)
39.0
36.9
59.1
43.4
10.2
0.0
19.7
31.1
55.5
21.3
50.2
42.2
44.3
45.1
33.5
44.4
52.0
47.0
51.2
31.1
28.4
31.8
43.3
49.6
22.9
51.5
33.0
46.4
25.8
48.0
29.9
42.4
40.4
55.3
32.3
38.7
42.0
43.3
38.5
42.7
Single
2 ch
67 (% AW)
56.0
43.3
55.6
93.7
7.0
0.0
10.5
31.1
36.9
21.3
44.8
51.6
43.0
34.1
33.5
46.7
71.4
29.4
42.0
45.2
14.6
11.0
43.3
52.1
12.1
44.6
42.5
34.4
96.3
34.0
29.9
34.6
49.7
28.1
13.9
32.8
73.0
48.6
39.3
42.4
Married
2 ch
100-0 (% AW)
42.0
48.2
55.6
40.4
7.0
0.0
10.5
31.1
41.7
32.4
46.6
51.6
42.1
37.6
33.5
45.3
48.5
32.0
52.7
27.7
23.2
37.4
43.3
33.0
19.5
51.7
55.0
34.4
25.8
34.0
29.9
34.6
30.0
32.3
19.8
38.7
32.0
26.3
34.9
39.7
Married
2 ch
100-67 (% AW)
1
42.0
48.2
54.5
35.4
7.0
0.0
10.5
31.1
41.7
32.4
46.6
32.6
48.3
37.6
33.5
42.9
48.5
32.0
51.9
27.7
23.2
37.4
43.3
50.1
19.5
45.5
30.0
34.4
25.8
39.5
29.9
34.6
32.9
32.3
25.0
38.7
32.0
26.3
34.3
39.9
Married
2 ch
100-100 (% AW)
1
42.0
48.2
54.5
35.4
7.0
0.0
10.5
31.1
41.7
32.4
46.6
43.0
50.9
37.6
33.5
35.7
48.5
32.0
51.9
27.7
23.2
37.4
43.3
51.1
19.5
45.5
30.0
34.4
25.8
39.5
29.9
34.6
32.9
32.3
29.3
38.7
32.0
36.3
34.9
40.5
Married
no ch
100-67 (% AW)
1
42.0
48.2
54.5
29.7
10.2
0.0
10.5
31.1
41.7
32.4
46.6
29.0
48.6
37.6
33.5
35.7
48.5
32.0
51.1
27.7
23.2
37.4
43.3
50.1
19.5
45.5
30.0
34.4
25.8
39.5
29.9
42.4
32.9
32.3
25.9
38.7
32.0
26.3
34.2
40.1
Note: ch = children
It is assumed that gross earnings of the principal earner in the household rise. The outcome may differ if the wage of the spouse goes up, especially if
partners are taxed individually.
1. Two-earner couple.
StatLink 2
https://stat.link/6roj4g
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0142.png
140
Table 5.8. Percentage increase in net income relative to percentage increase in gross wages, 2020
After an increase of 1 currency unit in gross wages, by household type and wage level
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
Single
no ch
67 (% AW)
0.79
0.78
0.65
0.51
1.00
1.00
1.00
0.89
0.91
0.88
0.71
0.88
0.82
0.80
1.00
0.85
0.86
0.77
0.77
0.97
0.89
0.82
0.84
0.74
0.96
0.77
0.96
0.86
0.97
0.85
0.88
0.94
0.46
0.92
0.92
0.90
0.84
0.89
0.85
0.82
Single
no ch
100 (% AW)
0.76
0.77
0.73
0.93
0.97
1.00
1.00
0.92
0.90
0.81
0.77
0.78
0.80
0.82
1.00
0.90
0.70
0.84
0.70
0.93
0.91
0.87
0.89
0.71
0.91
0.76
0.87
0.90
0.98
0.84
0.92
0.87
0.85
0.90
0.88
0.86
0.89
0.81
0.86
0.83
Single
no ch
167 (% AW)
0.88
1.02
0.78
0.81
0.98
1.00
0.92
0.95
0.75
1.00
0.81
0.87
0.98
0.80
1.00
0.84
0.75
0.74
0.81
0.93
0.88
0.96
0.93
0.82
0.92
0.76
0.89
0.81
0.99
0.79
0.95
0.92
0.81
0.69
0.87
0.91
0.82
0.79
0.87
0.87
Single
2 ch
67 (% AW)
0.42
0.56
0.49
0.06
0.99
0.93
1.00
0.67
0.66
0.72
0.61
0.46
0.66
0.72
0.73
0.60
0.27
0.70
0.59
0.57
0.90
0.94
0.61
0.47
0.96
0.52
0.49
0.75
0.03
0.70
0.76
0.66
0.50
0.81
0.85
0.88
0.27
0.48
0.63
0.60
Married
2 ch
100-0 (% AW)
0.69
0.60
0.55
0.67
1.00
0.96
1.00
0.70
0.78
0.70
0.71
0.57
0.72
0.78
0.81
0.64
0.57
0.81
0.57
0.86
0.85
0.74
0.70
0.72
0.91
0.61
0.48
0.86
0.73
0.77
0.77
0.79
0.81
0.82
0.84
0.84
0.83
0.76
0.75
0.71
Married
2 ch
100-67 (% AW)
1
0.74
0.64
0.65
0.80
1.00
0.95
1.00
0.80
0.84
0.73
0.70
0.85
0.73
0.78
0.88
0.77
0.63
0.77
0.62
0.89
0.86
0.77
0.79
0.61
0.90
0.68
0.85
0.86
0.82
0.77
0.85
0.88
0.80
0.84
0.84
0.84
0.84
0.84
0.80
0.76
Married
2 ch
100-100 (% AW)
1
0.76
0.68
0.69
0.84
1.00
0.96
1.00
0.83
0.86
0.76
0.74
0.74
0.73
0.83
0.89
0.89
0.67
0.80
0.65
0.90
0.88
0.80
0.82
0.64
0.91
0.72
0.87
0.88
0.84
0.80
0.87
0.92
0.83
0.86
0.82
0.86
0.86
0.76
0.82
0.78
Married
no ch
100-67 (% AW)
1
0.74
0.74
0.71
0.91
0.97
1.00
1.00
0.91
0.89
0.79
0.73
0.95
0.81
0.81
1.00
0.88
0.66
0.81
0.67
0.92
0.89
0.85
0.87
0.67
0.90
0.73
0.85
0.89
0.97
0.81
0.90
0.86
0.82
0.89
0.90
0.84
0.87
0.91
0.85
0.82
Note: ch = children
Net income is calculated as gross earnings minus personal income tax and employees' social security contributions plus family benefits. The increase
reported in the Table represents a form of elasticity. In a proportional tax system the elasticity would equal 1. The more progressive the system at these
income levels, the lower is the elasticity. The reported elasticities in Table 5.8 are calculated as (100 - METR) / (100 - AETR), where METR is the marginal
rate of income tax plus employee social security contributions less cash benefits reported in Table 5.7 and AETR is the average rate plus employee social
security contributions less cash benefits reported in Table 5.3.
1. Two-earner couple. Assumes a rise in the labour costs associated with the principal earner in the household.
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Table 5.9. Percentage increase in net income relative to percentage increase in gross labour cost,
2020
After an increase of 1 currency unit in gross labour cost, by household type and wage level
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
Single
no ch
67 (% AW)
0.79
0.78
0.58
0.50
1.00
1.00
1.00
0.89
0.91
0.88
0.71
0.59
0.82
0.80
1.00
0.85
0.86
0.75
0.77
0.97
0.89
0.82
0.84
0.74
1.02
0.77
0.96
0.86
0.97
0.85
0.88
0.94
0.46
0.92
0.92
0.90
0.81
0.89
0.85
0.81
Single
no ch
100 (% AW)
0.76
0.77
0.73
0.98
0.97
1.00
1.00
0.92
0.90
0.81
0.77
0.78
0.80
0.82
1.00
0.90
0.70
0.82
0.70
0.93
0.91
0.87
0.89
0.71
0.94
0.76
0.87
0.90
0.98
0.84
0.92
0.87
0.85
0.90
0.88
0.86
0.86
0.81
0.87
0.83
Single
no ch
167 (% AW)
0.88
1.20
0.78
0.84
0.98
1.00
0.92
0.95
0.75
1.00
0.81
0.87
1.14
0.80
1.00
0.84
0.75
0.73
0.81
1.00
0.91
0.96
0.93
0.82
0.94
0.82
0.89
0.81
0.99
0.79
0.95
0.92
0.81
0.69
0.88
0.91
0.81
0.80
0.89
0.89
Single
2 ch
67 (% AW)
0.42
0.56
0.44
0.06
0.99
0.93
1.00
0.67
0.66
0.72
0.61
0.31
0.66
0.72
0.73
0.60
0.27
0.68
0.59
0.57
0.90
0.94
0.61
0.47
1.02
0.52
0.49
0.75
0.03
0.70
0.76
0.66
0.50
0.81
0.85
0.88
0.26
0.49
0.61
0.57
Married
2 ch
100-0 (% AW)
0.69
0.60
0.55
0.71
1.00
0.96
1.00
0.70
0.78
0.70
0.71
0.57
0.72
0.78
0.81
0.64
0.57
0.80
0.57
0.86
0.85
0.74
0.70
0.72
0.94
0.61
0.48
0.86
0.73
0.77
0.77
0.79
0.81
0.82
0.84
0.84
0.81
0.76
0.76
0.71
Married
2 ch
100-67 (% AW)
1
0.74
0.64
0.65
0.85
1.00
0.95
1.00
0.80
0.84
0.73
0.70
0.82
0.73
0.78
0.88
0.77
0.63
0.76
0.62
0.89
0.86
0.77
0.79
0.61
0.94
0.68
0.85
0.86
0.82
0.77
0.85
0.88
0.80
0.84
0.84
0.84
0.81
0.84
0.81
0.76
Married
2 ch
100-100 (% AW)
1
0.76
0.68
0.69
0.88
1.00
0.96
1.00
0.83
0.86
0.76
0.74
0.74
0.73
0.83
0.89
0.89
0.67
0.79
0.65
0.90
0.88
0.80
0.82
0.64
0.94
0.72
0.87
0.88
0.84
0.80
0.87
0.92
0.83
0.86
0.82
0.86
0.84
0.76
0.83
0.78
Married
no ch
100-67 (% AW)
1
0.74
0.74
0.71
0.97
0.97
1.00
1.00
0.91
0.89
0.79
0.73
0.93
0.81
0.81
1.00
0.88
0.66
0.79
0.67
0.92
0.89
0.85
0.87
0.67
0.94
0.73
0.85
0.89
0.97
0.81
0.90
0.86
0.82
0.89
0.90
0.84
0.84
0.91
0.86
0.82
Note: ch = children
Net income is calculated as gross earnings minus personal income tax and employees' social security contributions plus family benefits. The increase
reported in the Table represents a form of elasticity. In a proportional tax system the elasticity would equal 1. The more progressive the system at these
income levels, the lower is the elasticity. The reported elasticities in Table 5.9 are calculated as (100 - METR) / (100 - AETR), where METR is the marginal
rate of income tax plus employee and employer social security contributions less cash benefits reported in Table 5.6 and AETR is the average rate plus
employee and employer social security contributions less cash benefits reported in Table 5.1.
1. Two-earner couple. Assumes a rise in the labour costs associated with the principal earner in the household.
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Table 5.10. Annual gross wage and net income, single person, 2020
In US dollars using PPP, by household type and wage level
Single
no ch
67 (% AW)
Total gross earnings
Net income
before taxes
after taxes
41 366
33 631
43 025
31 486
44 869
30 841
39 984
32 023
16 457
15 305
9 086
9 086
16 546
14 808
22 072
17 177
44 684
30 176
21 708
19 346
37 047
28 673
34 732
26 665
45 832
30 367
23 209
19 116
22 832
15 183
43 922
33 141
42 631
35 575
30 866
27 108
32 611
25 355
33 115
26 301
36 347
32 140
18 991
14 456
24 969
16 893
50 360
39 155
9 734
8 898
47 238
37 793
30 167
25 925
42 012
31 904
22 832
17 521
23 480
18 216
17 063
13 561
25 335
17 584
28 221
23 934
35 482
27 739
53 757
45 918
22 957
17 198
40 126
32 489
39 876
33 091
31 988
32 237
25 152
24 400
Single
no ch
100 (% AW)
Total gross earnings
Net income
before taxes
after taxes
61 740
46 873
64 216
43 213
66 968
40 650
59 678
44 996
24 563
22 836
13 561
13 561
24 695
22 102
32 943
24 670
66 693
43 169
32 400
27 173
55 295
38 471
51 839
37 751
68 407
41 973
34 641
26 348
34 077
22 661
65 556
47 050
63 629
46 869
46 069
37 446
48 673
33 991
49 426
38 439
54 250
46 054
28 345
20 314
37 267
23 866
75 164
51 772
14 529
12 895
70 504
50 487
45 025
36 347
62 704
45 478
34 078
25 864
35 045
25 354
25 467
19 456
37 814
24 959
42 120
33 389
52 958
39 913
80 235
66 161
34 265
24 374
59 890
45 928
59 517
46 867
47 743
48 116
35 256
33 742
Single
no ch
167 (% AW)
Total gross earnings
Net income
before taxes
after taxes
103 107
71 390
107 241
66 521
111 837
58 795
99 663
69 891
41 020
37 606
22 647
22 647
41 241
36 127
55 015
39 884
111 377
65 848
54 109
42 594
92 342
57 075
86 571
57 730
114 239
64 771
57 850
39 757
56 909
37 844
109 478
72 848
106 260
68 232
76 935
54 971
81 284
48 946
82 541
61 138
90 597
73 357
47 336
33 528
62 235
38 024
125 523
76 893
24 263
20 430
117 742
74 825
75 192
56 661
104 716
69 206
56 911
42 804
58 525
38 397
42 529
31 424
63 149
39 564
70 341
51 716
88 440
57 733
133 992
103 877
57 222
38 445
100 017
70 360
99 393
71 019
79 731
80 353
54 286
51 496
Single
2 ch
67 (% AW)
Total gross earnings
Net income
before taxes
after taxes
41 366
43 307
43 025
43 989
44 869
40 700
39 984
44 778
16 457
15 450
9 086
9 722
16 546
14 808
22 072
22 789
44 684
42 784
21 708
23 616
37 047
33 332
34 732
36 857
45 832
39 773
23 209
21 197
22 832
20 826
43 922
38 744
42 631
44 514
30 866
31 197
32 611
32 263
33 115
31 830
36 347
34 627
18 991
18 001
24 969
23 100
50 360
51 044
9 734
8 898
47 238
50 091
30 167
35 367
42 012
36 825
22 832
27 587
23 480
22 082
17 063
15 732
25 335
24 949
28 221
28 134
35 482
31 367
53 757
54 289
22 957
17 571
40 126
39 811
39 876
42 246
31 988
32 237
31 426
31 579
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
Note: ch = children
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Table 5.11. Annual gross wage and net income, married couple, 2020
In US dollars using PPP, by household type and wage level
Married
2 ch
100-0 (% AW)
Total gross earnings
Net income
before taxes
after taxes
61 740
51 797
64 216
55 716
66 968
54 131
59 678
52 929
24 563
22 843
13 561
14 197
24 695
22 102
32 943
32 245
66 693
49 881
32 400
31 390
55 295
41 322
51 839
44 018
68 407
55 353
38 105
30 588
34 077
28 061
65 556
56 139
63 629
57 598
46 069
38 597
48 673
40 111
49 426
41 471
54 250
48 964
28 345
23 904
37 267
30 073
75 164
69 567
14 529
12 895
70 504
55 639
45 025
42 434
62 704
48 001
34 078
34 479
35 045
30 197
25 467
23 082
37 814
31 392
42 120
36 414
52 958
43 541
80 235
76 687
34 265
24 996
59 890
48 895
59 517
57 900
47 834
48 273
41 041
40 850
Married
2 ch
100-67 (% AW)
1
Total gross earnings
Net income
before taxes
after taxes
103 107
80 504
107 241
86 327
111 837
78 527
99 663
80 130
41 020
38 293
22 647
23 918
41 241
36 911
55 015
47 459
111 377
77 322
54 109
49 923
92 342
69 995
86 571
68 853
114 239
80 551
63 635
50 843
56 909
43 244
109 478
81 034
106 260
87 210
76 935
67 536
81 284
63 486
82 541
67 074
90 597
80 817
47 336
38 360
62 235
44 480
125 523
102 418
24 263
21 792
117 742
94 794
75 192
62 272
104 716
79 905
56 911
51 705
58 525
45 818
42 529
35 188
63 149
47 093
70 341
58 851
88 440
71 280
133 992
119 204
57 222
41 945
100 017
81 026
99 393
87 289
79 884
80 616
64 299
63 351
Married
2 ch
100-100 (% AW)
1
Total gross earnings
Net income
before taxes
after taxes
123 481
93 747
128 432
98 054
133 937
88 585
119 356
92 356
49 126
45 687
27 123
28 394
49 390
44 204
65 886
54 953
133 385
90 315
64 801
57 750
110 589
79 793
103 678
79 811
136 813
91 926
76 210
57 469
68 154
50 722
131 111
94 514
127 258
98 024
92 138
77 874
97 347
71 614
98 852
79 212
108 500
94 731
56 689
44 218
74 533
51 453
150 327
114 593
29 058
25 789
141 008
107 488
90 050
72 694
125 409
93 479
68 157
60 048
70 090
52 815
50 933
41 083
75 627
53 683
84 241
68 306
105 917
83 454
160 470
138 505
68 530
49 121
119 780
94 466
119 034
100 366
95 669
96 546
74 245
72 552
Married
no ch
100-67 (% AW)
1
Total gross earnings
Net income
before taxes
after taxes
103 107
80 504
107 241
74 699
111 837
71 478
99 663
76 644
41 020
38 141
22 647
22 647
41 241
36 911
55 015
41 847
111 377
73 344
54 109
46 519
92 342
67 143
86 571
64 534
114 239
72 637
63 635
49 154
56 909
37 844
109 478
80 191
106 260
82 924
76 935
64 920
81 284
59 346
82 541
64 740
90 597
78 195
47 336
34 769
62 235
40 760
125 523
93 535
24 263
21 792
117 742
88 280
75 192
62 272
104 716
77 382
56 911
43 385
58 525
43 711
42 529
33 016
63 149
42 543
70 341
57 324
88 440
67 652
133 992
110 820
57 222
41 572
100 017
78 418
99 393
80 656
79 884
80 616
60 586
58 475
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
Note: ch = children
1. Two-earner couple.
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Table 5.12. Annual labour costs and net income, single person, 2020
In US dollars using PPP, by household type and wage level
Single
no ch
67 (% AW)
Total gross labour
Net income
costs before taxes
after taxes
43 835
33 631
55 097
31 486
56 472
30 841
44 155
32 023
16 457
15 305
9 086
9 086
20 930
14 808
29 532
17 177
44 684
30 176
29 046
19 346
43 971
28 673
44 253
26 665
54 942
30 367
28 903
19 116
26 941
15 183
46 711
33 141
47 342
35 575
32 354
27 108
42 910
25 355
38 202
26 301
40 268
32 140
23 575
14 456
25 416
16 893
57 289
39 155
11 045
8 898
52 984
37 793
30 167
25 925
47 431
31 904
26 568
17 521
29 057
18 216
22 215
13 561
29 414
17 584
36 659
23 934
46 631
27 739
57 184
45 918
26 975
17 198
43 930
32 489
43 244
33 091
36 997
38 814
25 152
24 400
Single
no ch
100 (% AW)
Total gross labour
Net income
costs before taxes
after taxes
65 425
46 873
82 234
43 213
85 113
40 650
65 073
44 996
24 563
22 836
13 561
13 561
31 239
22 102
44 078
24 670
66 693
43 169
43 352
27 173
65 629
38 471
70 641
37 751
82 003
41 973
43 138
26 348
40 211
22 661
69 718
47 050
70 660
46 869
48 712
37 446
64 044
33 991
57 018
38 439
60 102
46 054
35 182
20 314
37 934
23 866
85 506
51 772
16 200
12 895
79 000
50 487
45 025
36 347
70 793
45 478
39 653
25 864
43 368
25 354
33 157
19 456
43 902
24 959
54 714
33 389
69 598
39 913
85 350
66 161
40 261
24 374
66 421
45 928
64 387
46 867
55 359
58 173
35 256
33 742
Single
no ch
167 (% AW)
Total gross labour
Net income
costs before taxes
after taxes
109 260
71 390
135 450
66 521
142 140
58 795
106 109
69 891
41 020
37 606
22 647
22 647
52 170
36 127
73 610
39 884
111 377
65 848
72 397
42 594
109 601
57 075
123 349
57 730
132 974
64 771
72 041
39 757
67 152
37 844
116 430
72 848
118 002
68 232
81 924
54 971
106 954
48 946
94 287
61 138
99 391
73 357
58 748
33 528
63 349
38 024
142 795
76 893
26 673
20 430
127 171
74 825
75 192
56 661
118 225
69 206
66 221
42 804
72 425
38 397
55 373
31 424
73 316
39 564
91 373
51 716
116 228
57 733
142 511
103 877
67 236
38 445
112 085
70 360
107 314
71 019
92 224
96 911
54 286
51 496
Single
2 ch
67 (% AW)
Total gross labour
Net income
costs before taxes
after taxes
43 835
43 307
55 097
43 989
56 472
40 700
44 155
44 778
16 457
15 450
9 086
9 722
20 930
14 808
29 532
22 789
44 684
42 784
29 046
23 616
43 971
33 332
44 253
36 857
54 942
39 773
28 903
21 197
26 941
20 826
46 711
38 744
47 342
44 514
32 354
31 197
42 910
32 263
38 202
31 830
40 268
34 627
23 575
18 001
25 416
23 100
57 289
51 044
11 045
8 898
52 984
50 091
30 167
35 367
47 431
36 825
26 568
27 587
29 057
22 082
22 215
15 732
29 414
24 949
36 659
28 134
46 631
31 367
57 184
54 289
26 975
17 571
43 930
39 811
43 244
42 246
36 997
38 814
31 426
31 579
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
Note: ch = children
StatLink 2
https://stat.link/137vmq
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Table 5.13. Annual labour costs and net income, married couple, 2020
In US dollars using PPP, by household type and wage level
Married
2 ch
100-0 (% AW)
Total gross labour
Net income
costs before taxes
after taxes
65 425
51 797
82 234
55 716
85 113
54 131
65 073
52 929
24 563
22 843
13 561
14 197
31 239
22 102
44 078
32 245
66 693
49 881
43 352
31 390
65 629
41 322
70 641
44 018
82 003
55 353
47 452
30 588
40 211
28 061
69 718
56 139
70 660
57 598
48 712
38 597
64 044
40 111
57 018
41 471
60 102
48 964
35 182
23 904
37 934
30 073
85 506
69 567
16 200
12 895
79 000
55 639
45 025
42 434
70 793
48 001
39 653
34 479
43 368
30 197
33 157
23 082
43 902
31 392
54 714
36 414
69 598
43 541
85 350
76 687
40 261
24 996
66 421
48 895
64 387
57 900
55 473
58 369
41 041
40 850
Married
2 ch
100-67 (% AW)
1
Total gross labour
Net income
costs before taxes
after taxes
109 260
80 504
137 331
86 327
141 585
78 527
109 229
80 130
41 020
38 293
22 647
23 918
52 170
36 911
73 610
47 459
111 377
77 322
72 397
49 923
109 601
69 995
114 894
68 853
136 944
80 551
79 245
50 843
67 152
43 244
116 430
81 034
118 002
87 210
81 067
67 536
106 954
63 486
95 219
67 074
100 370
80 817
58 757
38 360
63 349
44 480
142 795
102 418
27 245
21 792
131 984
94 794
75 192
62 272
118 225
79 905
66 221
51 705
72 425
45 818
55 373
35 188
73 316
47 093
91 373
58 851
116 228
71 280
142 534
119 204
67 236
41 945
110 352
81 026
107 632
87 289
92 546
97 314
64 299
63 351
Married
2 ch
100-100 (% AW)
1
Total gross labour
Net income
costs before taxes
after taxes
130 850
93 747
164 469
98 054
170 227
88 585
130 147
92 356
49 126
45 687
27 123
28 394
62 479
44 204
88 156
54 953
133 385
90 315
86 704
57 750
131 258
79 793
141 282
79 811
164 005
91 926
94 904
57 469
80 422
50 722
139 437
94 514
141 320
98 024
97 425
77 874
128 089
71 614
114 035
79 212
120 203
94 731
70 364
44 218
75 867
51 453
171 012
114 593
32 401
25 789
158 000
107 488
90 050
72 694
141 587
93 479
79 307
60 048
86 737
52 815
66 315
41 083
87 803
53 683
109 429
68 306
139 196
83 454
170 700
138 505
80 522
49 121
132 843
94 466
128 775
100 366
110 946
116 739
74 245
72 552
Married
no ch
100-67 (% AW)
1
Total gross labour
Net income
costs before taxes
after taxes
109 260
80 504
137 331
74 699
141 585
71 478
109 229
76 644
41 020
38 141
22 647
22 647
52 170
36 911
73 610
41 847
111 377
73 344
72 397
46 519
109 601
67 143
114 894
64 534
136 944
72 637
79 245
49 154
67 152
37 844
116 430
80 191
118 002
82 924
81 067
64 920
106 954
59 346
95 219
64 740
100 370
78 195
58 757
34 769
63 349
40 760
142 795
93 535
27 245
21 792
131 984
88 280
75 192
62 272
118 225
77 382
66 221
43 385
72 425
43 711
55 373
33 016
73 316
42 543
91 373
57 324
116 228
67 652
142 534
110 820
67 236
41 572
110 352
78 418
107 632
80 656
92 546
97 314
60 586
58 475
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
Note: ch = children
1. Two-earner couple.
StatLink 2
https://stat.link/7siefn
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Notes
1
Tables 5.1 to 5.7 show figures rounded to the first decimal. The text may present figures rounded to two
decimal points for accuracy purposes.
2
The reported elasticities in Table 5.8 are calculated as (100 - METR) / (100 - AETR), where METR is the
marginal rate of income tax plus employee social security contributions less cash benefits reported in
Table 5.7 and AETR is the average rate of income tax plus employee social security contributions less
cash benefits reported in Table 5.3.
3
The reported elasticities in Table 5.9 are calculated as (100 - METR) / (100 - AETR), where METR is the
marginal rate of income tax plus employee and employer social security contributions less cash benefits
reported in Table 5.6 and AETR is the average rate of income tax plus employee and employer social
security contributions less cash benefits reported in Table 5.1.
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6
Evolution of the tax burden
(2000-21)
The chapter presents the evolution of the tax burdens on labour
income between 2000 and 2021. The chapter contains Tables 6.1
to 6.24, which are grouped by tax measures for the eight
household types. Tables 6.1 to 6.8 contain the (average) tax
wedge comprising income taxes plus employee and employer
social security contributions (including any applicable payroll
taxes) less cash benefits; Tables 6.9 to 6.16 provide the (average)
burden of personal income taxes; and Tables 6.17 to 6.24 depict
the (average) burden of income taxes plus employee social
security contributions less cash benefits (net personal average tax
rates).
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Key trends between 2000 and 2021
This chapter presents the evolution of the tax burden for the eight household types depicted by the
Taxing
Wages
models over the period from 2000 to 2021. Tables 6.1 to
6.24, titled “Tables showing income taxes,
social security contributions
and cash benefits”, correspond
to a tax burden measure for a particular
household type. The discussion focuses on the main observable trends over the period and highlights
important year-on-year changes.
1
The OECD average tax wedge, the personal income tax burden and the net tax burden (personal income
tax plus social security contributions less cash benefits) all declined between 2000 and 2021 for each of
the selected household types.
The reductions over the period in the OECD average tax wedge ranged from 1.3 percentage
points for single workers earning 167% of the average wage (AW) to 4.6 percentage points
for single parents earning 67% of the AW.
The decrease in the OECD average personal income tax burden ranged from 0.8 percentage
point for single workers earning the AW to 2.0 percentage points for single parents
earning 67% of the AW.
The OECD net personal average tax burden also declined for all household types in the period
considered. The reduction ranged from 0.5 percentage points for single workers earning
167% of the AW to 3.4 percentage points (for single parents earning 67% of the AW).
Tax wedge
Table 6.1 to Table 6.8 track the evolution of the average tax wedge in OECD countries between 2000
and 2021. Nineteen OECD countries observed a reduction of more than 5 percentage points for at least
one household type: Australia, Belgium, Canada, Chile, Denmark, Estonia, Finland, France, Germany,
Greece, Hungary, Israel, Ireland, Lithuania, the Netherlands, New Zealand, Poland, Sweden and the
United States.
The largest decline was observed in Chile, where the single parent benefited from a reduction in the tax
wedge of 30.3 percentage points. In Chile, all types of married couple with children also experienced
decreases in the tax wedge that exceeded 10 percentage points (24.8 percentage points for the one-earner
married couple, 15.2 percentage points for the two-earner married couple earning 167% of the AW, and
12.4 percentage points for the two-earner married couple earning 200% of the AW). In Poland, large
decreases in the tax wedge were observed for the household types with children: 28.3 percentage points
for the single parent, 19.0 percentage points for the one-earner couple on the AW, 13.1 percentage points
for the two-earner couple with total wage earnings at 167% of the AW and 11.6 percentage points for the
two-earner couple with total wage earnings at 200% of the AW. In Lithuania, the tax wedge also decreased
by more than 10 percentage points for all household types with children: by 24.9 percentage points for the
single parent, by 22.1 percentage points for the one-earner married couple, by 13.6 percentage points for
the married couple earning 167% of the AW and by 12.5 percentage points for the married couple earning
200% of the AW. In the Netherlands, the tax wedge decreased by more than 10 percentage points for the
single worker earning 67% of the AW (by 14.7 percentage points), for the single parent (by 21.8 percentage
points) and for the married couple with two children earning 167% of the AW (by 10.7 percentage points).
Reductions of more than 10 percentage points in the tax wedge for at least one household type were also
observed in France, Greece, Hungary, New Zealand and the United States. In France, the tax wedge
decreased by 13.9 percentage points for the single parent on 67% of the AW. In Greece, the tax wedge
decreased by 10.6 percentage points for the single parent earning 67% of the AW. In Hungary, there were
reductions of more than 10 percentage points for seven out of the eight household types. The largest was
for the single parent earning 67% of the AW (16.0 percentage points). In New Zealand, the tax wedge
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decreased by 13.3 percentage points for the single parent on 67% of the AW. In the United States, the tax
wedge decreased by more than 10 percentage points for the single parent earning 67% of the AW and the
one-earner married couple (by 10.8 and 12.7 percentage points, respectively).
In contrast, between 2000 and 2021, there were increases in the tax wedge of more than 5 percentage
points for at least one household type in six countries: Iceland, Korea, Luxembourg, Mexico, Norway and
the United Kingdom. The largest increase was in Iceland, where the tax wedge rose by 10.6 percentage
points for the single parent on 67% of the AW and by 7.0 percentage points for the one-earner couple on
the AW with two children. In Korea, the tax wedge increased for the single worker earning 67%,100% and
167% of the AW (by 5.4,7.2 and 6.1 percentage points, respectively), for the two-earner married couple
earning 200% of the AW with two children (by 5.7 percentage points) and the two-earner married couple
earning 167% of the AW without children (by 6.6 percentage points). In Luxembourg, the tax wedge
increased for all household types with children, by between 7.9 percentage points for the one-earner
married couple and 8.5 percentage points for the single parent. In Mexico, the average tax wedge
increased for seven of the eight household types. It increased most for single worker earning 67% of the
AW with and without children, by 9.1 percentage points. In Norway, it increased by 6.7 percentage points
for the single parent. In the United Kingdom, the tax wedge also increased for the single parent by 5.7
percentage points.
Between 2000 and 2021, the tax wedge decreased for all household types in fourteen OECD countries
(Australia, Belgium, Canada, Denmark, Finland, Germany, Greece, Hungary, Lithuania, the Netherlands,
Poland, Sweden, Switzerland and the United States), while it increased across all household types in five
countries (Costa Rica, Japan, Korea, Luxembourg and Mexico).
Average personal income tax rate
Between 2000 and 2021, the average personal income tax burden (Table 6.9 to Table 6.16) decreased for
all eight household types in thirteen OECD countries: Belgium, Canada, the Czech Republic, Estonia,
Finland, Germany, Hungary, Israel, Latvia, Lithuania, Slovenia, Sweden and the United States. Among
those countries, there were decreases of more than 5 percentage points in the personal income tax rates.
The most significant reductions affecting most of the household types were observed in Hungary, where
there were decreases exceeding 10 percentage points for three of the household types: of 15.3 percentage
points for the single worker earning 167% of the AW, 12.3 percentage points for the one-earner married
couple earning the AW with children, and 10.2 percentage points for the two-earner couple with total wage
earnings at 200% of the AW with two children. In the Czech Republic, the average personal income tax
rate decreased by more than 10 percentage points for the single parent and the one-earner married couple
(by 14.9 percentage points and 12.6 percentage points, respectively). In Estonia, the average personal
income tax rate decreased for the single worker earning 67% of the AW, by 10.0 percentage points for the
worker without children and by 13.0 percentage points for the single parent. In Sweden, decreases of
between 9.2 and 9.8 percentage points were observed for most household types, the exceptions being the
single taxpayer earning 67% of the AW, with and without children (reduction of 10.7 percentage points). In
Lithuania, the average personal income tax rates decreased by between 8.5 and 9.0 percentage points for
most of the household types, the exception being the single parent on 67% of the AW (2.5 percentage
points). In Finland, it decreased by between 6.5 and 8.3 percentage points for the eight household types.
In Israel, the average personal income tax rate decreased by 5.1 to 6.6 percentage points for most of the
household types, the exception being the single parent at 67% of the AW, which experienced a reduction
of 1.1 percentage points.
At the other extreme, the average personal income tax rate increased across all the eight household types
in six OECD countries: Denmark, Greece, Japan, Korea, Mexico and the Netherlands. Among those
countries, there were increases of more than 5 percentage points. In Luxembourg, the average personal
tax rate increased by between 5.3 and 6.2 percentage points for all households with children. In Mexico,
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the increases ranged from 7.9 to 9.7 percentage points over the eight household types. The average
personal income tax rate increased by more than 5 percentage points in Denmark for the one-earner
married couple on the AW with two children (5.8 percentage points).
Sixteen other OECD member countries recorded both reductions and increases in the average personal
income tax among the household types: Australia, Austria, France, Iceland, Ireland, Italy, the Netherlands,
Norway, New Zealand, Poland, Portugal, the Slovak Republic, Spain, Switzerland, Turkey and the
United Kingdom. Changes of more than 5 percentage points were observed among those countries. In
Iceland, the average tax rate increased by 5.7 percentage points for the one-earner married couple. In the
Netherlands, the average tax rate increased by more than 5 percentage points for three household types:
the single worker earning 100% of the AW (6.0 percentage points), the one-earner married couple (10.6
percentage points) and the two-earner married couple earning 200% of the AW (by 5.3 percentage points).
In Portugal, the average tax rate increased for the single worker earning 67% and 100% of the AW, by 5.4
and 5.6 percentage points, and for the two-earner married couple without children earning 167% of the
AW, by 5.5 percentage points. The average personal income tax rate decreased by more than five
percentage points in three countries: in Australia, it decreased by 5.5 percentage points for the single
worker earning 167% of the AW, by 7.3 percentage points in Austria for the single parent and by 5.5
percentage points in the Slovak Republic for the one-earner married couple.
In Chile and Costa Rica, the average income tax rates stayed constant for most household types as they
did not pay personal income taxes between 2000 and 2021, the exception being the single worker earning
167% of the AW, for whom the average personal tax rate decreased by 0.05 percentage points in Chile
and increased by 2.3 percentage points in Costa Rica. In Colombia, there were no changes for the eight
household types between 2000 and 2021 as no personal income taxes were levied at their earnings level.
Net personal average tax rate
The net personal average tax rate takes into account personal income taxes and employee social security
contributions as well as cash benefits (Table 6.17 to Table 6.24). It decreased between 2000 and 2021
for all eight household types in eight OECD countries: Australia, Belgium, Denmark, Germany, the
Netherlands, Poland, Sweden and the United States. The most significant reductions were observed in
Poland, where the net personal average tax rate fell by 32.7 percentage points for the single parent
earning 67% of the AW, followed by the one-earner couple on the AW with two children (21.9 percentage
points). In the Netherlands, the decline in the net personal average tax rate exceeded 10 percentage
points for the single worker on 67% of the AW, with or without children (by 21.6 percentage points and
14.2 percentage points, respectively) and for the two-earner couple with total earnings at 167% of the AW
with two children (by 11.5 percentage points). Decreases exceeding 10 percentage points were also
observed in Sweden for the single worker earning 67% of the AW (by 10.7 percentage points) and in the
United States for the single parent and the one-earner married couple (by 11.2 percentage points
and 13.4 percentage points, respectively).
In Australia, the net personal average tax rate decreased for the single worker earning 167% of the AW by
5.5 percentage points while it decreased by between 1.9 and 4.2 percentage points for the other seven
household types. In Belgium, decreases larger than 5 percentage points were observed for the single parent
and the two-earner married couple earning 167% of the AW without children (5.4 percentage points for
both). In Germany, four of the eight household types experienced decreases larger than 5 percentage
points: the net average tax rate decreased for the single worker earning 100% of the AW as well as for the
two-earner married couple with two children earning 200% of the AW by 5.5 percentage points; it also
decreased by 6.1 percentage points for the single worker earning 167% of the AW and by 5.1 percentage
points for the two-earner married couple earning 167% of the AW with two children. In Denmark, decreases
exceeded 5 percentage points in five of the eight household types: the net personal average tax rate
decreased by 5.5 percentage points for the married couple earning 167% of the AW with and without
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children, by 6.0 percentage points for the single worker earning 100% of the AW, by 6.2 percentage point
for the single parent, and by 8.2 percentage point for the single worker earning 167% of the AW.
In contrast, the net personal average tax rate increased across all household types in four OECD countries:
Costa Rica, Japan, Luxembourg and Mexico. Two of those countries experienced increases of more than
5 percentage points. The largest change was in Mexico where it increased by 9.7 percentage points for the
single worker on 67% of the AW, with and without children. In Luxembourg, net personal average tax rates
increased by between 6.7 and 7.2 percentage points for all household types with children while increasing
by less than five percentage points in the remaining three.
Twenty-three other OECD member countries recorded both reductions and increases in the net personal
average tax rate among the household types: Austria, the Czech Republic, Estonia, Finland, France,
Greece, Hungary, Iceland, Ireland, Israel, Italy, Korea, Latvia, Lithuania, New Zealand, Norway, Portugal,
the Slovak Republic, Slovenia, Spain, Switzerland, Turkey and the United Kingdom. There was a significant
decrease in France, where the net personal average tax rate fell by 16.5 percentage points for the single
parent on 67% of the AW. For this household type, there were also decreases exceeding 10 percentage
points in Ireland (10.8 percentage points) and New Zealand (13.3 percentage points). In Hungary, the net
personal average tax rate decreased by 9.3 percentage points for the single worker on 167% of the AW; in
Greece, it fell by 9.5 percentage points and in Lithuania by 7.3 percentage points for the single parent. In
Estonia, the net personal average tax rate decreased by 8.4 percentage points for the single worker earning
67% of the AW, and in Isreal it fell by 5.9 percentage points for the same household type, as well as by 6.4
pecentage points for the single worker at 100% of the AW and by 5.3 percentage points for the single
worker earning 167% of the AW.
The one-earner married couple experienced a decrease in the net personal average tax rates in Estonia
(5.7 percentage points), Greece (5.6 percentage points), Lithuania (6.5 percentage points) and
New Zealand (7.1 percentage points). For the two-earner married couple earning 167% of the AW with two
children, the rate decreased by 6.7 percentage points in the Czech Republic and by 7.8 percentage points
in Estonia. In both countries, the rate also decreased for the two-earner married couple earning 200% of
the AW with two children, decreasing by 7.8 percentage points and 6.1 percentage points, respectively. For
the two-earner married couple earning 167% of the AW without children, the net personal average tax rate
decreased by 6.3 percentage points in Estonia and by 6.0 percentage points in Israel.
In contrast, increases larger than 5 percentage points for the single parent earning 67% of the average
wage occurred in the Czech Republic (5.8 percentage points), the United Kingdom (5.7 percentage points),
Hungary (5.4 percentage points), Iceland (10.0 percentage points), Norway (7.4 percentage points), the
Slovak Republic (8.3 percentage points) and Slovenia (5.7 percentage points). The tax rate also increased
significantly for the single worker earning 67% of the AW in Lithuania and Portugal (by 8.0 percentage
points and 5.4 percentage points, respectively), for the single worker earning 100% of the AW in Korea (6.3
percentage points), Lithuania (7.7 percentage points) and Portugal (5.6 percentage points). It also
increased by more than 5 percentage points for the one-earner married family in Iceland (6.2 percentage
points) and Slovenia (8.0 percentage points), the two-earner married couple with two children earning 167%
of the AW in Portugal (5.2 percentage points) and without children in Korea (5.6 percentage points),
Lithuania (7.9 percentage points) and Portugal (5.5 percentage points).
Progressivity
The degree of progressivity of
countries’
personal income tax system can be assessed by comparing the
burden faced by single workers earning 67% of the AW with that faced by their counterparts earning 167%
of the AW. Hence Table 6.9 is compared with Table 6.11. For all OECD countries (except Hungary) and for
all years between 2000 and 2021, the higher paid worker always pays a higher percentage of income in
personal income tax than the lower paid worker. In Hungary, the level of tax burden was the same for both
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types of worker from 2013 onwards. In Mexico, the personal income tax was negative for the single persons
earning 67% of the AW from 2000 to 2010 due to non-wastable tax credits.
On average, the progressivity of personal income taxes has increased in OECD countries. On average
(excluding Mexico), the single person earning 67% of the AW paid 57% of the tax burden of the person
earning 167% of the AW in 2000 and 52% in 2021. Comparing the situation in each OECD country, personal
income taxes have become more progressive in twenty countries: Australia, Belgium, Canada,
Czech Republic, Germany, Estonia, Finland, France, Ireland, Israel, Italy, Lithuania, Latvia, Netherlands,
Norway, New Zealand, Sweden, Switzerland, Turkey and the United Kingdom. The most significant
changes were in Estonia, where the tax burden on the lower paid worker as a share of the tax burden of
the higher paid worker fell from 85.7% in 2017 to 42.2% in 2018, and in Italy, where the corresponding
measure decreased gradually from 60.2% in 2000 to 42.9% in 2021.
Between 2000 and 2021, personal income taxes became slightly less progressive (using this measure) in
fifteen OECD countries: Austria, Denmark, Greece, Hungary, Iceland, Japan, Korea, Luxembourg, Mexico,
Poland, Portugal, the Slovak Republic, Slovenia, Spain and the United States. The most significant
changes occurred in Hungary, where the ratio rose from 58.0% of the higher-paid person’s
tax burden
in 2000 to 100% from 2013 onwards, and in Iceland, where it rose from 54.6% in 2000 to 70.7% in 2021.
The tax burden ratio remained at the same level in Chile and Colombia between 2000 and 2021. In Chile
and Costa Rica, the lower paid worker on 67% of the AW did not pay personal income tax between 2000
and 2021. In Colombia, no personal income taxes were levied on earnings at either 67% or 167% of the
AW between 2000 and 2021.
Families
The results presented in Table 6.21 and Table 6.18 can be used to compare the net tax burdens (personal
income tax plus employee social security contributions less cash benefits) faced by a one-earner married
couple earning the AW with two children, and the single worker without children at the same income level.
The OECD average tax savings for the married couple compared with the single person represented 10.2%
of gross income in 2000 and 11.5% in 2021.
Between 2000 and 2021, the savings for the one-earner married couple increased in twenty countries and
declined in eighteen. No tax savings are observed for Colombia, as the households do not pay income tax
at this level of income, and for Mexico, as the tax burden is the same for the two household types. There
were four countries where the tax savings increased by more than 5 percentage points: in the United States,
increasing by 11 percentage points from 10.5% to 21.5% of gross income; in Poland, increasing by 18.3
percentage points from 5.7% to 23.9% of gross income; in Lithuania, increasing by 14.3 percentage points
from 0% to 14.3% of gross income; and in Chile, increasing by 24.8 percentage points from 0.7% to 25.5%
of gross income. There were corresponding reductions of more than 5 percentage points in Norway, with a
reduction in the tax savings by 7.6 percentage points from 11.4% to 3.8%, and in Slovenia, where the tax
savings decreased by 9.0 percentage points, from 25.4% to 16.4% 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 household
types across the OECD over the period 2000 to 2021 is presented in Tables 6.1 to 6.24.
Tables 6.1 to 6.8 contain the (average) tax wedge comprising income taxes plus employee and
employer social security contributions (including any applicable payroll taxes) less cash benefits,
Tables 6.9 to 6.16 provide the (average) burden of personal income taxes, and
TAXING WAGES 2022 © OECD 2022
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153
Tables 6.17 to 6.24 depict the (average) burden of income taxes plus employee social security
contributions less cash benefits (net personal average tax rates).
Table 6.25 and Table 6.26 show the average gross and net earnings of a single individual between 2000
and 2021 in in national currencies and in US dollars using purchasing power parities of national currencies.
TAXING WAGES 2022 © OECD 2022
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2675007_0156.png
154
Table 6.1. Income tax plus employee and employer contributions less cash benefits,
single persons at 67% of average wage
Tax burden as a % of labour costs, single persons without children
2000
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
1
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
25.9
43.2
51.4
29.4
7.0
0.0
27.8
41.3
37.4
39.8
42.7
43.9
47.6
35.9
51.4
23.8
27.5
23.2
43.6
28.7
15.0
41.7
43.0
29.8
7.6
42.3
18.6
35.1
37.0
33.2
40.7
42.6
34.9
48.6
20.2
39.1
29.1
29.0
33.1
40.9
2010
21.0
43.5
50.4
29.0
7.0
0.0
28.0
39.0
33.5
38.7
36.8
46.8
44.9
35.8
43.8
28.4
24.2
14.1
44.0
28.9
17.4
43.2
38.8
28.8
12.9
33.6
14.3
34.1
33.3
32.2
35.0
38.6
36.5
40.7
19.3
34.4
29.4
28.3
31.3
38.3
2014
22.4
44.8
49.9
29.5
7.0
0.0
28.0
39.7
33.1
38.9
38.0
45.0
45.1
36.1
49.0
29.7
25.3
14.2
41.9
30.6
18.2
42.1
39.0
31.6
14.7
31.8
13.4
33.8
34.9
34.8
38.9
38.6
37.3
40.5
19.2
35.8
26.2
29.5
31.8
38.9
2015
23.1
45.1
49.4
29.6
7.0
0.0
28.2
40.0
33.4
38.0
37.9
43.6
45.3
34.6
49.0
30.2
24.9
14.8
40.8
30.9
18.4
41.7
39.3
32.4
15.0
32.0
13.5
33.7
35.0
36.3
39.1
38.6
35.8
40.6
19.1
35.9
26.0
29.2
31.8
38.8
2016
23.4
43.0
47.5
29.3
7.0
0.0
28.2
40.3
33.4
37.9
38.3
42.9
45.3
35.8
48.2
30.3
24.3
15.2
40.8
31.0
18.6
41.2
39.0
32.5
15.3
30.4
13.7
33.2
34.9
36.4
39.3
38.7
35.8
40.8
19.3
32.9
26.1
29.2
31.6
38.5
2017
23.6
43.1
47.3
28.7
7.0
0.0
28.6
40.8
33.3
38.0
36.9
42.3
45.4
36.0
46.2
29.5
24.0
15.1
40.7
31.0
18.9
41.3
37.8
30.2
16.1
30.4
13.8
32.8
35.0
36.6
39.4
40.0
35.8
40.9
19.4
33.4
26.3
29.2
31.4
38.2
2018
24.1
43.3
46.1
28.8
7.0
0.0
29.0
41.4
32.6
32.7
36.5
42.3
45.3
36.2
45.0
29.6
24.3
15.7
40.8
31.2
19.2
39.7
37.2
30.5
16.1
30.8
13.9
32.7
35.1
36.7
39.7
39.8
35.9
41.0
19.4
34.6
26.2
27.6
31.3
37.9
2019
22.7
43.6
45.5
28.2
7.0
0.0
29.0
41.7
32.7
33.2
35.9
41.9
45.2
36.2
44.6
29.4
24.6
15.9
41.0
31.2
19.7
39.6
34.8
30.7
16.8
29.7
14.0
32.6
35.0
37.1
39.7
40.3
35.9
40.4
19.5
36.2
26.1
27.5
31.2
37.7
2020
23.3
42.9
45.4
27.5
7.0
0.0
29.2
41.8
32.5
33.4
34.8
39.7
44.7
33.9
43.6
29.1
24.9
16.2
40.9
31.2
20.2
38.7
33.5
31.7
19.4
28.7
14.1
32.7
34.1
37.3
39.0
40.2
34.7
40.5
19.7
36.2
26.0
23.5
30.8
37.1
2021
21.6
43.3
46.2
28.9
-6.5
0.0
29.2
37.6
32.7
33.9
36.2
41.1
44.2
31.9
43.2
28.2
25.0
17.6
41.2
31.2
20.4
37.9
34.4
32.3
16.8
27.6
14.2
32.9
34.2
37.6
39.0
40.4
35.7
39.8
19.9
36.3
26.7
24.7
30.5
37.1
1. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
StatLink 2
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2675007_0157.png
155
Table 6.2. Income tax plus employee and employer contributions less cash benefits,
single persons at 100% of average wage
Tax burden as a % of labour costs, single persons without children
2000
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
1
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
31.0
47.3
57.1
34.1
7.0
0.0
27.8
42.6
41.5
41.3
47.5
50.4
52.9
38.7
54.7
28.8
35.3
29.6
47.1
29.8
16.4
43.2
45.7
35.8
12.7
40.0
19.4
38.6
38.2
37.3
42.1
46.3
38.6
50.1
22.9
40.4
32.6
30.8
36.2
44.3
2010
26.8
48.2
55.9
31.8
7.0
0.0
28.0
42.1
35.9
40.1
42.3
49.9
49.0
40.0
46.6
33.4
30.9
20.7
47.2
30.2
20.1
44.0
40.6
35.3
16.0
38.1
17.0
37.3
34.2
37.1
38.1
42.5
39.7
42.8
22.1
37.0
32.6
30.7
34.5
41.8
2014
27.7
49.4
55.6
32.4
7.0
0.0
28.0
42.6
35.6
40.0
43.6
48.4
49.3
40.2
49.0
33.9
34.0
21.1
47.8
32.0
21.2
43.0
41.0
38.6
19.5
39.0
17.3
36.9
35.7
41.1
41.4
42.5
40.7
42.5
21.9
38.1
31.0
31.6
35.3
42.8
2015
28.3
49.6
55.3
32.5
7.0
0.0
28.2
42.8
35.9
39.0
43.5
48.5
49.4
38.8
49.0
34.3
33.2
21.8
47.8
32.3
21.4
42.5
41.2
39.5
19.8
37.0
17.6
36.7
35.7
42.1
41.5
42.6
39.4
42.6
21.8
38.2
30.8
31.4
35.2
42.6
2016
28.6
47.3
53.9
32.1
7.0
0.0
28.2
43.0
35.9
39.0
44.1
48.0
49.5
40.0
48.2
33.9
32.7
22.3
47.8
32.4
21.8
42.5
41.3
39.6
20.1
37.2
18.0
36.2
35.6
41.5
41.7
42.7
39.4
42.8
22.1
38.2
30.9
31.6
35.2
42.4
2017
28.6
47.4
53.8
31.4
7.0
0.0
28.6
43.4
35.8
39.0
43.0
47.4
49.5
40.2
46.2
32.8
32.6
22.1
47.7
32.5
22.0
42.7
41.1
37.8
20.4
37.4
18.3
35.9
35.7
41.4
41.7
42.9
39.3
42.9
22.1
38.9
31.0
31.8
35.1
42.2
2018
28.9
47.6
52.7
31.4
7.0
0.0
29.0
43.7
35.4
36.2
42.6
47.4
49.5
40.4
45.0
32.9
32.9
22.7
47.7
32.7
22.4
42.6
40.7
38.2
19.7
37.8
18.6
35.8
35.8
40.9
41.9
43.2
39.4
43.0
22.2
39.2
31.0
29.6
34.9
42.0
2019
27.9
47.9
52.3
31.0
7.0
0.0
29.0
44.0
35.5
37.0
42.2
47.2
49.3
40.4
44.6
32.7
33.2
22.9
47.9
32.7
22.9
42.5
37.7
38.5
20.2
36.9
19.0
35.7
35.6
41.4
41.9
43.5
39.4
42.6
22.3
39.6
30.9
29.7
34.9
41.9
2020
28.4
47.5
52.2
30.9
7.0
0.0
29.2
44.0
35.3
37.3
41.4
46.6
48.8
38.9
43.6
32.5
33.7
23.1
46.9
32.6
23.4
42.3
37.1
39.5
20.4
36.1
19.3
35.8
34.8
41.5
41.3
43.1
39.0
42.7
22.5
39.5
30.9
27.2
34.6
41.5
2021
27.1
47.8
52.6
31.5
7.0
0.0
29.2
39.9
35.4
38.1
42.7
47.0
48.1
36.7
43.2
32.2
34.0
24.2
46.5
32.6
23.6
40.5
37.6
40.2
19.6
35.3
19.4
36.0
34.9
41.8
41.3
43.6
39.3
42.6
22.8
39.9
31.3
28.4
34.6
41.3
1. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
StatLink 2
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2675007_0158.png
156
Table 6.3. Income tax plus employee and employer contributions less cash benefits,
single persons at 167% of average wage
Tax burden as a % of labour costs, single persons without children
2000
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
1
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
38.8
50.4
62.6
37.0
8.3
0.0
27.8
44.8
49.3
42.5
53.2
52.5
56.2
44.7
59.2
39.6
42.2
38.1
51.1
31.6
20.5
44.4
47.9
44.1
19.5
44.9
24.2
45.2
39.1
42.3
45.5
51.0
41.0
55.7
27.4
35.0
35.8
37.1
40.3
48.4
2010
32.4
51.4
61.0
35.0
8.0
0.0
28.5
44.7
42.9
41.2
48.2
53.6
51.5
45.5
53.1
37.8
40.7
29.5
52.5
33.3
21.7
44.7
42.0
42.5
21.4
41.8
23.3
43.0
35.0
43.1
40.3
47.6
42.4
51.0
26.6
39.8
37.2
35.9
38.7
46.2
2014
33.4
52.0
60.8
35.5
8.1
0.0
29.1
45.0
41.9
40.9
49.4
54.3
51.3
47.9
49.0
38.4
43.1
30.0
53.6
34.7
22.9
43.8
42.1
45.5
22.6
50.4
23.1
42.5
36.3
47.4
43.5
46.4
45.0
50.6
26.4
41.5
37.3
36.4
39.5
47.3
2015
34.0
52.1
60.7
35.5
8.2
0.0
29.2
45.1
42.1
39.9
49.4
54.3
51.3
45.1
49.0
38.6
42.3
30.8
54.2
34.9
23.3
43.2
42.1
46.2
22.8
42.2
23.4
42.4
36.3
48.0
43.5
46.5
43.8
50.7
26.4
41.8
37.3
36.3
39.3
46.7
2016
34.1
50.7
59.9
34.8
8.3
0.0
29.6
45.3
42.0
39.9
50.1
54.4
51.4
45.6
48.2
38.5
41.5
31.4
54.1
35.0
23.8
43.3
42.1
46.3
23.1
42.0
23.7
41.9
36.2
47.0
43.6
46.1
43.8
51.5
26.7
42.1
37.5
36.4
39.3
46.6
2017
34.0
50.8
59.6
34.5
8.3
0.0
30.2
45.5
41.8
39.9
49.1
54.4
51.5
45.7
46.2
37.7
41.4
31.3
53.8
35.0
24.4
43.5
42.1
45.3
23.4
42.0
23.9
41.6
36.2
46.7
43.6
46.3
43.7
51.6
26.7
42.5
37.4
36.5
39.2
46.4
2018
34.3
51.0
59.0
34.5
8.3
0.0
30.6
45.7
41.2
41.2
48.8
54.0
51.3
45.9
45.0
37.5
41.6
32.1
53.9
35.1
25.0
42.6
42.1
45.5
22.8
42.3
24.1
41.5
36.3
46.3
43.7
46.7
43.8
51.6
26.9
42.7
37.4
34.1
39.1
46.3
2019
34.4
51.0
58.7
34.1
8.3
0.0
30.7
45.8
41.2
41.2
48.4
54.1
51.0
46.0
44.6
37.4
41.8
32.5
54.0
35.1
25.6
42.8
40.0
45.6
23.2
42.1
24.4
41.5
36.1
46.8
43.6
47.0
43.9
50.7
27.0
42.9
37.1
34.1
39.1
46.2
2020
34.7
50.9
58.6
34.1
8.3
0.0
30.8
45.8
40.9
41.2
47.9
53.2
51.3
44.8
43.6
37.4
42.2
32.9
54.2
35.2
26.2
42.9
40.0
46.2
23.4
41.2
24.6
41.5
35.4
47.0
43.2
46.0
43.4
50.3
27.1
42.8
37.2
33.8
39.0
45.9
2021
33.0
51.1
58.9
34.5
8.3
0.0
31.0
41.8
41.1
41.2
49.1
54.0
50.7
41.8
43.2
37.4
42.4
34.1
54.7
35.6
26.6
42.6
40.2
46.6
22.7
40.7
24.8
41.7
35.9
47.3
43.3
46.4
43.7
50.5
27.4
43.1
37.7
34.7
38.9
45.8
1. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
StatLink 2
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TAXING WAGES 2022 © OECD 2022
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2675007_0159.png
157
Table 6.4. Income tax plus employee and employer contributions less cash benefits,
single parent at 67% of average wage
Tax burden as a % of labour costs, single parent with two children
2000
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
1
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
4.0
25.2
36.4
10.4
5.9
-6.9
27.8
12.7
11.5
18.5
28.3
34.5
31.8
35.2
34.0
5.9
16.6
3.3
29.5
15.9
14.4
24.0
38.4
4.4
7.6
26.4
-3.0
16.4
29.8
26.6
26.1
13.4
28.6
39.9
6.5
39.1
15.3
10.7
19.6
26.0
2010
-6.5
26.1
36.8
11.1
6.1
-5.6
28.0
15.8
8.0
24.1
25.5
38.8
29.8
34.4
27.4
16.7
-4.5
1.6
28.1
9.5
16.7
29.5
30.0
2.0
12.9
12.2
-17.7
20.9
28.4
20.6
22.6
12.4
29.2
32.3
4.7
33.0
9.3
8.9
17.3
23.2
2014
-1.8
29.2
36.1
12.0
6.2
-5.8
28.0
24.8
5.8
27.4
27.3
36.6
31.3
32.6
26.4
19.1
0.0
2.9
26.2
16.2
16.9
25.5
31.0
7.6
14.7
11.3
-15.4
22.0
26.9
25.0
27.4
9.9
30.6
33.0
4.1
34.4
4.6
12.0
18.5
24.2
2015
-1.4
29.6
35.6
2.4
6.2
-6.6
28.2
24.7
6.3
21.7
27.2
36.0
30.9
30.8
27.2
20.5
0.1
2.9
25.3
17.0
17.0
25.0
31.7
9.0
15.0
10.2
-14.1
22.2
23.9
25.3
27.9
10.1
24.2
33.2
4.1
34.6
5.3
11.7
17.9
23.5
2016
-1.1
27.4
33.5
1.3
6.2
-6.7
28.2
22.0
6.2
21.8
27.9
24.3
31.1
31.4
25.5
21.0
0.0
0.9
25.2
17.2
17.0
24.9
29.3
9.3
15.3
7.0
-14.1
21.9
-16.3
21.4
28.4
10.5
24.2
33.6
4.5
31.3
7.3
12.2
16.1
20.4
2017
0.6
27.7
33.4
1.4
6.2
-6.6
28.6
22.6
4.8
22.8
26.5
23.6
31.3
31.6
23.0
19.1
1.2
1.7
25.1
17.0
17.0
26.2
30.6
6.6
16.1
6.8
-12.8
21.9
-18.5
22.0
29.0
12.6
24.3
33.9
4.5
31.9
9.5
13.0
16.2
20.3
2018
1.9
28.1
32.3
1.3
6.2
-6.4
29.0
21.4
4.0
17.4
26.5
23.9
31.5
29.6
21.8
17.9
3.8
3.0
25.3
17.3
17.3
24.9
26.1
7.6
16.1
7.2
-19.9
22.2
-11.2
22.5
29.7
13.4
24.5
33.1
4.7
33.1
11.0
9.7
16.0
20.2
2019
1.1
22.3
31.4
0.0
6.2
-6.5
29.0
22.8
4.4
18.1
26.1
20.1
31.4
29.7
22.0
18.1
5.3
3.7
25.8
16.9
17.0
24.3
23.3
8.3
16.8
6.0
-18.8
22.0
-4.8
23.6
30.0
14.8
24.8
32.5
4.9
34.8
12.6
10.1
16.1
20.1
2020
1.2
20.2
27.9
-1.4
6.1
-7.0
29.2
22.8
4.3
18.7
24.2
16.7
27.6
26.7
22.7
17.1
6.0
3.6
24.8
16.7
14.0
23.6
9.1
10.9
19.4
5.5
-17.2
22.4
-3.8
24.0
29.2
15.2
23.3
32.7
5.1
34.9
9.4
2.3
14.9
18.7
2021
-1.0
22.8
29.4
2.8
-24.4
-7.4
29.2
16.2
5.3
20.0
26.1
20.6
28.0
24.6
23.4
16.5
6.2
6.0
26.4
17.1
15.4
24.3
13.5
12.9
16.8
4.6
-16.3
23.1
1.5
24.7
27.9
17.0
24.4
32.4
5.6
34.9
21.0
-0.1
15.0
19.6
1. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
StatLink 2
https://stat.link/oq2ty4
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0160.png
158
Table 6.5. Income tax plus employee and employer contributions less cash benefits,
married couple at 100% of average wage
Tax burden as a % of labour costs, one-earner married couple with two children
2000
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
1
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
23.4
35.2
42.6
27.1
6.3
-4.6
27.8
22.0
28.2
32.8
40.3
41.3
35.3
40.3
43.9
13.1
20.4
25.5
39.3
26.4
15.7
31.4
45.7
11.7
12.7
29.9
13.6
28.4
33.3
30.2
31.3
25.0
32.3
44.3
11.7
40.4
27.8
21.2
27.7
33.5
2010
14.6
36.4
41.2
24.7
7.0
-3.8
28.0
21.1
24.9
31.0
37.0
42.9
32.6
40.3
36.7
19.2
14.7
17.5
37.8
22.1
17.8
34.8
34.7
12.9
16.0
30.8
-0.9
30.7
28.4
26.3
23.5
22.9
34.0
37.2
10.3
35.4
26.5
18.5
25.4
31.0
2014
17.4
38.9
40.6
23.5
7.0
-3.9
28.0
26.7
24.9
32.9
38.6
40.5
33.8
39.5
34.8
21.8
18.5
18.7
38.5
26.5
18.6
31.9
35.6
16.5
19.5
33.0
4.1
32.0
30.3
29.8
28.6
23.5
34.9
37.4
9.3
36.6
26.4
20.6
26.7
32.3
2015
17.8
39.2
40.3
19.2
7.0
-4.4
28.2
26.8
25.3
28.6
38.9
40.5
34.0
37.3
35.3
23.2
17.7
19.2
38.6
27.0
19.0
31.4
36.1
17.5
19.8
31.4
5.2
31.9
30.6
30.7
29.0
23.6
33.7
37.7
9.2
36.7
25.8
20.4
26.6
32.0
2016
18.0
36.8
38.5
20.8
7.0
-4.5
28.2
25.3
25.2
28.5
39.6
40.0
34.1
38.1
33.8
23.3
16.9
19.6
38.6
27.2
19.5
31.5
37.8
17.7
20.1
31.9
6.0
31.6
14.4
28.2
29.5
23.9
33.7
38.0
9.6
36.6
26.0
20.6
26.1
31.0
2017
20.7
37.0
38.4
20.2
7.0
-4.4
28.6
26.0
25.2
29.0
38.5
39.4
34.3
38.3
31.4
21.6
16.9
19.5
38.4
27.3
19.7
32.6
35.7
16.6
20.4
32.2
7.1
31.3
10.5
28.8
30.0
24.4
33.7
38.2
9.6
37.3
26.3
20.9
26.0
30.7
2018
21.5
37.3
37.4
20.1
7.0
-4.3
29.0
25.5
24.9
26.1
38.2
39.3
34.3
37.1
30.2
20.2
17.6
20.2
38.6
27.5
20.3
32.6
33.3
17.1
19.7
32.7
2.8
32.3
15.0
29.3
30.7
25.1
33.9
37.7
9.8
37.7
26.3
18.5
25.9
30.6
2019
20.8
33.7
36.6
19.5
7.0
-4.3
29.0
26.7
25.3
27.1
37.9
38.5
34.2
37.2
30.1
19.9
17.9
20.5
39.0
27.5
20.4
32.2
30.0
17.4
20.2
31.9
4.3
32.0
17.4
30.1
31.0
25.8
34.0
37.3
10.0
38.0
26.4
18.6
25.8
30.5
2020
20.8
32.2
36.4
18.7
7.0
-4.7
29.2
26.8
25.2
27.6
37.0
37.7
32.5
35.5
30.2
19.5
18.5
20.8
37.4
27.3
18.5
32.1
20.7
18.6
20.4
29.6
5.8
32.2
13.1
30.4
30.4
28.5
33.4
37.4
10.1
37.9
26.4
10.1
25.0
29.6
2021
19.1
34.1
37.3
20.4
-18.5
-5.0
29.2
21.8
25.7
28.9
38.6
39.0
32.7
33.2
30.5
20.0
19.0
21.9
37.9
27.4
19.6
31.4
23.6
19.7
19.6
29.1
6.5
32.6
14.3
30.9
29.6
29.5
33.8
37.6
10.6
38.3
27.0
8.5
24.6
29.9
1. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
StatLink 2
https://stat.link/ev0h5a
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0161.png
159
Table 6.6. Income tax plus employee and employer contributions less cash benefits,
married couple with two children, at 100% and 67% of average wage
Tax burden as a % of labour costs, two-earner married couple with two children
2000
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
1
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
26.7
39.0
50.9
31.9
6.6
-5.5
27.8
36.3
35.8
37.4
41.3
43.3
45.4
39.1
47.0
25.4
29.3
21.6
44.2
28.2
15.5
35.5
44.6
21.4
10.6
38.1
19.0
33.0
35.8
33.0
37.2
37.1
35.4
46.0
17.7
39.9
28.4
26.9
31.8
38.8
2010
23.8
40.1
48.9
29.7
6.6
-4.5
28.0
34.3
31.0
35.8
37.0
45.3
41.4
39.2
39.6
30.4
22.1
14.4
42.5
25.4
17.9
38.2
38.8
22.5
14.7
31.9
13.9
33.4
30.7
32.5
31.9
34.0
36.7
38.6
16.4
35.4
28.4
25.3
29.8
36.0
2014
25.5
42.0
48.4
30.3
6.7
-4.7
28.0
35.5
30.8
36.6
38.4
43.6
42.2
39.2
40.5
32.1
25.7
15.1
41.9
28.9
18.7
36.0
39.0
26.5
17.6
31.7
15.8
33.4
32.8
36.7
35.8
34.5
37.6
38.7
15.5
36.6
26.3
26.6
30.7
37.0
2015
26.2
42.2
48.1
28.4
6.7
-5.3
28.2
35.5
31.1
33.7
38.4
43.2
42.3
37.3
40.8
32.7
24.8
15.5
41.5
29.3
19.0
35.5
39.3
27.5
17.9
30.6
16.0
33.2
33.0
35.7
36.0
34.6
36.3
38.8
15.4
36.7
26.2
26.3
30.5
36.6
2016
26.5
39.9
46.4
28.1
6.7
-5.4
28.2
34.6
31.1
33.6
39.0
42.5
42.5
38.1
39.6
32.5
24.3
15.8
41.5
29.4
19.4
35.4
38.3
27.7
18.2
29.5
16.3
32.8
28.0
35.9
36.3
34.4
36.3
39.1
15.8
35.5
26.4
26.4
30.2
36.1
2017
26.6
40.0
46.3
27.5
6.7
-5.3
28.6
35.1
31.0
33.9
37.8
41.8
42.5
38.3
37.3
31.4
24.4
15.8
41.4
29.5
19.7
36.1
36.5
25.8
18.7
29.6
16.5
32.5
27.0
36.2
36.6
35.1
36.2
39.3
15.9
36.2
26.6
26.5
30.0
35.8
2018
27.0
40.3
45.1
27.5
6.7
-5.2
29.0
34.8
30.6
30.0
37.5
41.9
42.6
37.7
36.2
31.2
24.9
16.3
41.5
29.7
20.1
35.5
36.3
26.4
18.3
30.0
16.7
32.4
27.2
35.8
37.0
35.3
36.3
39.0
16.0
36.8
26.6
24.0
29.9
35.5
2019
25.8
38.3
44.6
27.0
6.7
-5.2
29.0
35.5
30.8
30.7
37.1
41.6
42.4
37.7
35.9
31.1
25.5
16.5
41.7
29.7
20.4
35.2
31.9
26.8
18.8
29.0
17.0
32.2
24.9
36.5
37.1
35.7
36.4
38.5
16.2
37.7
26.6
24.0
29.7
35.2
2020
26.3
37.1
44.5
26.6
6.6
-5.6
29.2
35.5
30.6
31.0
36.1
40.1
41.2
35.8
35.6
30.4
26.1
16.7
40.6
29.6
19.5
34.7
29.8
28.3
20.0
28.2
17.2
32.4
21.9
36.7
36.5
35.8
35.6
38.7
16.4
37.6
26.6
18.9
29.2
34.6
2021
24.9
38.4
45.2
27.8
-8.6
-6.0
29.2
30.7
30.9
32.0
37.6
40.9
40.9
33.6
35.6
29.9
26.5
18.1
40.9
29.6
20.2
34.0
31.0
29.4
18.5
27.4
17.3
32.7
22.7
37.2
35.9
36.4
36.2
38.5
16.8
37.9
27.2
17.9
28.8
34.6
1. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
StatLink 2
https://stat.link/feqxj0
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0162.png
160
Table 6.7. Income tax plus employee and employer contributions less cash benefits,
married couple, both at 100% of average wage
Tax burden as a % of labour costs, two-earner married couple with two children
2000
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
1
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
29.6
41.7
53.7
34.1
6.6
-4.6
27.8
39.4
38.1
38.6
43.9
46.5
48.3
40.8
49.3
28.8
33.7
25.0
45.9
28.9
16.1
37.3
45.7
25.9
12.7
37.6
19.4
35.1
36.6
35.5
41.3
41.1
37.2
47.2
20.1
40.4
30.2
28.8
33.8
41.1
2010
26.8
42.9
51.8
31.4
7.0
-1.9
28.0
37.2
32.7
36.9
39.7
47.1
44.1
41.0
41.7
33.3
27.0
16.7
44.7
26.6
19.1
39.4
39.7
27.0
16.0
34.3
17.0
35.1
31.6
35.0
33.9
37.8
38.3
40.0
18.9
36.5
30.3
26.8
31.9
38.4
2014
27.7
44.7
51.4
32.0
7.0
-2.0
28.0
37.6
32.4
37.5
41.1
45.5
44.6
41.6
41.9
33.9
30.8
17.6
45.2
29.9
20.2
37.5
40.0
31.1
19.5
35.2
17.3
35.0
33.5
39.3
37.6
37.2
39.3
39.9
18.0
37.6
28.7
27.8
32.7
39.3
2015
28.3
45.0
51.1
30.9
7.0
-4.4
28.2
37.7
32.7
34.9
41.2
45.6
44.7
39.6
42.2
34.3
29.9
18.2
45.3
30.2
20.5
36.9
40.3
32.1
19.8
33.3
17.6
34.8
33.7
38.4
37.8
37.2
38.0
40.1
17.9
37.7
28.6
27.6
32.5
39.0
2016
28.6
42.5
49.7
30.5
7.0
-4.5
28.2
36.9
32.7
34.8
41.8
45.1
44.8
40.4
41.0
33.9
29.3
18.8
45.3
30.4
20.9
37.0
39.5
32.3
20.1
33.0
18.0
34.4
29.5
38.4
38.0
37.1
38.0
40.4
18.3
37.7
28.7
27.7
32.3
38.5
2017
28.6
42.7
49.5
29.9
7.0
-4.4
28.6
38.8
32.7
35.1
40.7
44.4
44.9
40.6
38.8
32.8
29.2
18.7
45.1
30.5
21.1
37.7
38.4
30.7
20.4
33.2
18.3
34.1
28.7
38.7
38.2
37.3
37.9
40.6
18.4
38.4
28.9
28.0
32.2
38.4
2018
28.9
42.9
48.4
29.8
7.0
-4.3
29.0
37.1
32.3
32.2
40.4
44.4
44.9
40.8
37.6
32.9
29.7
19.5
45.2
30.7
21.6
37.6
38.2
31.3
19.7
33.6
18.6
34.0
28.8
38.3
38.5
38.7
38.0
40.4
18.5
38.8
28.9
25.9
32.1
38.2
2019
27.9
41.3
48.0
29.4
7.0
-4.3
29.0
39.6
32.5
33.0
40.0
44.2
44.7
40.8
37.3
32.7
30.1
19.7
45.5
30.7
21.9
37.3
33.8
31.6
20.2
32.7
19.0
33.8
26.9
38.9
38.6
39.0
38.1
39.9
18.7
39.1
28.9
26.1
31.9
37.9
2020
28.4
40.4
48.0
29.0
7.0
-4.7
29.2
37.7
32.3
33.4
39.2
43.5
43.9
39.4
36.9
32.2
30.6
20.1
44.1
30.5
21.2
37.2
32.2
33.0
20.4
32.0
19.3
34.0
24.3
39.1
38.0
38.9
37.6
40.0
18.9
39.0
28.9
22.1
31.5
37.3
2021
27.1
41.5
48.4
30.1
-5.8
-5.0
29.2
33.0
32.5
34.4
40.6
44.1
43.5
37.1
36.8
32.2
31.0
21.3
44.0
30.6
21.8
36.0
33.2
34.0
19.6
31.3
19.4
34.3
24.9
39.5
37.6
39.5
37.9
40.1
19.3
39.4
29.4
21.6
31.2
37.3
1. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
StatLink 2
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TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0163.png
161
Table 6.8. Income tax plus employee and employer contributions less cash benefits,
married couple at 100% and 67% of average wage
Tax burden as a % of labour costs, two-earner married couple without children
2000
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
1
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
29.0
45.7
56.2
32.5
7.0
0.0
27.8
42.1
39.8
40.7
45.6
47.7
50.5
38.7
53.4
26.8
31.3
26.4
45.7
29.3
15.7
42.6
44.6
30.7
10.6
41.0
19.0
37.2
37.7
35.6
41.6
44.8
37.1
49.5
22.9
39.9
31.2
30.5
35.0
42.8
2010
24.5
46.3
53.8
30.7
7.0
0.0
28.0
40.9
35.0
39.5
40.1
48.7
47.2
39.2
45.5
31.4
26.7
17.5
45.9
29.7
19.0
43.7
39.9
30.6
14.7
36.3
15.9
36.0
33.8
35.1
36.8
41.0
38.5
41.9
21.8
35.9
31.3
29.5
33.1
40.3
2014
25.5
47.6
53.4
31.3
7.0
0.0
28.0
41.4
34.6
39.6
41.4
47.0
47.4
39.9
49.0
32.2
29.6
17.8
45.4
31.4
19.9
42.6
40.2
33.7
17.6
36.1
15.8
35.7
35.4
38.6
40.4
40.9
39.3
41.7
21.6
37.2
29.1
30.4
33.8
41.1
2015
26.2
47.8
53.0
31.3
7.0
0.0
28.2
41.7
34.9
38.6
41.3
46.7
47.6
38.0
49.0
32.7
28.8
18.5
45.0
31.7
20.2
42.2
40.4
34.5
17.9
35.0
16.0
35.5
35.4
39.8
40.5
41.0
38.0
41.8
21.6
37.3
28.9
30.2
33.8
41.0
2016
26.5
45.6
51.4
31.0
7.0
0.0
28.2
41.9
34.9
38.6
41.8
46.4
47.6
39.2
48.2
32.5
28.4
19.0
45.0
31.9
20.5
42.0
40.4
34.7
18.2
34.5
16.3
35.0
35.3
39.4
40.7
41.1
38.0
42.0
21.8
36.1
29.0
30.2
33.7
40.8
2017
26.6
45.7
51.2
30.3
7.0
0.0
28.6
42.4
34.8
38.6
40.6
45.9
47.7
39.4
46.2
31.5
28.4
18.8
44.9
31.9
20.7
42.2
39.7
32.7
18.7
34.6
16.5
34.6
35.4
39.5
40.8
41.8
37.9
42.1
21.9
36.7
29.1
30.2
33.6
40.6
2018
27.0
45.9
50.1
30.3
7.0
0.0
29.0
42.8
34.2
34.8
40.2
45.8
47.6
39.6
45.0
31.6
28.8
19.4
44.9
32.1
21.1
41.4
39.3
33.1
18.3
35.0
16.7
34.5
35.5
38.9
41.0
41.9
38.0
42.2
22.0
37.4
29.1
28.3
33.4
40.3
2019
25.8
46.2
49.6
29.9
7.0
0.0
29.0
43.1
34.4
35.5
39.7
45.4
47.4
39.6
44.6
31.4
29.2
19.6
45.1
32.1
21.7
41.3
36.5
33.3
18.8
34.0
17.0
34.4
35.3
39.4
41.0
42.2
38.0
41.7
22.1
38.2
29.0
28.3
33.3
40.1
2020
26.3
45.6
49.5
29.8
7.0
0.0
29.2
43.2
34.1
35.7
38.7
43.8
47.0
38.0
43.6
31.1
29.7
19.9
44.5
32.0
22.1
40.8
35.7
34.5
20.0
33.1
17.2
34.5
34.5
39.6
40.4
42.0
37.3
41.8
22.3
38.2
28.9
25.1
33.1
39.7
2021
24.9
46.0
50.0
30.4
-1.8
0.0
29.2
39.3
34.3
36.4
40.1
44.3
46.3
35.8
43.2
30.6
30.1
21.1
44.4
32.1
22.3
39.5
36.3
35.4
18.5
32.2
17.3
34.7
34.6
40.0
40.4
42.3
37.8
41.5
22.5
38.5
29.4
26.1
32.8
39.6
1. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
StatLink 2
https://stat.link/x1fbts
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0164.png
162
Table 6.9. Income tax, single persons at 67% of average wage
Tax burden as a % of gross wage earnings, single persons without children
2000
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
1
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
21.1
7.6
22.8
16.2
0.0
0.0
0.0
8.3
28.4
19.9
20.9
12.5
16.3
2.1
17.6
20.0
15.8
12.1
15.2
5.1
0.8
17.0
22.2
10.3
-5.7
5.3
18.6
19.0
5.3
6.4
6.2
10.2
8.6
24.7
8.4
13.2
15.1
15.0
12.2
13.8
2010
16.0
9.0
22.5
13.5
0.0
0.0
0.0
7.2
34.0
14.8
15.7
12.2
13.8
1.7
10.8
22.0
13.0
4.4
16.6
6.1
1.4
20.5
10.7
7.3
-0.4
5.3
14.3
17.8
5.6
5.1
4.6
6.6
11.2
15.0
8.3
8.6
14.4
13.8
10.6
12.0
2014
17.7
10.7
22.0
13.6
0.0
0.0
0.0
8.2
33.6
16.2
15.8
12.6
14.2
3.5
16.0
24.2
13.3
4.7
13.8
6.1
1.4
17.9
10.9
9.7
1.8
5.2
13.4
17.0
6.2
8.3
6.4
6.6
12.2
14.8
7.9
9.5
11.5
15.2
11.1
12.6
2015
18.5
11.1
21.5
13.7
0.0
0.0
0.0
8.5
33.8
15.5
15.8
11.8
14.2
3.0
16.0
24.8
12.8
5.0
12.3
6.2
1.5
17.4
11.4
10.0
2.1
7.2
13.5
16.9
6.3
10.2
6.6
6.6
10.3
15.0
7.8
9.7
11.2
15.2
11.1
12.6
2016
18.8
8.5
19.5
13.5
0.0
0.0
0.0
9.0
33.7
15.3
15.0
10.9
14.1
4.1
15.0
25.0
12.1
5.3
12.4
6.2
1.7
16.8
11.0
10.2
2.4
6.3
13.7
16.3
6.4
10.3
6.9
6.7
10.3
15.3
8.1
9.3
11.1
15.3
11.0
12.3
2017
19.1
8.9
19.4
13.7
0.0
0.0
0.0
9.7
33.6
15.4
13.5
10.9
14.0
4.0
15.0
24.6
11.8
5.1
12.4
6.2
2.1
16.9
9.4
8.1
3.4
6.7
13.8
15.9
6.5
10.6
7.3
8.3
10.3
15.4
8.1
9.7
11.1
15.5
10.9
12.2
2018
19.6
9.3
18.3
13.7
0.0
0.0
0.0
10.4
32.8
8.3
13.1
12.7
14.1
4.2
15.0
24.7
12.1
5.5
12.6
6.2
2.3
14.2
8.5
8.5
3.3
6.8
13.9
15.7
6.7
10.6
7.7
8.1
10.4
15.4
8.2
9.9
11.1
13.7
10.7
11.8
2019
18.1
9.7
17.5
13.5
0.0
0.0
0.0
11.0
32.9
9.0
13.0
12.8
14.2
4.5
15.0
24.6
12.3
5.7
12.8
6.2
2.5
14.0
14.1
8.9
4.3
5.6
14.0
15.6
6.4
11.2
8.0
8.6
10.4
14.8
8.3
10.0
10.9
13.7
10.9
12.1
2020
18.7
8.8
17.4
13.4
0.0
0.0
0.0
11.2
32.6
9.3
12.6
11.9
13.6
2.1
15.0
24.4
12.6
6.0
12.8
6.1
2.6
12.9
12.8
10.0
7.3
5.3
14.1
15.9
5.4
11.4
7.1
8.5
8.8
14.8
8.2
10.1
11.1
13.9
10.8
11.7
2021
17.4
9.4
18.1
13.4
0.0
0.0
0.0
5.5
32.8
9.9
12.6
12.3
12.9
2.4
15.0
23.7
12.7
6.9
13.2
6.2
2.6
12.8
13.7
10.7
4.0
4.9
14.2
16.0
5.6
11.8
7.4
8.7
10.2
14.0
8.4
10.2
11.5
14.1
10.7
11.7
1. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
StatLink 2
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TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0165.png
163
Table 6.10. Income tax, single persons at 100% of average wage
Tax burden as a % of gross wage earnings, single persons without children
2000
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
1
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
26.6
12.9
29.0
21.7
0.0
0.0
0.0
10.0
32.5
21.9
26.9
15.7
22.7
5.7
23.2
25.3
24.1
18.0
19.9
6.4
2.2
18.9
25.8
17.0
1.0
9.6
19.4
22.9
6.6
11.4
8.2
13.5
13.5
26.7
11.3
14.7
17.4
17.3
15.8
18.0
2010
22.3
15.0
28.7
19.0
0.0
0.0
0.0
11.5
36.3
16.7
22.3
14.2
18.7
7.1
14.4
27.4
20.1
9.0
20.7
7.6
4.5
21.5
13.1
14.6
4.8
16.2
17.0
21.5
6.7
11.2
8.5
11.2
15.4
17.8
11.3
11.6
16.2
17.0
14.5
16.4
2014
23.4
16.6
28.4
19.1
0.0
0.0
0.0
12.1
36.0
17.6
22.6
14.6
19.1
8.6
16.0
28.8
22.9
9.1
21.5
7.7
4.7
19.1
13.6
17.7
8.8
15.3
17.3
20.5
7.1
16.1
9.7
11.1
16.6
17.4
10.7
12.3
14.3
18.0
15.1
17.3
2015
24.1
17.0
28.0
19.2
0.0
0.0
0.0
12.4
36.1
16.8
22.6
14.8
19.2
8.2
16.0
29.2
22.0
9.6
21.6
7.8
4.9
18.4
13.9
18.0
9.1
17.1
17.6
20.3
7.1
17.4
9.9
11.2
14.9
17.6
10.7
12.4
14.1
18.0
15.2
17.3
2016
24.3
14.1
26.8
18.5
0.0
0.0
0.0
12.7
36.1
16.8
22.0
14.7
19.1
9.3
15.0
28.9
21.4
10.0
21.6
7.9
5.3
18.4
14.0
18.2
9.4
16.6
18.0
19.7
7.2
16.6
10.1
11.4
14.9
17.9
11.0
12.4
14.1
18.2
15.1
17.0
2017
24.4
14.5
26.6
18.7
0.0
0.0
0.0
13.1
36.0
16.8
20.9
14.6
19.0
9.2
15.0
28.2
21.3
9.7
21.6
7.9
5.5
18.7
13.7
16.7
9.8
17.2
18.3
19.3
7.3
16.5
10.3
11.6
14.7
18.0
11.0
13.2
14.0
18.4
15.0
17.0
2018
24.6
14.8
25.9
18.7
0.0
0.0
0.0
13.6
35.6
13.0
20.6
16.5
19.1
9.5
15.0
28.2
21.6
10.2
21.7
7.9
5.9
17.7
13.1
17.3
9.0
17.5
18.6
19.2
7.4
15.9
10.6
12.0
14.9
18.1
11.2
13.6
14.0
16.1
15.0
16.9
2019
23.6
15.2
25.4
18.6
0.0
0.0
0.0
14.0
35.6
14.1
20.5
16.7
19.1
9.7
15.0
28.2
21.9
10.4
22.0
7.9
6.1
17.6
17.0
17.7
9.6
16.3
19.0
19.1
7.2
16.4
10.8
12.3
14.9
17.6
11.3
14.0
13.9
16.2
15.1
17.1
2020
24.1
14.7
25.3
18.6
0.0
0.0
0.0
14.1
35.4
14.5
20.3
15.9
18.5
8.4
15.0
28.1
22.3
10.6
20.7
7.8
6.1
17.3
16.5
18.8
9.9
15.9
19.3
19.3
6.3
16.7
10.2
11.9
14.4
17.6
11.2
13.9
14.0
16.6
15.0
16.9
2021
23.2
15.2
25.8
18.6
0.0
0.0
0.0
8.6
35.5
15.5
20.3
16.5
17.5
8.3
15.0
27.9
22.7
11.4
20.1
7.8
6.2
16.0
17.0
19.6
8.9
15.6
19.4
19.4
6.4
17.0
10.4
12.4
14.7
17.5
11.5
14.4
14.3
17.2
14.9
16.7
1. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
StatLink 2
https://stat.link/yviad0
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0166.png
164
Table 6.11. Income tax, single persons at 167% of average wage
Tax burden as a % of gross wage earnings, single persons without children
2000
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
1
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
34.9
20.4
36.0
28.9
1.3
0.0
0.0
13.0
40.3
23.6
34.0
21.2
31.7
13.3
30.3
36.6
32.9
26.3
25.3
10.6
6.7
20.4
28.7
26.2
8.0
25.4
24.2
30.4
7.7
17.6
12.8
19.1
18.5
36.3
16.2
18.0
23.1
24.3
21.7
24.3
2010
28.2
22.2
35.5
26.5
1.0
0.0
0.6
14.9
42.9
18.2
29.5
20.3
27.1
14.2
22.8
32.3
30.9
16.4
27.7
12.0
8.6
22.4
15.0
22.6
11.9
28.4
23.3
27.9
7.5
18.5
11.7
17.0
20.6
30.9
16.3
14.9
22.4
22.9
20.2
22.8
2014
29.4
23.2
35.2
26.7
1.1
0.0
1.4
15.3
41.9
18.8
29.7
20.8
27.6
18.4
16.0
33.7
33.0
16.4
29.2
12.4
8.6
20.0
15.0
25.5
13.3
28.5
23.1
26.9
7.8
23.9
12.4
15.6
22.5
30.4
15.7
16.3
22.3
23.4
20.6
23.2
2015
30.1
23.4
35.1
26.8
1.2
0.0
1.3
15.5
42.1
18.0
29.7
21.0
27.8
16.1
16.0
33.9
32.1
17.0
29.9
12.6
8.9
19.3
15.0
25.7
13.6
28.9
23.4
26.7
7.8
24.7
12.5
15.8
21.1
30.4
15.6
16.6
22.4
23.5
20.6
23.1
2016
30.2
21.2
34.5
25.8
1.3
0.0
1.8
15.7
42.0
17.9
29.4
20.9
27.6
16.2
15.0
33.9
31.2
17.5
29.9
12.8
9.5
19.4
15.0
25.8
13.9
27.6
23.7
26.2
7.8
23.4
12.6
15.3
20.9
31.5
16.0
17.0
22.6
23.6
20.4
22.8
2017
30.1
21.4
34.3
26.1
1.3
0.0
1.9
15.9
41.8
18.0
28.5
20.8
27.5
16.1
15.0
33.5
31.1
17.3
29.6
12.8
10.1
19.7
15.0
25.2
14.2
28.0
23.9
25.8
7.9
23.1
12.8
15.6
20.5
31.7
16.0
17.4
22.4
23.7
20.4
22.7
2018
30.4
21.6
33.9
26.1
1.3
0.0
1.9
16.2
41.2
19.7
28.1
22.7
27.6
16.4
15.0
33.2
31.3
18.1
29.7
12.9
10.8
17.8
15.0
25.5
13.5
28.3
24.1
25.7
8.0
22.5
13.0
16.0
20.7
31.6
16.1
17.7
22.4
21.2
20.5
22.8
2019
30.5
21.9
33.5
25.9
1.3
0.0
2.1
16.4
41.2
19.7
28.1
22.8
27.6
16.7
15.0
33.2
31.5
18.5
29.9
13.0
11.1
18.0
19.4
25.7
14.0
27.2
24.4
25.7
7.8
23.2
13.0
16.3
20.8
30.4
16.3
17.9
21.7
21.2
20.6
23.0
2020
30.8
21.5
33.5
26.1
1.3
0.0
1.9
16.5
40.9
19.7
28.0
22.3
26.7
15.8
15.0
33.4
31.8
18.9
30.2
12.6
11.1
18.2
19.4
26.4
14.3
26.5
24.6
25.7
7.0
23.4
12.7
15.2
20.1
29.9
16.1
17.8
22.1
21.5
20.5
22.8
2021
29.4
21.8
33.8
26.3
1.3
0.0
2.3
11.2
41.1
19.7
28.0
22.7
26.0
14.6
15.0
33.5
32.0
20.0
30.7
12.7
11.1
18.5
19.6
26.8
13.4
26.4
24.8
26.0
7.6
23.8
12.9
15.7
20.5
30.2
16.4
18.1
22.9
21.9
20.5
22.7
1. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
StatLink 2
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TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0167.png
165
Table 6.12. Income tax, single parent at 67% of average wage
Tax burden as a % of gross wage earnings, single parent with two children
2000
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
1
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
15.5
5.8
16.7
8.9
0.0
0.0
0.0
2.3
28.4
19.9
20.9
7.1
-2.6
1.2
10.3
20.0
9.0
1.1
10.0
2.4
0.1
5.4
16.2
0.0
-5.7
3.0
18.6
13.3
2.5
3.4
3.6
3.4
0.4
24.7
4.0
13.2
8.6
-5.0
7.5
8.7
2010
14.3
5.8
17.2
4.9
0.0
0.0
0.0
-4.9
34.0
9.3
15.7
7.5
-4.0
0.0
10.8
22.0
6.5
0.0
9.3
2.7
0.7
9.0
7.3
-0.3
-0.4
3.5
15.9
14.1
0.0
0.6
-2.9
0.0
1.7
15.0
3.4
7.0
0.0
-7.4
5.7
6.4
2014
17.7
7.8
16.5
5.3
0.0
0.0
0.0
-4.7
32.0
11.8
15.8
7.6
-2.1
3.5
4.3
24.2
7.6
0.0
6.0
6.1
0.0
1.9
7.1
2.8
1.8
2.9
14.8
13.4
-3.1
3.4
-0.7
0.0
3.5
14.8
2.2
8.0
-4.5
-4.0
5.9
6.3
2015
18.5
8.3
16.0
6.9
0.0
0.0
0.0
-5.1
32.2
11.2
15.2
7.9
-2.7
3.0
4.7
24.8
7.2
0.0
4.6
6.2
0.0
3.2
7.6
3.3
2.1
5.7
14.9
13.3
-2.7
3.8
-0.3
0.0
-4.8
15.0
2.2
8.2
-3.9
-3.8
5.9
6.1
2016
18.8
5.3
14.0
6.4
0.0
0.0
0.0
-9.0
32.2
11.4
14.3
7.9
-2.6
3.3
1.6
25.0
6.6
-3.4
4.7
6.2
0.0
2.6
4.1
3.6
2.4
4.4
15.0
12.8
-2.3
0.0
0.1
0.1
-4.8
15.3
2.3
7.5
-2.3
-3.1
5.3
5.1
2017
19.1
5.7
14.0
6.8
0.0
0.0
0.0
-8.6
32.1
11.7
12.9
7.9
-2.6
3.2
0.6
24.6
6.4
-2.8
4.7
6.2
0.0
3.8
0.0
0.7
3.4
4.6
15.1
12.6
-1.7
0.6
0.7
1.8
-4.7
15.4
2.3
7.9
-0.3
-2.1
5.3
5.0
2018
19.6
6.2
12.9
6.8
0.0
0.0
0.0
-7.8
31.1
4.8
13.1
9.5
-2.2
3.5
0.0
24.7
6.9
-1.9
5.0
6.2
0.2
2.1
8.5
1.5
3.3
4.7
15.1
12.7
-0.9
1.1
1.5
1.9
-4.4
15.4
2.4
8.3
1.1
-5.7
5.4
5.2
2019
18.1
-1.6
11.6
6.5
0.0
0.0
0.0
-6.4
31.1
5.7
13.0
9.5
-2.0
3.8
0.0
24.6
7.3
-1.4
5.3
6.2
0.8
1.2
14.1
2.1
4.3
3.6
15.2
12.8
5.0
2.1
1.9
2.6
-4.1
14.8
2.5
8.4
2.6
-5.2
5.7
5.5
2020
18.7
-2.3
11.5
6.4
0.0
0.0
0.0
-6.4
30.9
6.1
12.6
9.5
-6.7
1.2
0.8
24.4
7.6
-1.7
5.5
6.1
0.9
0.0
12.8
4.0
7.3
3.3
15.3
13.2
-1.3
2.4
1.1
2.7
-6.0
14.8
2.4
8.5
-0.7
-3.6
5.3
4.7
2021
17.4
-1.5
12.4
6.6
0.0
0.0
0.0
-12.6
31.0
6.9
12.6
9.5
-6.3
1.5
1.7
23.7
7.9
0.0
6.4
6.2
0.9
1.0
13.7
5.5
4.0
3.0
15.3
13.4
-0.8
3.1
-0.6
3.3
-4.5
14.0
2.6
8.5
11.5
-6.2
5.6
4.9
1. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
StatLink 2
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TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0168.png
166
Table 6.13. Income tax, married couple at 100% of average wage
Tax burden as a % of gross wage earnings, one-earner married couple with two children
2000
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
1
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
25.6
11.7
18.9
18.4
0.0
0.0
0.0
4.0
25.9
17.9
26.9
7.3
1.5
7.7
18.4
16.1
11.1
18.0
15.6
2.5
1.5
11.1
25.8
2.3
1.0
4.8
19.4
18.1
4.8
6.2
5.0
4.8
5.2
26.7
6.2
14.7
17.4
6.8
11.3
12.0
2010
21.1
12.8
17.7
14.6
0.0
0.0
0.0
-5.3
32.1
9.2
22.3
8.3
-0.6
7.6
14.4
17.3
10.8
9.0
13.9
3.9
1.9
13.9
10.8
4.5
4.8
15.9
17.0
19.0
0.0
3.3
-4.5
2.9
7.9
17.8
5.9
9.8
14.6
3.6
9.4
9.8
2014
23.4
14.6
17.1
12.6
0.0
0.0
0.0
-4.5
32.0
11.8
22.6
7.9
0.9
10.4
8.1
20.3
12.9
9.1
14.6
6.3
1.9
8.4
11.0
6.2
8.8
14.9
17.3
19.3
0.8
6.1
-1.8
2.8
9.1
17.4
4.3
10.5
14.3
5.9
9.9
10.1
2015
24.1
15.0
16.7
13.7
0.0
0.0
0.0
-4.5
32.2
11.2
22.5
7.9
1.0
9.2
8.4
21.3
12.3
9.6
14.7
6.4
2.2
8.9
11.4
6.4
9.1
16.5
17.6
19.1
1.1
7.3
-1.4
2.9
7.6
17.6
4.3
10.6
13.5
6.1
10.1
10.2
2016
24.3
11.9
15.1
15.2
0.0
0.0
0.0
-6.8
32.1
11.2
21.9
7.9
1.0
9.8
6.0
21.4
11.5
10.0
14.7
6.5
2.7
8.8
9.4
6.5
9.4
16.1
18.0
18.6
1.3
4.3
-0.9
3.0
7.6
17.9
4.5
10.4
13.5
6.3
9.8
9.6
2017
24.4
12.2
15.0
15.4
0.0
0.0
0.0
-6.1
32.0
11.5
20.9
7.9
1.0
9.7
5.4
20.7
11.3
9.7
14.8
6.5
3.0
9.9
6.6
5.6
9.8
16.8
18.3
18.3
1.8
4.5
-0.2
3.3
7.6
18.0
4.5
11.3
13.4
6.7
9.8
9.5
2018
24.6
12.6
14.6
15.5
0.0
0.0
0.0
-5.1
31.5
7.9
20.6
9.5
1.2
10.0
4.8
20.8
11.8
10.2
14.9
6.5
3.5
9.7
13.1
5.9
9.0
17.2
18.6
19.2
6.4
5.1
0.6
3.6
7.8
18.1
4.6
11.8
13.4
4.1
10.1
10.1
2019
23.6
7.7
13.4
15.3
0.0
0.0
0.0
-3.7
31.6
9.4
20.5
9.5
1.3
10.2
4.6
20.7
11.8
10.4
15.3
6.5
4.1
9.0
17.0
6.2
9.6
15.9
19.0
19.1
2.4
5.9
1.0
3.9
8.0
17.6
4.7
12.1
13.3
4.3
10.0
9.9
2020
24.1
7.3
13.3
15.2
0.0
0.0
0.0
-3.6
31.5
9.9
20.3
9.5
-0.8
9.1
5.5
21.2
12.2
10.6
14.1
6.4
4.2
8.5
16.5
7.0
9.9
15.7
19.3
19.3
1.7
6.2
0.4
4.1
7.2
17.6
4.6
12.1
13.4
4.8
10.0
9.7
2021
23.2
7.9
14.2
15.2
0.0
0.0
0.0
-8.6
31.8
11.1
20.3
9.5
-0.7
8.8
6.1
21.9
12.7
11.4
14.0
6.5
4.2
8.1
17.0
7.6
8.9
15.4
19.4
19.4
2.1
6.7
-0.5
4.6
7.7
17.5
4.9
12.5
13.7
2.3
9.9
9.7
1. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
StatLink 2
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TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0169.png
167
Table 6.14. Income tax, married couple with two children, at 100% and 67% of average wage
Tax burden as a % of gross wage earnings, two-earner married couple with two children
2000
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
1
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
23.8
10.8
26.4
19.5
0.0
0.0
0.0
6.8
30.8
21.1
24.5
10.8
13.8
6.1
18.0
23.2
19.7
12.5
16.8
4.5
1.3
13.5
24.3
8.2
-1.7
7.9
19.0
20.6
6.1
8.1
6.0
8.1
9.3
25.9
9.8
14.1
16.5
12.8
13.1
14.7
2010
19.1
12.3
24.8
16.2
0.0
0.0
0.0
4.9
35.4
13.7
19.7
11.1
9.9
6.2
13.0
25.3
15.6
5.4
16.3
5.5
2.0
16.5
10.8
9.3
2.7
11.7
16.5
20.0
2.6
7.3
3.9
5.7
11.5
16.7
9.5
9.7
15.4
10.9
11.5
12.7
2014
21.1
14.0
24.3
16.2
0.0
0.0
0.0
5.4
35.0
15.3
19.9
11.5
10.9
8.2
11.3
26.9
18.0
5.5
15.5
7.1
2.0
12.2
11.0
12.1
6.0
10.8
15.8
19.1
3.7
10.7
5.5
5.6
12.7
16.4
8.1
10.5
13.2
12.2
11.9
13.2
2015
21.8
14.3
23.9
16.9
0.0
0.0
0.0
5.4
35.2
14.6
19.7
11.4
11.0
7.3
11.5
27.5
17.1
5.7
14.9
7.1
2.3
12.3
11.4
12.4
6.3
12.5
16.0
18.9
3.9
9.4
5.8
5.7
10.9
16.5
8.1
10.7
12.9
12.3
11.9
13.0
2016
22.1
11.3
22.4
16.5
0.0
0.0
0.0
4.0
35.2
14.6
19.0
10.9
10.9
7.8
9.6
27.3
16.7
6.0
15.0
7.2
2.6
12.0
10.0
12.6
6.6
11.7
16.3
18.3
4.1
9.7
6.1
5.8
10.9
16.8
8.4
10.5
12.9
12.4
11.7
12.6
2017
22.2
11.6
22.2
16.7
0.0
0.0
0.0
4.4
35.1
14.8
17.8
10.8
10.8
7.7
9.2
26.7
16.7
5.8
15.0
7.2
2.9
12.7
7.7
10.9
7.2
12.2
16.5
17.9
4.3
10.1
6.5
6.5
10.8
16.9
8.4
11.1
12.8
12.7
11.7
12.5
2018
22.6
12.0
21.4
16.7
0.0
0.0
0.0
5.0
34.5
9.7
17.6
12.7
11.1
8.0
8.9
26.8
17.1
6.1
15.2
7.2
3.3
11.5
11.3
11.4
6.7
12.4
16.7
17.8
4.7
9.5
7.0
6.6
10.9
17.0
8.6
11.5
12.8
9.9
11.6
12.5
2019
21.4
9.3
20.7
16.5
0.0
0.0
0.0
5.8
34.5
10.8
17.5
12.9
11.1
8.2
8.7
26.7
17.4
6.2
15.5
7.2
3.8
11.0
15.9
11.9
7.5
11.2
17.0
17.7
4.6
10.4
7.2
6.9
11.0
16.4
8.7
11.7
12.7
10.1
11.7
12.7
2020
21.9
8.7
20.6
16.5
0.0
0.0
0.0
5.9
34.3
11.1
17.2
11.7
9.6
6.5
9.3
26.6
18.0
6.4
14.8
7.1
3.9
10.3
15.0
13.2
8.9
10.8
17.2
17.9
3.7
10.7
6.5
7.0
10.0
16.5
8.6
11.7
12.9
10.4
11.6
12.3
2021
20.9
9.3
21.2
16.5
0.0
0.0
0.0
0.5
34.5
12.1
17.2
12.0
9.1
6.5
9.7
26.2
18.3
7.4
14.8
7.2
3.9
10.0
15.7
14.1
6.9
10.5
17.3
18.1
4.0
11.3
6.0
7.4
10.8
16.1
8.9
12.0
13.2
8.9
11.5
12.3
1. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
StatLink 2
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TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0170.png
168
Table 6.15. Income tax, married couple, both at 100% of average wage
Tax burden as a % of gross wage earnings, two-earner married couple with two children
2000
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
1
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
26.6
12.9
29.0
21.7
0.0
0.0
0.0
7.9
32.5
21.9
26.9
12.5
17.2
8.3
20.8
25.3
24.1
15.4
18.9
5.3
2.0
15.0
25.8
12.0
1.0
9.6
19.4
22.3
6.6
10.9
7.0
10.0
11.6
26.7
11.7
14.7
17.4
15.1
14.9
16.7
2010
22.3
14.7
27.5
18.5
0.0
0.0
0.0
7.4
36.3
14.8
22.3
12.2
13.1
8.5
14.4
27.4
20.1
6.5
18.6
6.3
3.4
17.7
12.0
12.8
4.8
16.1
17.0
21.5
3.6
10.1
6.0
8.1
13.5
17.8
11.5
11.0
16.2
12.6
13.3
14.9
2014
23.4
16.4
27.1
18.6
0.0
0.0
0.0
7.8
36.0
16.2
22.6
12.6
13.8
10.4
12.1
28.8
22.9
6.7
19.2
7.7
3.6
13.7
12.3
16.0
8.8
14.9
17.3
20.5
4.6
13.9
7.3
8.1
14.8
17.4
10.0
11.7
14.3
13.8
13.8
15.5
2015
24.1
16.7
26.8
19.2
0.0
0.0
0.0
7.8
36.1
15.4
22.5
12.8
13.8
9.2
12.2
29.2
22.0
7.2
19.3
7.8
3.9
13.7
12.6
16.4
9.1
16.6
17.6
20.3
4.7
12.8
7.5
8.1
13.1
17.6
10.0
11.8
14.1
13.9
13.8
15.4
2016
24.3
13.6
25.5
18.5
0.0
0.0
0.0
6.7
36.1
15.5
21.9
12.7
13.7
9.8
10.5
28.9
21.4
7.7
19.3
7.9
4.3
13.6
11.7
16.6
9.4
15.9
18.0
19.7
4.8
12.8
7.8
8.3
13.1
17.9
10.4
11.8
14.1
14.0
13.6
15.0
2017
24.4
13.9
25.4
18.7
0.0
0.0
0.0
7.0
36.0
15.6
20.9
12.6
13.6
9.7
10.2
28.2
21.3
7.5
19.3
7.9
4.6
14.3
10.2
15.1
9.8
16.5
18.3
19.3
5.1
13.1
8.1
8.5
12.9
18.0
10.4
12.6
14.0
14.3
13.6
14.9
2018
24.6
14.3
24.7
18.7
0.0
0.0
0.0
7.5
35.6
11.8
20.6
14.5
13.8
10.0
9.9
28.2
21.6
8.1
19.4
7.9
5.0
13.7
13.1
15.7
9.0
16.9
18.6
19.2
5.3
12.6
8.5
8.8
13.1
18.1
10.6
13.1
14.0
12.2
13.7
15.0
2019
23.6
12.1
24.1
18.6
0.0
0.0
0.0
8.2
35.6
13.0
20.5
14.7
13.9
10.2
9.8
28.2
21.9
8.3
19.7
7.9
5.4
13.3
17.0
16.1
9.6
15.6
19.0
19.1
5.3
13.4
8.7
9.1
13.2
17.6
10.7
13.4
13.9
12.3
13.8
15.1
2020
24.1
11.7
24.0
18.6
0.0
0.0
0.0
8.2
35.4
13.5
20.3
13.8
12.9
9.1
10.2
28.1
22.3
8.6
18.5
7.8
5.4
12.9
16.5
17.4
9.9
15.2
19.3
19.3
4.4
13.6
8.2
8.9
12.6
17.6
10.6
13.3
14.0
12.9
13.7
14.9
2021
23.2
12.2
24.5
18.6
0.0
0.0
0.0
2.9
35.5
14.5
20.3
14.5
12.2
8.8
10.6
27.9
22.7
9.5
18.1
7.8
5.4
12.1
17.0
18.2
8.9
14.9
19.4
19.4
4.6
14.1
7.7
9.5
13.0
17.5
11.0
13.8
14.3
12.0
13.6
14.8
1. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
StatLink 2
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TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0171.png
169
Table 6.16. Income tax, married couple at 100% and 67% of average wage
Tax burden as a % of gross wage earnings, two-earner married couple without children
2000
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
1
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
24.4
10.8
28.0
19.5
0.0
0.0
0.0
9.3
30.8
21.1
24.5
14.1
19.8
5.6
21.0
23.2
19.7
15.0
18.0
5.8
1.6
18.1
24.3
11.3
-1.7
7.9
19.0
21.3
6.1
9.2
7.4
12.2
11.5
25.9
11.3
14.1
16.5
16.8
14.3
16.2
2010
19.8
12.6
26.2
16.8
0.0
0.0
0.0
9.7
35.4
15.9
19.7
13.4
16.5
6.2
13.0
25.3
15.6
6.6
19.1
7.0
3.2
21.1
12.2
9.3
2.7
11.8
15.9
20.0
6.2
8.7
6.9
9.4
13.7
16.7
11.0
10.4
15.5
15.4
12.9
14.5
2014
21.1
14.3
25.8
16.9
0.0
0.0
0.0
10.5
35.0
17.1
19.9
13.7
16.9
8.2
16.0
26.9
18.0
6.8
18.4
7.1
3.3
18.6
12.5
12.1
6.0
11.2
15.8
19.1
6.7
13.0
8.4
9.3
14.8
16.4
10.5
11.2
13.2
16.5
13.4
15.3
2015
21.8
14.6
25.4
17.0
0.0
0.0
0.0
10.8
35.2
16.3
19.9
13.8
16.9
7.3
16.0
27.5
17.1
7.2
17.9
7.1
3.5
18.0
12.9
12.4
6.3
13.1
16.0
18.9
6.8
14.5
8.6
9.4
13.1
16.5
10.5
11.3
12.9
16.5
13.5
15.3
2016
22.1
11.9
23.9
16.5
0.0
0.0
0.0
11.2
35.2
16.2
19.2
13.7
16.8
8.3
15.0
27.3
16.7
7.6
17.9
7.2
3.8
17.8
12.8
12.6
6.6
12.4
16.3
18.3
6.8
14.1
8.8
9.5
13.1
16.8
10.8
11.2
12.9
16.6
13.4
15.0
2017
22.2
12.2
23.7
16.7
0.0
0.0
0.0
11.8
35.1
16.2
18.0
13.7
16.7
8.2
15.0
26.7
16.7
7.4
17.9
7.2
4.1
18.0
11.9
10.9
7.2
13.0
16.5
17.9
7.0
14.1
9.1
10.3
12.9
16.9
10.8
11.8
12.8
16.7
13.4
15.0
2018
22.6
12.6
22.9
16.7
0.0
0.0
0.0
12.3
34.5
11.1
17.6
15.5
16.8
8.5
15.0
26.8
17.1
7.8
18.1
7.2
4.4
16.3
11.3
11.4
6.7
13.2
16.7
17.8
7.1
13.4
9.5
10.4
13.1
17.0
10.9
12.1
12.8
14.7
13.2
14.8
2019
21.4
13.0
22.2
16.5
0.0
0.0
0.0
12.8
34.5
12.1
17.5
15.5
16.9
8.7
15.0
26.7
17.4
8.0
18.3
7.2
4.7
16.2
15.9
11.9
7.5
12.0
17.0
17.7
6.9
14.1
9.6
10.8
13.1
16.4
11.0
12.4
12.7
14.7
13.4
15.0
2020
21.9
12.4
22.1
16.5
0.0
0.0
0.0
12.9
34.3
12.4
17.2
14.1
16.3
7.3
15.0
26.6
18.0
8.3
17.5
7.1
4.7
15.5
15.0
13.2
8.9
11.7
17.2
17.9
5.9
14.3
9.0
10.5
12.2
16.5
10.9
12.4
12.9
14.8
13.2
14.7
2021
20.9
12.9
22.7
16.5
0.0
0.0
0.0
7.8
34.5
13.3
17.2
14.3
15.4
7.2
15.0
26.2
18.3
9.2
17.3
7.2
4.7
14.7
15.7
14.1
6.9
11.3
17.3
18.1
6.0
14.8
9.2
11.0
12.9
16.1
11.2
12.7
13.2
15.0
13.2
14.6
1. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
StatLink 2
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TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0172.png
170
Table 6.17. Income tax plus employee contributions less cash benefits,
single persons at 67% of average wage
Tax burden as a % of gross wage earnings, single persons without children
2000
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
1
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
21.1
25.6
35.8
21.3
7.0
0.0
9.0
20.8
37.4
19.9
27.8
25.9
36.8
18.0
30.1
20.2
18.8
19.4
24.4
18.4
7.5
26.0
25.2
21.8
-4.4
32.9
18.6
26.8
26.5
17.4
18.2
32.3
15.0
31.7
14.9
27.2
22.8
22.6
21.6
25.8
2010
16.0
27.0
36.4
20.8
7.0
0.0
9.2
18.2
33.5
17.6
22.7
25.9
34.3
17.7
27.8
22.2
16.0
10.4
26.1
19.1
9.2
29.5
19.7
19.4
0.8
27.1
14.3
25.6
23.4
16.1
18.0
28.7
17.5
22.0
14.4
23.6
22.6
21.5
20.0
23.9
2014
17.7
28.8
35.9
21.0
7.0
0.0
9.2
19.2
33.1
18.2
23.7
26.7
34.6
19.5
34.5
24.4
17.3
10.5
23.3
20.2
9.8
28.4
19.9
22.0
3.0
24.5
13.4
25.2
24.0
19.3
19.8
28.7
18.5
21.8
14.1
24.5
19.4
22.9
20.6
24.6
2015
18.5
29.2
35.4
21.1
7.0
0.0
9.3
19.5
33.4
17.1
24.0
26.0
34.7
18.5
34.5
25.0
16.8
11.0
21.8
20.4
9.9
27.9
20.4
22.7
3.4
24.7
13.5
25.1
24.1
21.2
20.0
28.7
16.7
22.0
14.1
24.7
19.2
22.9
20.6
24.5
2016
18.8
26.5
33.4
20.8
7.0
0.0
9.3
20.0
33.4
16.9
23.6
25.2
34.8
19.9
33.5
25.2
16.1
11.3
21.9
20.5
10.1
27.3
20.0
22.9
3.7
22.5
13.7
24.5
24.2
21.3
20.3
28.8
16.7
22.3
14.3
24.3
19.3
23.0
20.5
24.2
2017
19.1
26.9
33.3
20.8
7.0
0.0
9.8
20.7
33.3
17.0
22.9
25.2
34.8
20.0
33.5
24.8
15.8
11.2
21.9
20.6
10.5
27.4
18.4
20.3
4.7
22.5
13.8
24.1
24.3
21.6
20.7
30.4
16.6
22.4
14.3
24.7
19.3
23.1
20.5
24.1
2018
19.6
27.2
32.1
20.8
7.0
0.0
10.3
21.4
32.6
9.9
22.9
24.6
34.7
20.2
33.5
24.9
16.1
11.7
22.1
20.6
10.8
25.2
17.5
20.8
4.6
22.8
13.9
23.9
24.5
21.6
21.1
30.2
16.8
22.4
14.4
24.9
19.3
21.4
20.2
23.6
2019
18.1
27.7
31.4
20.7
7.0
0.0
10.3
22.0
32.7
10.6
22.8
24.1
34.3
20.4
33.5
24.8
16.3
11.9
22.3
20.6
11.2
25.0
33.6
21.1
5.5
21.2
14.0
23.8
24.3
22.2
21.4
30.7
16.7
21.7
14.5
25.0
19.1
21.4
20.6
24.4
2020
18.7
26.8
31.3
19.9
7.0
0.0
10.5
22.2
32.5
10.9
22.6
23.2
33.7
17.6
33.5
24.5
16.6
12.2
22.3
20.6
11.6
23.9
32.3
22.3
8.6
20.0
14.1
24.1
23.3
22.4
20.5
30.6
15.2
21.8
14.6
25.1
19.0
17.0
20.3
23.9
2021
17.4
27.3
32.0
21.3
-6.5
0.0
10.5
16.5
32.7
11.5
23.0
23.6
33.1
16.6
33.5
23.9
16.7
13.5
22.7
20.6
11.8
23.3
33.2
23.0
5.3
18.7
14.2
24.2
23.4
22.8
20.8
30.8
16.5
20.9
14.8
25.2
19.6
18.4
19.9
23.7
1. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
StatLink 2
https://stat.link/6scvbg
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0173.png
171
Table 6.18. Income tax plus employee contributions less cash benefits,
single persons at 100% of average wage
Tax burden as a % of gross wage earnings, single persons without children
2000
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
1
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
26.6
31.0
43.0
26.9
7.0
0.0
9.0
22.5
41.5
21.9
33.9
29.2
43.2
21.6
35.7
25.4
27.5
26.1
29.0
19.7
8.9
27.9
28.8
28.7
2.5
33.6
19.4
30.7
27.8
22.4
20.2
35.6
19.8
33.7
17.8
28.7
25.8
24.9
25.2
29.9
2010
22.3
33.1
42.7
25.0
7.0
0.0
9.2
22.5
35.9
19.5
29.4
27.8
39.2
23.1
31.4
27.6
23.4
17.0
30.2
20.6
12.3
30.5
22.1
26.8
6.1
31.7
17.0
29.3
24.5
22.2
21.9
33.3
21.7
24.8
17.4
26.6
25.4
24.6
23.8
28.1
2014
23.4
34.7
42.4
25.3
7.0
0.0
9.2
23.1
35.6
19.6
30.6
28.6
39.5
24.6
34.5
28.9
26.9
17.0
31.0
21.8
13.0
29.6
22.6
30.0
10.1
32.4
17.3
28.7
24.9
27.1
23.1
33.2
23.0
24.4
17.0
27.3
23.6
25.6
24.7
29.2
2015
24.1
35.0
42.0
25.3
7.0
0.0
9.3
23.4
35.9
18.4
30.9
29.0
39.7
23.7
34.5
29.4
26.0
17.5
31.1
22.1
13.3
28.9
22.9
30.8
10.4
30.3
17.6
28.5
24.9
28.4
23.3
33.3
21.3
24.6
17.0
27.4
23.4
25.6
24.6
29.0
2016
24.3
32.1
40.7
24.7
7.0
0.0
9.3
23.7
35.9
18.4
30.8
29.0
39.7
25.1
33.5
29.0
25.4
17.9
31.1
22.2
13.7
28.9
23.0
31.0
10.8
30.2
18.0
27.9
25.0
27.6
23.5
33.5
21.3
24.9
17.2
27.4
23.5
25.8
24.6
28.8
2017
24.4
32.4
40.6
24.6
7.0
0.0
9.8
24.1
35.8
18.4
30.2
29.0
39.7
25.2
33.5
28.3
25.3
17.7
31.1
22.3
13.9
29.2
22.7
29.0
11.1
30.3
18.3
27.5
25.1
27.5
23.7
33.7
21.1
25.0
17.2
28.2
23.5
26.1
24.5
28.8
2018
24.6
32.8
39.9
24.6
7.0
0.0
10.3
24.6
35.4
14.6
30.3
28.4
39.7
25.5
33.5
28.4
25.6
18.3
31.2
22.4
14.4
28.7
22.1
29.6
10.4
30.5
18.6
27.4
25.2
26.9
24.0
34.1
21.3
25.1
17.4
28.6
23.5
23.8
24.4
28.6
2019
23.6
33.2
39.4
24.6
7.0
0.0
10.3
25.0
35.5
15.7
30.3
28.0
39.2
25.5
33.5
28.3
25.9
18.5
31.5
22.4
14.8
28.6
36.5
30.0
10.9
29.4
19.0
27.3
25.0
27.4
24.2
34.4
21.3
24.5
17.5
29.0
23.4
23.9
24.9
29.3
2020
24.1
32.7
39.3
24.6
7.0
0.0
10.5
25.1
35.3
16.1
30.4
27.2
38.6
23.9
33.5
28.2
26.3
18.7
30.2
22.2
15.1
28.3
36.0
31.1
11.2
28.4
19.3
27.5
24.1
27.7
23.6
34.0
20.7
24.6
17.5
28.9
23.3
21.3
24.6
29.0
2021
23.2
33.2
39.8
25.1
7.0
0.0
10.5
19.6
35.4
17.1
30.8
27.8
37.7
22.4
33.5
28.0
26.7
19.7
29.6
22.3
15.3
26.5
36.5
31.9
10.2
27.5
19.4
27.6
24.2
28.0
23.8
34.5
21.1
24.5
17.9
29.4
23.7
22.6
24.6
28.7
1. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
StatLink 2
https://stat.link/k4d6fg
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0174.png
172
Table 6.19. Income tax plus employee contributions less cash benefits,
single persons at 167% of average wage
Tax burden as a % of gross wage earnings, single persons without children
2000
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
1
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
34.9
36.3
50.1
32.1
8.3
0.0
9.0
25.5
49.3
23.6
41.1
33.1
48.8
29.2
42.8
36.7
35.6
35.0
34.5
22.6
13.4
29.4
31.7
37.9
10.1
40.6
24.2
38.2
28.9
28.6
24.8
41.2
24.4
41.1
22.7
26.9
28.8
31.9
30.3
35.4
2010
28.2
38.3
49.5
30.3
8.0
0.0
9.8
25.9
42.9
21.0
36.6
33.4
43.8
30.2
39.8
32.4
34.4
26.0
37.3
24.5
15.0
31.4
24.0
34.9
13.4
37.7
23.3
35.7
25.4
29.5
24.9
39.1
26.5
35.6
22.2
29.9
30.0
30.6
29.0
33.7
2014
29.4
39.2
49.2
30.5
8.1
0.0
10.6
26.3
41.9
20.8
37.8
34.2
43.8
34.4
34.5
33.8
37.0
26.0
38.8
25.6
15.8
30.5
24.0
37.9
14.8
46.8
23.1
35.1
25.6
34.9
25.8
37.7
28.7
35.1
21.9
31.3
29.8
31.1
29.8
34.8
2015
30.1
39.4
49.1
30.6
8.2
0.0
10.6
26.5
42.1
19.6
38.1
34.5
43.8
31.6
34.5
34.0
36.1
26.5
39.5
25.9
16.2
29.8
24.0
38.6
15.1
38.2
23.4
34.9
25.6
35.7
25.9
37.9
27.3
35.2
21.8
31.6
29.8
31.1
29.5
34.2
2016
30.2
37.5
48.5
29.7
8.3
0.0
11.1
26.7
42.0
19.5
38.2
34.5
43.9
32.0
33.5
34.0
35.2
27.1
39.5
25.9
16.8
29.9
24.0
38.7
15.4
37.7
23.7
34.4
25.7
34.4
26.0
37.4
27.2
36.2
22.2
32.0
29.9
31.2
29.5
34.0
2017
30.1
37.7
48.3
29.8
8.3
0.0
11.8
26.9
41.8
19.6
37.8
34.5
43.9
32.1
33.5
33.5
35.1
26.9
39.2
26.0
17.4
30.2
24.0
37.6
15.7
37.7
23.9
34.0
25.7
34.1
26.2
37.7
26.8
36.5
22.2
32.4
29.9
31.4
29.5
33.9
2018
30.4
38.0
47.9
29.8
8.3
0.0
12.3
27.2
41.2
21.3
37.9
33.9
43.8
32.4
33.5
33.3
35.3
27.8
39.3
26.1
18.1
28.8
24.0
37.9
15.0
37.9
24.1
33.9
25.8
33.5
26.4
38.1
27.0
36.4
22.3
32.7
29.9
28.8
29.5
34.0
2019
30.5
38.1
47.5
29.7
8.3
0.0
12.4
27.4
41.2
21.3
37.9
33.8
43.4
32.5
33.5
33.3
35.5
28.1
39.5
26.1
18.6
29.0
38.9
38.1
15.5
37.5
24.4
33.9
25.6
34.2
26.4
38.4
27.1
35.2
22.5
32.9
29.5
28.9
29.9
34.6
2020
30.8
38.0
47.4
29.9
8.3
0.0
12.4
27.5
40.9
21.3
38.2
33.3
43.3
31.3
33.5
33.5
35.8
28.5
39.8
25.9
19.0
29.2
38.9
38.7
15.8
36.4
24.6
33.9
24.8
34.4
26.1
37.3
26.5
34.7
22.5
32.8
29.7
28.5
29.8
34.4
2021
29.4
38.2
47.7
30.2
8.3
0.0
12.8
22.2
41.1
21.3
38.5
33.6
42.6
28.7
33.5
33.6
36.0
29.8
40.4
26.3
19.3
29.0
39.1
39.2
14.9
35.9
24.8
34.2
25.4
34.8
26.3
37.8
26.9
34.9
22.8
33.1
30.2
29.5
29.8
34.2
1. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
StatLink 2
https://stat.link/6petx3
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0175.png
173
Table 6.20. Income tax plus employee contributions less cash benefits,
single parent at 67% of average wage
Tax burden as a % of gross wage earnings, single parent with two children
2000
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
1
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
-2.1
2.0
16.1
0.0
5.9
-6.9
9.0
-17.9
11.5
-8.5
9.7
13.5
17.9
17.1
5.0
1.4
6.6
-1.5
5.5
3.8
6.8
3.5
19.2
-6.4
-4.4
14.5
-3.0
5.7
18.0
9.1
-2.0
-2.0
6.8
20.1
0.3
27.2
7.7
2.6
5.6
7.2
2010
-13.2
4.6
18.9
0.8
6.1
-5.6
9.2
-12.9
8.0
-2.1
8.9
14.8
16.2
16.0
6.7
9.5
-15.8
-2.6
5.1
-3.0
8.5
12.4
8.2
-10.9
0.8
3.6
-17.7
10.8
17.8
1.7
2.3
-1.7
8.1
11.1
-1.1
22.0
0.6
0.2
3.9
5.5
2014
-7.9
8.6
18.3
1.5
6.2
-5.8
9.2
-0.8
5.8
2.7
10.5
15.4
18.1
15.0
5.4
12.9
-10.7
-1.3
2.5
3.8
8.3
7.8
9.5
-5.4
3.0
1.7
-15.4
11.9
14.7
7.2
4.8
-4.6
9.8
11.9
-1.9
23.0
-4.1
3.7
5.1
6.7
2015
-7.5
9.3
17.8
-9.4
6.2
-6.6
9.3
-0.9
6.3
-4.8
10.9
16.0
17.5
13.9
6.5
14.5
-10.7
-1.5
1.3
4.6
8.4
7.3
10.3
-4.1
3.4
0.6
-14.1
12.1
11.2
7.6
5.4
-4.4
1.5
12.2
-1.9
23.2
-3.4
3.9
4.5
5.9
2016
-7.2
6.4
15.7
-10.6
6.2
-6.7
9.3
-4.5
6.2
-4.6
10.7
0.9
17.8
14.4
4.3
15.2
-10.7
-3.7
1.4
4.7
8.4
7.1
7.3
-3.5
3.7
-3.5
-14.1
11.8
-35.4
2.8
6.1
-3.9
1.5
12.8
-1.5
22.5
-1.4
4.5
2.4
2.2
2017
-5.3
7.1
15.7
-9.6
6.2
-6.6
9.8
-3.7
4.8
-3.2
10.2
1.0
17.9
14.4
4.9
13.7
-9.5
-2.9
1.4
4.4
8.4
8.7
9.0
-6.6
4.7
-3.8
-12.8
11.7
-37.9
3.5
7.0
-1.5
1.6
13.1
-1.4
22.9
0.9
5.5
2.7
2.5
2018
-3.9
7.7
14.7
-9.7
6.2
-6.4
10.3
-5.3
4.0
-10.5
10.8
0.4
18.2
11.9
5.4
12.4
-6.6
-1.5
1.7
4.7
8.7
6.7
3.0
-5.3
4.6
-3.6
-19.9
12.1
-29.5
4.1
8.1
-0.5
2.0
12.1
-1.2
23.3
2.6
2.0
2.5
2.2
2019
-4.8
0.4
13.6
-10.5
6.2
-6.5
10.3
-3.3
4.4
-9.5
10.9
-4.3
17.8
12.2
6.4
12.7
-5.0
-1.0
2.3
4.1
8.2
6.0
22.0
-4.3
5.5
-5.3
-18.8
11.9
-22.0
5.5
8.7
1.0
2.3
11.3
-1.0
23.4
4.3
2.4
3.1
3.2
2020
-4.7
-2.2
9.3
-12.0
6.1
-7.0
10.5
-3.3
4.3
-8.8
10.0
-6.1
13.2
8.7
8.8
11.8
-4.4
-1.1
1.1
3.9
4.7
5.2
7.5
-1.4
8.6
-6.0
-17.2
12.3
-20.8
6.0
7.8
1.5
0.3
11.6
-1.0
23.5
0.8
-5.9
2.0
1.9
2021
-6.4
1.2
10.7
-7.5
-24.4
-7.4
10.5
-12.1
5.3
-7.0
10.8
-3.0
13.7
7.6
10.4
11.4
-4.2
1.3
3.2
4.4
6.2
6.4
11.9
0.8
5.3
-7.1
-16.3
13.1
-14.7
6.8
6.3
3.6
1.8
11.1
-0.5
23.5
13.4
-8.5
2.1
2.9
1. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
StatLink 2
https://stat.link/85xip2
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0176.png
174
Table 6.21. Income tax plus employee contributions less cash benefits,
married couple at 100% of average wage
Tax burden as a % of gross wage earnings, one-earner married couple with two children
2000
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
1
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
18.4
15.1
23.7
19.3
6.3
-4.6
9.0
-5.3
28.2
10.6
24.8
16.1
22.0
23.6
20.5
8.9
10.9
21.8
18.6
15.8
8.2
12.8
28.8
1.9
2.5
22.4
13.6
19.3
22.1
13.6
5.2
10.1
11.5
26.0
5.9
28.7
20.6
14.4
15.0
16.5
2010
9.3
17.9
23.6
17.1
7.0
-3.8
9.2
-5.7
24.9
7.3
23.0
17.7
19.6
23.6
18.7
12.2
5.6
13.6
17.8
11.3
9.7
19.1
14.4
1.5
6.1
23.6
-0.9
21.8
17.8
8.8
3.4
10.4
14.2
17.4
4.9
24.8
18.7
11.2
13.1
14.8
2014
12.4
21.1
22.9
15.4
7.0
-3.9
9.2
1.8
24.9
10.0
24.4
17.7
21.1
23.7
16.2
15.8
9.7
14.5
18.8
15.6
10.3
15.8
15.5
4.8
10.1
25.9
4.1
23.2
18.6
13.1
6.3
11.2
15.4
17.8
3.6
25.5
18.5
13.6
14.5
16.2
2015
12.9
21.6
22.6
10.6
7.0
-4.4
9.3
1.9
25.3
4.5
25.2
18.0
21.2
21.9
16.9
17.5
8.9
14.8
19.0
16.0
10.6
15.2
16.1
5.7
10.4
24.1
5.2
23.1
18.9
14.3
6.9
11.3
13.9
18.1
3.6
25.6
17.8
13.7
14.3
16.0
2016
13.1
18.6
20.9
12.1
7.0
-4.5
9.3
-0.2
25.2
4.3
25.2
18.1
21.4
22.7
15.0
17.7
8.0
15.1
19.0
16.2
11.1
15.3
18.4
6.0
10.8
24.3
6.0
22.7
0.3
11.2
7.5
11.7
13.9
18.5
4.0
25.4
18.0
13.9
13.8
14.8
2017
16.0
19.1
20.9
12.3
7.0
-4.4
9.8
0.8
25.2
5.0
24.8
18.1
21.5
22.8
15.3
16.3
7.9
15.0
19.0
16.2
11.4
16.7
15.6
4.8
11.1
24.5
7.1
22.4
-4.2
11.9
8.4
12.3
13.9
18.8
4.0
26.3
18.2
14.3
13.8
14.7
2018
16.9
19.6
20.4
12.3
7.0
-4.3
10.3
0.2
24.9
1.1
25.0
17.4
21.6
21.4
15.5
14.8
8.7
15.7
19.2
16.4
12.0
16.4
12.4
5.5
10.4
24.9
2.8
23.5
1.1
12.5
9.5
13.1
14.1
18.2
4.2
26.8
18.3
11.8
13.7
14.7
2019
16.0
15.0
19.4
12.1
7.0
-4.3
10.3
2.0
25.3
2.4
25.1
16.2
21.2
21.5
16.1
14.6
8.9
15.9
19.7
16.4
12.0
15.8
28.7
6.0
10.9
23.8
4.3
23.2
3.9
13.5
10.0
13.8
14.3
17.6
4.4
27.1
18.4
11.9
14.2
15.5
2020
16.1
13.2
19.2
11.3
7.0
-4.7
10.5
2.1
25.2
3.1
25.3
15.1
19.1
19.7
17.7
14.4
9.5
16.2
17.6
16.1
9.7
15.7
19.3
7.4
11.2
21.1
5.8
23.4
-1.2
13.8
9.4
17.0
13.5
17.8
4.4
27.1
18.4
2.7
13.4
14.6
2021
14.8
15.7
20.3
13.0
-18.5
-5.0
10.5
-4.6
25.7
4.9
25.8
16.9
19.3
18.1
18.7
15.1
10.1
17.4
18.3
16.2
10.8
15.2
22.2
8.5
10.2
20.5
6.5
23.8
0.2
14.5
8.5
18.1
14.0
17.9
4.9
27.5
18.9
1.0
13.1
14.9
1. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
StatLink 2
https://stat.link/z4lkah
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0177.png
175
Table 6.22. Income tax plus employee contributions less cash benefits,
married couple with two children, at 100% and 67% of average wage
Tax burden as a % of gross wage earnings, two-earner married couple with two children
2000
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
1
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
22.0
20.1
35.0
24.4
6.6
-5.5
9.0
14.0
35.8
16.8
26.0
21.4
34.3
22.0
24.3
21.9
20.8
17.7
25.1
17.9
8.0
18.1
27.3
12.6
-0.3
30.1
19.0
24.4
25.0
17.0
13.3
25.1
15.6
28.3
12.3
28.1
21.5
20.5
19.9
23.1
2010
19.0
22.6
33.9
22.2
6.6
-4.5
9.2
12.0
31.0
13.7
22.9
22.2
30.1
22.2
22.3
24.4
13.7
10.5
24.0
15.1
9.8
23.3
19.8
12.3
4.0
24.9
13.9
24.8
20.4
16.5
14.0
23.4
17.8
19.3
11.3
24.7
21.1
18.5
18.2
21.0
2014
21.1
25.1
33.5
22.5
6.7
-4.7
9.2
13.5
30.8
15.1
24.2
23.1
31.1
23.4
23.5
26.9
17.7
11.0
23.3
18.3
10.4
20.8
20.0
16.1
7.3
24.4
15.8
24.7
21.5
21.7
15.8
24.0
19.0
19.4
10.2
25.5
18.9
19.9
19.2
22.1
2015
21.8
25.5
33.1
20.3
6.7
-5.3
9.3
13.6
31.1
11.2
24.6
23.2
31.2
22.0
23.9
27.6
16.7
11.2
22.8
18.6
10.7
20.3
20.4
17.1
7.6
23.2
16.0
24.6
21.7
20.4
16.1
24.1
17.2
19.6
10.1
25.7
18.7
20.0
19.0
21.8
2016
22.1
22.5
31.5
19.9
6.7
-5.4
9.3
12.4
31.1
11.1
24.4
22.7
31.3
22.7
22.4
27.5
16.2
11.5
22.8
18.8
11.0
20.1
19.0
17.4
7.9
21.6
16.3
24.1
16.2
20.7
16.5
23.8
17.2
20.0
10.6
25.5
18.9
20.1
18.6
21.1
2017
22.2
23.0
31.3
20.0
6.7
-5.3
9.8
13.0
31.0
11.6
23.9
22.7
31.4
22.8
22.6
26.8
16.2
11.4
22.8
18.8
11.3
21.0
16.7
15.3
8.5
21.7
16.5
23.7
15.0
21.1
17.0
24.6
17.1
20.2
10.6
26.1
19.0
20.3
18.6
21.0
2018
22.6
23.4
30.5
20.0
6.7
-5.2
10.3
12.6
30.6
6.3
24.2
22.1
31.4
22.1
22.8
26.5
16.8
11.9
23.0
18.9
11.8
19.9
16.4
16.1
8.0
21.9
16.7
23.6
15.2
20.5
17.6
24.9
17.3
19.9
10.8
26.5
19.1
17.6
18.5
20.7
2019
21.4
20.9
29.8
19.9
6.7
-5.2
10.3
13.6
30.8
7.2
24.2
21.7
31.0
22.2
23.1
26.5
17.3
12.0
23.3
18.9
12.0
19.5
30.7
16.7
8.8
20.5
17.0
23.4
12.6
21.4
18.0
25.3
17.4
19.2
11.0
26.7
19.0
17.7
18.8
21.2
2020
21.9
19.5
29.8
19.6
6.6
-5.6
10.5
13.7
30.6
7.7
24.2
20.5
29.5
20.1
24.0
26.0
17.9
12.2
21.9
18.7
10.8
19.0
28.5
18.4
10.2
19.5
17.2
23.7
9.1
21.7
17.3
25.4
16.3
19.4
11.0
26.7
19.0
12.2
18.3
20.6
2021
20.9
21.1
30.5
20.7
-8.6
-6.0
10.5
7.3
30.9
9.0
24.7
21.0
29.1
18.7
24.6
25.6
18.4
13.6
22.2
18.8
11.5
18.4
29.8
19.6
8.3
18.6
17.3
24.0
10.0
22.3
16.8
26.1
17.2
19.1
11.5
27.0
19.5
11.2
17.9
20.7
1. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
StatLink 2
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TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0178.png
176
Table 6.23. Income tax plus employee contributions less cash benefits,
married couple, both at 100% of average wage
Tax burden as a % of gross wage earnings, two-earner married couple with two children
2000
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
1
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
25.1
23.7
38.4
26.9
6.6
-4.6
9.0
18.2
38.1
18.3
29.3
23.5
37.7
24.2
28.1
25.4
25.7
21.3
27.4
18.6
8.7
20.4
28.8
17.6
2.5
30.9
19.4
26.8
25.9
20.2
19.0
29.4
18.0
29.9
14.8
28.7
23.2
22.7
22.3
26.0
2010
22.3
26.3
37.4
24.4
7.0
-1.9
9.2
15.9
32.7
15.2
26.2
23.8
33.3
24.5
25.0
27.5
19.2
12.8
27.0
16.5
11.2
24.8
21.0
17.4
6.1
27.5
17.0
26.8
21.4
19.5
16.6
27.8
19.9
21.1
14.0
26.0
22.8
20.3
20.7
23.8
2014
23.4
28.6
36.9
24.7
7.0
-2.0
9.2
16.4
32.4
16.3
27.5
24.6
34.0
26.4
25.3
28.9
23.3
13.3
27.7
19.4
12.0
22.7
21.3
21.5
10.1
28.3
17.3
26.5
22.4
24.9
18.1
27.0
21.2
21.1
12.8
26.7
21.1
21.4
21.6
24.9
2015
24.1
29.1
36.6
23.5
7.0
-4.4
9.3
16.5
32.7
12.9
28.0
25.0
34.1
24.7
25.7
29.4
22.3
13.8
27.8
19.7
12.3
22.0
21.6
22.4
10.4
26.2
17.6
26.3
22.5
23.8
18.4
27.1
19.4
21.3
12.8
26.8
20.9
21.5
21.4
24.6
2016
24.3
25.9
35.3
22.9
7.0
-4.5
9.3
15.5
32.7
12.8
28.0
25.0
34.2
25.6
24.2
29.0
21.7
14.3
27.8
19.9
12.7
22.1
20.7
22.7
10.8
25.5
18.0
25.8
18.0
23.8
18.7
26.9
19.4
21.7
13.2
26.8
21.0
21.6
21.1
24.0
2017
24.4
26.3
35.1
22.9
7.0
-4.4
9.8
18.0
32.7
13.2
27.5
24.9
34.2
25.7
24.4
28.3
21.6
14.2
27.8
19.9
13.0
22.9
19.2
20.9
11.1
25.7
18.3
25.5
16.9
24.1
19.1
27.3
19.3
21.9
13.3
27.6
21.2
22.0
21.1
24.0
2018
24.6
26.8
34.4
22.9
7.0
-4.3
10.3
15.7
32.3
9.2
27.7
24.4
34.2
26.0
24.5
28.4
22.1
14.9
27.9
20.1
13.5
22.6
18.9
21.6
10.4
25.9
18.6
25.4
17.1
23.6
19.7
28.8
19.5
21.6
13.5
28.1
21.2
19.8
21.0
23.8
2019
23.6
24.8
33.9
22.9
7.0
-4.3
10.3
19.2
32.5
10.4
27.7
24.0
33.7
26.1
24.8
28.3
22.5
15.1
28.2
20.1
13.6
22.2
32.6
22.2
10.9
24.7
19.0
25.2
14.9
24.4
19.9
29.1
19.6
21.1
13.7
28.4
21.2
20.0
21.4
24.5
2020
24.1
23.7
33.9
22.6
7.0
-4.7
10.5
16.6
32.3
10.9
27.8
23.0
32.8
24.6
25.6
27.9
23.0
15.5
26.4
19.9
12.7
22.0
31.0
23.8
11.2
23.8
19.3
25.5
11.9
24.6
19.3
29.0
18.9
21.2
13.7
28.3
21.1
15.7
21.0
23.9
2021
23.2
25.1
34.4
23.6
-5.8
-5.0
10.5
10.4
32.5
12.2
28.3
23.8
32.2
23.0
26.1
28.0
23.3
16.7
26.3
20.0
13.3
20.8
32.0
24.9
10.2
23.0
19.4
25.7
12.6
25.1
18.9
29.7
19.3
21.2
14.2
28.8
21.6
15.2
20.7
23.9
1. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
StatLink 2
https://stat.link/ej68x3
TAXING WAGES 2022 © OECD 2022
 SAU, Alm.del - 2022-23 (2. samling) - Bilag 77: Baggrundsmateriale til Skatteudvalgets studietur til OECD i Paris den 26. og 27. marts 2023
2675007_0179.png
177
Table 6.24. Income tax plus employee contributions less cash benefits,
married couple at 100% and 67% of average wage
Tax burden as a % of gross wage earnings, two-earner married couple without children
2000
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
1
United Kingdom
United States
Unweighted average
OECD-Average
OECD-EU 22
24.4
28.8
42.0
25.0
7.0
0.0
9.0
21.8
39.8
21.1
31.5
27.5
40.3
21.5
33.5
23.3
23.0
22.8
27.2
19.2
8.3
27.1
27.3
22.9
-0.3
33.3
19.0
29.1
27.3
20.2
19.4
34.3
17.9
32.9
17.8
28.1
24.6
24.4
23.7
28.2
2010
19.8
30.7
40.2
23.4
7.0
0.0
9.2
20.7
35.0
18.7
26.7
27.1
37.0
22.2
30.0
25.4
18.8
13.7
28.6
20.0
11.0
30.1
21.2
21.4
4.0
29.8
15.9
27.8
24.1
19.7
20.3
31.5
20.1
23.7
17.1
25.4
24.3
23.1
22.2
26.2
2014
21.1
32.3
39.8
23.6
7.0
0.0
9.2
21.5
34.6
19.1
27.8
27.7
37.3
24.2
34.5
27.1
22.0
13.8
27.9
21.2
11.7
29.1
21.5
24.3
7.3
29.2
15.8
27.3
24.5
24.0
21.8
31.4
21.2
23.4
16.7
26.2
21.9
24.1
23.0
27.2
2015
21.8
32.7
39.4
23.6
7.0
0.0
9.3
21.8
34.9
17.9
28.1
28.0
37.4
22.8
34.5
27.6
21.1
14.3
27.4
21.4
11.9
28.5
21.9
25.2
7.6
28.0
16.0
27.1
24.6
25.5
22.0
31.5
19.4
23.5
16.7
26.3
21.7
24.2
23.0
27.1
2016
22.1
29.9
37.8
23.2
7.0
0.0
9.3
22.2
34.9
17.8
27.9
28.0
37.5
24.1
33.5
27.5
20.7
14.7
27.4
21.5
12.2
28.3
21.8
25.4
7.9
27.1
16.3
26.5
24.7
25.1
22.2
31.6
19.4
23.8
17.0
26.2
21.8
24.2
22.9
26.9
2017
22.2
30.2
37.7
23.1
7.0
0.0
9.8
22.8
34.8
17.8
27.3
28.0
37.5
24.2
33.5
26.9
20.7
14.6
27.4
21.6
12.5
28.5
20.9
23.2
8.5
27.2
16.5
26.1
24.8
25.1
22.5
32.4
19.3
23.9
17.0
26.8
21.8
24.3
22.9
26.8
2018
22.6
30.6
36.8
23.1
7.0
0.0
10.3
23.3
34.2
12.7
27.4
27.4
37.4
24.5
33.5
27.0
21.1
15.2
27.5
21.7
12.9
27.3
20.3
23.7
8.0
27.4
16.7
26.0
24.9
24.4
22.9
32.5
19.5
24.0
17.1
27.1
21.8
22.3
22.7
26.5
2019
21.4
31.0
36.2
23.1
7.0
0.0
10.3
23.8
34.4
13.7
27.3
26.9
37.0
24.6
33.5
26.9
21.4
15.3
27.8
21.7
13.4
27.2
35.4
24.1
8.8
26.1
17.0
25.9
24.7
25.1
23.0
32.9
19.5
23.4
17.2
27.4
21.7
22.4
23.1
27.2
2020
21.9
30.3
36.1
23.1
7.0
0.0
10.5
23.9
34.1
14.0
27.3
25.5
36.4
22.8
33.5
26.8
22.0
15.6
27.0
21.6
13.7
26.5
34.5
25.5
10.2
25.0
17.2
26.1
23.8
25.3
22.4
32.6
18.5
23.5
17.3
27.4
21.6
18.9
22.9
26.8
2021
20.9
30.8
36.6
23.6
-1.8
0.0
10.5
18.8
34.3
14.9
27.7
25.6
35.6
21.3
33.5
26.3
22.3
16.8
26.8
21.6
13.9
25.2
35.2
26.4
8.3
24.0
17.3
26.3
23.9
25.8
22.6
33.1
19.3
23.1
17.6
27.7
22.0
20.0
22.6
26.7
1. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
StatLink 2
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178
Table 6.25. Annual average gross and net wage earnings, single individual no children, 2000-21
In US dollars using PPP
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
1
United Kingdom
United States
OECD average
2000
Gross
31 508
32 772
35 171
35 273
12 878
7 141
11 173
11 233
32 501
8 386
26 799
28 724
36 487
23 091
9 871
32 020
30 655
27 796
26 770
32 234
26 547
6 421
7 058
37 548
7 964
35 837
24 186
32 852
12 585
16 527
10 182
16 898
23 418
28 774
40 775
19 698
35 368
33 129
23 901
Net
23 128
22 625
20 045
25 773
11 977
7 141
10 168
8 706
19 028
6 546
17 719
20 349
20 724
18 104
6 345
23 875
22 210
20 540
18 995
25 870
24 171
4 631
5 028
26 785
7 767
23 789
19 502
22 767
9 086
12 817
8 129
10 890
18 770
19 070
33 509
14 038
26 240
24 877
17 414
2010
Gross
44 401
45 754
51 946
48 143
17 179
10 973
15 946
21 031
49 581
18 980
43 782
40 625
51 883
33 484
19 887
39 584
49 456
30 538
36 559
42 744
43 865
14 993
14 966
53 395
11 420
52 983
32 088
51 584
20 229
26 567
19 120
26 537
34 123
40 832
58 069
19 602
48 877
45 665
34 931
Net
34 507
30 622
29 755
36 117
15 977
10 973
14 484
16 309
31 762
15 283
30 900
29 312
31 543
25 737
13 645
28 660
37 861
25 344
25 507
33 926
38 479
10 416
11 655
39 102
10 721
36 210
26 635
36 488
15 275
20 669
14 937
17 703
26 708
30 717
47 974
14 392
36 466
34 429
25 979
2015
Gross
54 774
54 970
58 099
52 562
21 682
11 758
20 444
24 782
55 247
24 266
47 665
46 958
60 530
33 648
23 935
54 010
54 012
35 609
41 357
49 134
46 293
19 270
19 341
63 384
12 915
61 162
38 199
55 743
26 138
29 693
22 344
30 392
39 828
46 768
70 009
26 832
51 950
50 963
40 439
Net
41 591
35 708
33 692
39 273
20 164
11 758
18 535
18 994
35 418
19 789
32 959
33 336
36 512
25 658
15 677
38 155
39 947
29 374
28 498
38 272
40 124
13 696
14 919
43 836
11 566
42 657
31 462
39 884
19 618
21 269
17 143
20 263
31 358
35 272
58 141
19 489
39 784
37 900
29 781
2019
Gross
59 519
63 399
65 691
57 035
25 173
13 709
24 158
32 778
64 949
30 813
54 642
53 446
69 749
36 528
32 071
64 368
60 547
43 316
46 922
50 391
53 289
25 779
34 253
71 903
14 208
67 433
43 933
62 747
33 186
34 697
24 875
36 026
43 596
51 261
79 384
32 625
59 929
56 577
46 708
Net
45 449
42 344
39 835
42 984
23 400
13 709
21 660
24 577
41 908
25 962
38 076
38 490
42 396
27 203
21 327
46 149
44 861
35 318
32 160
39 116
45 409
18 410
21 737
50 360
12 653
47 615
35 601
45 626
24 893
25 177
18 863
23 640
34 314
38 680
65 483
23 163
45 921
43 066
34 409
2020
Gross
61 740
64 216
66 968
59 678
24 563
13 561
24 695
32 943
66 693
32 400
55 295
51 839
68 407
34 641
34 077
65 556
63 629
46 069
48 673
49 426
54 250
28 345
37 267
75 164
14 529
70 504
45 025
62 704
34 078
35 045
25 467
37 814
42 120
52 958
80 235
34 265
59 890
59 517
47 743
Net
46 873
43 213
40 650
44 996
22 836
13 561
22 102
24 670
43 169
27 173
38 471
37 751
41 973
26 348
22 661
47 050
46 869
37 446
33 991
38 439
46 054
20 314
23 866
51 772
12 895
50 487
36 347
45 478
25 864
25 354
19 456
24 959
33 389
39 913
66 161
24 374
45 928
46 867
35 256
2021
Gross
62 376
66 751
69 734
59 377
25 127
13 877
26 462
34 369
70 755
35 444
58 079
56 677
71 157
36 311
35 782
68 960
67 635
49 921
52 324
51 923
55 346
31 747
40 831
77 897
13 984
73 185
46 216
65 769
35 981
37 068
27 264
40 860
44 497
55 518
84 437
37 161
64 716
62 954
50 223
Net
47 884
44 605
42 006
44 492
23 369
13 877
23 684
27 631
45 685
29 378
40 189
40 934
44 312
28 168
23 795
49 642
49 602
40 080
36 820
40 346
46 891
23 338
25 933
53 025
12 554
53 070
37 233
47 596
27 276
26 680
20 785
26 752
35 112
41 903
69 359
26 242
49 396
48 737
37 063
1. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
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Table 6.26. Annual average gross and net wage earnings, single individual no children, 2000-21
(national currency)
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
1
United Kingdom
United States
AUD
EUR
EUR
CAD
CLP
COP
CRC
CZK
DKK
EUR
EUR
EUR
EUR
EUR
HUF
ISK
EUR
ILS
EUR
JPY
KRW
EUR
EUR
EUR
MXN
EUR
NZD
NOK
PLN
EUR
EUR
EUR
EUR
EUR
CHF
TRY
GBP
USD
2000
Gross
41 322
29 732
31 644
43 300
3 690 623
1 604 324
5 283 845
160 922
281 700
3 931
26 362
26 712
34 400
15 459
1 086 240
2 712 000
28 924
95 664
21 550
4 987 116
19 849 729
2 316
3 187
35 875
48 607
31 901
34 923
298 385
23 061
10 922
5 256
8 894
17 319
263 581
72 910
5 545
24 910
33 129
Net
30 332
20 526
18 035
31 639
3 432 280
1 459 935
5 283 845
124 729
164 922
3 068
17 431
18 923
19 539
12 120
698 166
2 022 102
20 956
70 691
15 291
4 002 481
18 073 190
1 670
2 270
25 591
47 400
21 176
28 159
206 788
16 649
8 470
4 197
5 732
13 882
174 686
59 918
3 952
18 481
24 877
2010
Gross
66 724
38 504
43 423
58 800
6 181 738
5 191 869
12 382 986
287 320
376 073
9 712
39 395
34 693
41 736
24 156
2 512 020
5 256 000
41 981
121 581
28 243
4 773 076
36 876 204
7 296
6 735
49 387
87 672
45 215
48 007
471 696
36 482
16 542
9 593
16 915
24 786
368 208
85 068
18 026
34 297
45 665
Net
51 856
25 770
24 873
44 113
5 749 016
4 715 774
12 382 986
222 803
240 914
7 820
27 804
25 032
25 374
18 567
1 723 560
3 805 407
32 139
100 905
19 705
3 788 423
32 348 478
5 069
5 245
36 167
82 301
30 901
39 850
333 655
27 548
12 870
7 494
11 284
19 400
277 001
70 280
13 235
25 589
34 429
2015
Gross
80 720
43 911
46 479
65 600
8 481 551
7 205 069
15 107 886
320 624
403 600
13 045
43 268
37 975
47 100
20 494
3 172 680
7 668 000
43 733
139 728
30 550
5 083 906
39 695 196
9 588
8 623
55 858
107 551
49 540
56 459
553 670
46 136
17 369
10 983
18 092
26 475
414 105
86 517
31 191
35 978
50 963
Net
61 292
28 524
26 954
49 015
7 887 842
6 532 116
15 107 886
245 750
258 738
10 638
29 918
26 959
28 411
15 628
2 078 105
5 417 104
32 345
115 260
21 052
3 960 010
34 405 928
6 815
6 652
38 631
96 320
34 552
46 502
396 149
34 628
12 441
8 427
12 062
20 845
312 312
71 850
22 654
27 552
37 900
2019
Gross
87 769
48 398
49 783
69 200
10 042 281
8 248 633
18 499 302
410 579
432 300
16 817
46 117
39 043
51 800
20 243
4 593 599
9 048 000
48 852
160 440
31 369
5 221 760
46 285 248
12 804
15 435
60 896
133 131
52 970
63 255
612 610
58 554
19 573
13 154
20 265
27 292
455 072
92 039
61 841
40 990
56 577
Net
67 022
32 325
30 189
52 152
9 334 826
7 395 724
18 499 302
307 852
278 942
14 170
32 135
28 117
31 486
15 075
3 054 743
6 487 080
36 196
130 817
21 500
4 053 434
39 440 841
9 144
9 795
42 651
118 563
37 402
51 258
445 455
43 923
14 202
9 975
13 298
21 482
343 379
75 921
43 906
31 409
43 066
2020
Gross
90 866
49 087
50 312
71 994
10 277 863
8 294 100
18 345 584
416 997
440 000
17 224
46 470
37 922
51 000
18 834
5 043 851
9 528 000
49 876
165 240
32 262
5 082 722
46 753 752
13 656
16 844
64 424
138 349
54 510
65 079
628 685
60 723
19 959
13 418
21 054
26 028
464 186
91 427
72 933
41 897
59 517
Net
68 985
33 032
30 540
54 282
9 555 132
7 423 220
18 345 584
312 276
284 802
14 445
32 331
27 616
31 293
14 325
3 354 161
6 838 404
36 738
134 310
22 530
3 952 907
39 690 849
9 787
10 788
44 374
122 787
39 034
52 536
455 971
46 087
14 440
10 251
13 897
20 633
349 843
75 390
51 880
32 130
46 867
2021
Gross
93 313
50 460
52 248
74 037
10 776 819
8 761 423
19 240 596
435 312
457 613
18 329
47 915
39 971
52 556
18 831
5 400 419
10 103 366
50 636
176 029
34 032
5 146 879
47 021 176
15 270
18 711
67 263
136 170
55 339
66 077
659 902
64 093
20 602
14 075
22 485
26 832
482 897
94 489
87 187
43 978
62 954
Net
71 634
33 719
31 473
55 476
10 022 442
7 841 473
19 240 596
349 971
295 469
15 192
33 155
28 869
32 728
14 608
3 591 278
7 273 117
37 135
141 328
23 948
3 999 294
39 838 084
11 225
11 884
45 787
122 243
40 128
53 234
477 568
48 587
14 828
10 730
14 722
21 173
364 473
77 616
61 567
33 567
48 737
1. Wage figures are based on the old definition of average worker (ISIC D, rev3.) for years 2000 to 2006.
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180
Note
1
Tables 6.1 to 6.24 show figures rounded to the first decimal. Due to rounding, changes in percentage
points that are presented in the text may differ by one-tenth of a percentage point relative to those in the
tables.
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Part II
Country details,
2021
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Australia
(2020-2021 Income tax year)
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in the
tax/benefit system. The methodology also includes the parameter values and
tax equations underlying the data.
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Australia 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
Gross wage earnings
Principal Gross wage earnings
Spouse Gross wage earnings
2.
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Income tax
Medicare Levy
Total
6.
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
1 142
10 894
0
0
10 894
0
0
Total
12. Take-home pay (1-10+11)
13. Employers' payroll tax
(assumes NSW-based employer with more than $900,000 in annual wages)
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer payroll taxes
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
36.0%
n.a.
39.2%
n.a.
37.5%
n.a.
40.7%
n.a.
39.0%
n.a.
42.1%
n.a.
56.0%
n.a.
58.2%
n.a.
17.4%
0.0%
17.4%
21.6%
23.2%
0.0%
23.2%
27.1%
29.4%
0.0%
29.4%
33.0%
17.4%
0.0%
-6.4%
-1.0%
0
51 626
3 320
981
21 679
0
0
21 679
0
0
0
71 634
4 956
0
45 842
0
0
45 842
0
0
0
109 991
8 276
1 142
10 894
0
0
10 894
0
14 865
14 865
66 491
3 320
1 142
0
981
0
0
0
1 142
0
10 786
1 250
12 036
20 794
1 866
22 660
42 725
3 117
45 842
10 786
1 250
12 036
0
0
62 520
0
0
93 313
0
0
155 833
0
0
62 520
67
none
62 520
62 520
0
100
none
93 313
93 313
0
167
none
155 833
155 833
0
67
2
62 520
62 520
0
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
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Australia 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
Gross wage earnings
Principal Gross wage earnings
Spouse Gross wage earnings
2.
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Income tax
Medicare Levy
Total
6.
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
0
981
21 679
0
0
21 679
0
7 864
Total
12. Take-home pay (1-10+11)
13. Employers' payroll tax
(assumes NSW-based employer with more than $900,000 in annual wages)
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer payroll taxes
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
37.5%
30.0%
40.7%
33.5%
37.5%
36.0%
40.7%
39.2%
37.5%
37.5%
40.7%
40.7%
37.5%
36.0%
40.7%
39.2%
23.2%
0.0%
14.8%
19.1%
20.9%
0.0%
20.9%
24.9%
23.2%
0.0%
23.2%
27.1%
20.9%
0.0%
20.9%
24.9%
7 864
79 497
4 956
0
2 123
32 573
0
0
32 573
0
0
0
123 259
8 276
0
1 961
43 359
0
0
43 359
0
0
0
143 267
9 911
0
2 123
32 573
0
0
32 573
0
0
0
123 259
8 276
981
2 123
1 961
2 123
20 794
1 866
22 660
31 580
3 117
34 696
41 587
3 733
45 320
31 580
3 117
34 696
0
0
93 313
0
0
155 833
0
0
186 626
0
0
155 833
100-0
2
93 313
93 313
0
100-67
2
155 833
93 313
62 520
100-100
2
186 626
93 313
93 313
100-67
none
155 833
93 313
62 520
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
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The national currency is the Australian dollar (AUD). For the 2020-2021 income tax year AUD 1.33 was
equal to USD 1. The average full time worker earned AUD 93 313 in 2020-2021.
1. Personal income tax system
1.1. Federal income tax
1.1.1. Tax unit
Members of a family unit are taxed separately. However, individual eligibility for some tax offsets, as well
as liability for some taxes, levies and surcharges, are at least partially dependent on the circumstances of
other members of an individual’s household.
1.1.2. Tax allowances and credits
1.1.2.1. Standard tax reliefs
Basic reliefs: Income earned up to AUD 18 200 by resident taxpayers is subject to tax at a zero
rate.
Standard marital status reliefs: No relief available.
Relief(s) for children: See Section 4.2 for more detail on transfers related to dependent children.
Relief for social security contributions and other taxes: No such contributions are levied.
Reliefs for low income earners: A tax offset worth a maximum of AUD 700 is available for low
income earners called the Low Income Tax Offset. Taxpayers whose taxable income was less than
AUD 37 500 in 2020-2021 are eligible to receive the full amount of the offset. Between taxable
income ranges of AUD 37 501 and AUD 45 000, the offset is reduced by AUD 0.05 for every AUD
1
by which a taxpayer’s taxable
income exceeds AUD 37 500. When taxable income exceeds
AUD 45 000, the offset is further reduced by 0.015 AUD for every AUD 1. The offset is no longer
available once a taxpayer’s taxable income
exceeds AUD 66 667.
Reliefs for Low and Middle Income Earners: A tax offset worth a maximum of AUD 1 080 is
available for taxpayers with earnings up to AUD 126 000 called the Low and Middle Income Tax
Offset. Taxpayers whose taxable income was less than AUD 37 000 in 2020-2021 are eligible to
receive AUD 255.
The offset is increased by AUD 0.075 for every AUD 1 by which a taxpayer’s
taxable income exceeds AUD 37 000 up to a maximum of AUD 1 080 when the taxpayer’s earnings
are between AUD 48 000 and AUD 90 000. The offset is then reduced by AUD 0.03 for every AUD
1 by which a taxpayers earnings exceed AUD 90 000 and is no longer available once a taxpayer’s
taxable income exceeds AUD 126 000.
Relief for mature age workers: No relief available.
Relief for recipients of certain social security benefits: The Beneficiary Tax Offset is available for
those who receive certain taxable social security benefits called ‘rebatable benefits’.
It ensures that
a person who is wholly or mainly dependent on rebatable benefits, and does not have any other
taxable income, is not liable for income tax. The amount of the Beneficiary Tax Offset available to
an individual is determined by the total amount of the rebatable benefit(s) they receive in an income
year.
Relief for taxpayers who maintain a dependant who is genuinely unable to work: A taxpayer who
maintains a dependant who is genuinely unable to work due to invalidity or carer obligations may
be eligible for the Dependent (Invalid and Carer) Tax Offset. This tax offset is worth a maximum of
AUD 2 816 in 2020-2021. To qualify for the offset in 2020-2021, the combined adjusted taxable
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income of the taxpayer and their spouse (where one exists) should not exceed AUD 100 000. The
amount of offset that may be received is reduced by AUD 1 for every AUD 4 by which the
dependant's adjusted taxable income exceeds AUD 282 and is no longer available once the
dependant’s adjusted taxable income exceeds AUD
11 546. This offset is not included in the
Taxing Wages model.
Relief for pensioners and seniors. The Seniors and Pensioners Tax Offset (SAPTO) is available to
recipients of taxable Government Pensions, including Parenting Payment Single. The SAPTO is
also available to Australians who meet all of the Age Pension eligibility criteria except the income
and/or asset tests. The SAPTO is worth up to AUD 2 230 for a single taxpayer, up to AUD 1 602
for each member of a senior couple not separated by illness and AUD 2 040 for each member of
a senior couple separated by illness. The offset is withdrawn at the rate of AUD 0.125 for every
AUD 1 that
a recipient’s income exceeds
their relevant shade out threshold dependent on their
circumstances. For a single taxpayer, the offset is withdrawn from AUD 32 279 and is no longer
available once income reaches AUD 50 119. For members of a couple not separated by illness,
the offset is withdrawn from a combined income of AUD 57 948 and is no longer available once
combined income reaches AUD 83 580.
Other: No other standard relief available.
1.1.2.2. Main non-standard tax reliefs applicable to an average worker include:
Relief for superannuation: Contributions to a low income spouse’s superannuation attract an 18%
rebate up to a maximum rebate of AUD 540. In 2020-2021, the Low Income Superannuation Tax
Offset matches AUD 0.15 for each AUD 1 of concessional contributions from at least AUD 10 up
to AUD 500 a year for eligible individuals with annual incomes up to AUD 37 000. In addition in
2020-2021, eligible individuals with incomes not exceeding AUD 54 837 can make non-
concessional contributions and receive a co-contribution of 50%, up to a maximum of AUD 500.
The co-contribution rate progressively decreases for incomes between AUD 39 837 and
AUD 54 837, at a rate of AUD 0.03 per AUD 1 of income above AUD 39 837.
Relief for private health insurance: For the 2020-2021 income year, there are different rebate
amounts depending on age and income. For individuals below 65 years without dependants and
with annual income for surcharge purposes below AUD 90 000 the rebate is 25.059% of the cost
of cover for eligible private health care for the period 1 July 2020 to 31 March 2021, and 24.608%
for 1 April 2021 to 30 June 2021. The same rebate rates apply for families (couples and individuals
with at least one dependent child) below 65 years with annual income for surcharge purposes
below AUD 180 000. The threshold is increased by AUD 1 500 for each dependent child after the
first.
The rebate percentages are reduced for individuals and families with annual incomes above these
amounts. The rebate percentages are also higher for individuals and families aged 65 years or more.
Other non-standard reliefs provided as deductions are:
‒
‒
subscriptions paid in respect of membership of a trade, business or professional
association or union;
charitable contributions of AUD 2 or more to specified funds, authorities and institutions,
including public benevolent institutions, approved research institutes for scientific
research, building funds for schools conducted by non-profit organisations etc.; and
work-related expenses including cost of replacement of tools of trade, cost of provision
and of cleaning protective clothing and footwear, travelling between jobs or travelling
in the course of employment, and expenses related to working from home.
‒
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1.1.3. Tax schedule
General rates of tax - resident individuals
Taxable income (AUD)
Not less than
Not more than
0
18 201
45 001
120 001
180 001 and over
18 200
45 000
120 000
180 000
Tax at general rates on total taxable income
NIL
19c for each AUD in excess of AUD 18 200
AUD 5 092 + AUD 0.325 for each AUD in excess of AUD 45 000
AUD 29 467 + AUD 0.370 for each AUD in excess of AUD 120 000
AUD 51 667 + AUD 0.450 for each AUD in excess of AUD 180 000
To nominally contribute towards the cost of basic medical and hospital care, a Medicare levy is imposed
on the taxable incomes of resident taxpayers. In 2020-2021 the levy is applied at the rate of 2.0% of the
taxable income of an individual.
Certain thresholds are applied before the Medicare levy is imposed. For taxpayers aged under Age
Pension age in 2020-2021, an individual was not liable for the levy where their taxable income did not
exceed AUD 23 226. A taxpayer in a couple or sole parent family who is not receiving Parenting Payment,
(see section 4.2), does not pay the levy if the taxable family income does not exceed AUD 39 167.
Individual senior Australians of Age Pension age were not liable to pay the levy where their taxable income
did not exceed AUD 36 705. Pensioner families (including couples and sole parents on Parenting Payment)
and senior Australian families of Age Pension age, did not become liable to pay any Medicare levy until
their combined income in 2020-2021 exceeded AUD 51 094. The thresholds are increased by AUD 3 597
for each dependent child.
Where an individual’s or family’s taxable income exceeds these thresholds, the Medicare levy shades in
at a rate of 10% of the excess taxable income over the threshold, until the levy is equal to 2.0% of the
individual’s or family’s total taxable income.
Individual taxpayers who had income for surcharge purposes greater than AUD 90 000 in 2020-2021 (or if
a couple had a combined income greater than AUD 180 000 plus AUD 1 500 for each dependent child
after the first child) but who did not have a complying private health insurance policy, were liable for the
Medicare levy surcharge. The surcharge rates are 1%, 1.25% and 1.5% depending on the taxpayer’s
income for surcharge purposes above these thresholds. The surcharge rate is applied as a flat rate on
their taxable income, reportable fringe benefits and any amount on which family trust distribution tax has
been paid. However, the majority of taxpayers with income above the thresholds purchase a complying
policy and avoid incurring the surcharge. The surcharge is therefore not included in Taxing Wages 2020-
21.
1.2. State and local income taxes
In Australia no states or territories levy a tax based on a resident’s income.
2. Social security contributions
2.1.
Employees’ contributions
None. There is, however, a Medicare Levy which is based upon taxable income. See Section 1.1.3.
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2.2.
Employers’ contributions
No contributions are collected from employers or employees specifically for pensions, sickness,
unemployment or work injury benefits, family allowances or other benefits.
Part
of Australia’s retirement income system is the provision of compulsory employer contributions (the
Superannuation Guarantee system). In 2020-2021 the Superannuation Guarantee required employers to
pay 9.5% on top of employees’ gross ordinary time earnings
to an approved superannuation fund, provided
they earn more than AUD 450 per month (they may also choose to make contributions for workers earning
less than this threshold). This threshold is not indexed. There is also a limit to the Superannuation
Guarantee. In each quarter any earnings beyond a threshold are not covered by the Superannuation
Guarantee. This threshold is indexed to a measure of average earnings. In the 2020-2021 tax year this
threshold was AUD 57 090 per quarter. The Superannuation Guarantee rate will remain at 9.5% until the
end of 2020-2021, then increase by 0.5 percentage points each year until it reaches 12% in 2025-26.
These contributions are not reflected in the ‘Taxing Wages’ calculations because they are not a form of
taxation (they are not an unrequited transfer to general government). While employers are legislatively
required to make contributions to approved superannuation funds, superannuation funds are private,
although subject to regulation. Employers’ contributions are generally
made to individual accounts and
form part of employees’ personal superannuation assets. Some defined benefit schemes for public sector
employees and private defined benefit schemes also exist. The employee may take superannuation
benefits as either a lump sum payment or pension on retirement. Accordingly, superannuation
contributions are reflected in the Non-Tax Compulsory Payment calculations.
3. Other taxes
3.1. Pay-roll tax
Australian State Governments levy pay-roll taxes on wages, cash or in kind, provided by larger employers
to their employees. The rates of pay-roll tax, thresholds and deductions differ between States. In New
South Wales, the State with the largest population, the pay-roll tax rate in 2020-2021 was 4.85% for
employers with total Australian wages in excess of AUD 1 200 000. Employers are entitled to an exemption
from tax, or a pro-rated pay-roll tax threshold, on wages paid in New South Wales up to a maximum of
AUD 1 200 000. The exempt amount is reduced based on the proportion of the employer’s
New South
Wales pay-roll to its total Australian pay-roll.
4. Universal cash transfers
4.1. Transfers related to marital status
There are no cash transfers made on a universal basis to married couples.
4.2. Transfers related to dependent children
Family Tax Benefit Part A (FTB(A)) is paid to a parent, guardian or an approved care organisation
to help families meet the costs of raising children. For 2020-2021, the base rate of FTB(A) is
payable where the combined adjusted taxable income of the family does not exceed AUD 98 988.
The payment shades out at the rate of AUD 0.30 per AUD 1 of income over the ceiling until the
payment is nil. The base rate of payment is AUD 1 587.75 per annum for dependent children aged
under 18 and for dependent full time students aged 16 to 19. A higher FTB(A) benefit is available
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for lower income earners, and the value of this benefit is dependent on the age and number of
children. For 2020-2021 families may receive a maximum payment of AUD 4 942.10 for each child
aged under 13 years and AUD 6 427.65 for each child aged 13 to 15 years and for each child aged
16 to 19 in full time secondary school. For 2020-2021 an end of year supplement of AUD 781.10
per child is also available for families with a combined adjusted taxable income of less than AUD 80
000. For 2020-2021, the higher benefit tapers out at the rate of AUD 0.20 for each dollar of income
over AUD 55 626 until the base payment is reached. However, people receiving any social security
allowances or pensions automatically qualify for the maximum higher benefit. The attached
calculations assume each dependant is between 5 and 12 years of age.
Family Tax Benefit Part B (FTB(B)) is targeted at single income couple and sole parent families.
Eligibility for FTB(B) is contingent upon having a child under the age of 16 or a qualifying dependent
full-time student up to of the end of the calendar year they turn 18. There are two separate income
tests applied to the parent(s). The parent earning the higher amount (or the sole parent, in the case
of single parent families) must have an adjusted taxable income less than AUD 100 000 for the
financial year for the family to be eligible. A secondary earner income threshold is also applied to
the parent earning the lower amount. For 2020-2021, this threshold is AUD 5 767, above which the
entitlement is reduced by AUD 0.20 for each dollar of income. There is no secondary earner income
test applied to sole parents. For 2020-2021, the maximum payment is AUD 3 314.20 (including a
one-off supplement of AUD 379.60 paid at the end of the financial year) if the youngest dependent
child is aged between 5 and 15 (or up to the end of the calendar year they turn 18 years if the
dependent child is a full-time student), and AUD 4 580.75 (including a one-off supplement of
AUD 379.60 paid at the end of the financial year) if there is at least one child under 5 years. The
attached calculations assume each dependant is between 5 and 12 years of age.
Recipients of the Family Tax Benefit may elect to receive the benefit in fortnightly instalments or
as an end of year lump sum payment.
A Newborn Supplement and Newborn Upfront Payment may be paid to families for each baby born
from 1 March 2014. To be eligible families will need to be eligible for FTB(A) and not be accessing
Parental Leave Pay for that child. For multiple births, Parental Leave Pay may be payable for one
child and Newborn Supplement for the other child or children. The total value of the Newborn
Supplement and Newborn Upfront Payment in 2020-2021 is up to AUD 2 279.89 for the first child
(and all multiple births) and up to AUD 1 140.57 for subsequent children. This supplement and
upfront payment replace the previous Baby Bonus.
On 1 January 2011 Australia’s first Paid Parental Leave scheme commenced. The scheme
provides two government-funded payments: Parental Leave Pay and Dad and Partner Pay.
Parental Leave Pay (PLP) provides the primary
carer of a child with 18 weeks’ pay at the national
minimum wage (AUD 753.80 per week before tax in 2020-2021),
in the year following the child’s
birth or adoption. The primary carer must have worked for at least 10 of the 13 months prior to the
birth or adoption, and for at least 330 hours in that 10 month period with no more than an eight
week gap between two working days. The primary carer’s adjusted taxable income must be
equal
to or less than an income test threshold in the financial year prior to the date of claim or date of
birth or adoption, whichever is earlier. The income test threshold is AUD 151 350 for the 2020-21
financial year. PLP and Newborn Supplement cannot be paid for the same child. A person cannot
claim FTB(B) or the dependent spouse, child housekeeper and housekeeper tax offsets while they
are receiving PLP.
Dad and Partner Pay (DAPP) provides the father or partner of the primary carer of a child with two
weeks’ pay at the national minimum wage (AUD
753.80 per week before tax in 2020-21), in the
year following the child’s birth or adoption. The father or partner must have worked for at least 10
of the 13 months prior to the birth or adoption and for at least 330 hours in that 10 month period
with no more than an eight week gap between
two working days. The father or partner’s adjusted
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taxable income must be equal to or less than the income test threshold in the financial year prior
to the date of claim or date of birth or adoption, whichever is earlier. The income test threshold is
AUD 151 350 for the 2020-21 financial year. DAPP and PLP may be paid for the same child.
Child Care Subsidy (CCS) replaced the previous Child Care Benefit (CCB) and Child Care Rebate
(CCR) from 2 July 2018. CCS is a means-tested payment which assists families with the cost of
approved child care. CCS is payable to eligible families with incomes up to AUD 353 680. A
percentage of the cost of childcare is subsidised, with the applicable percentage varying from 85
per cent for families with income less than AUD 69 390 to 20 per cent for families with income
between AUD 343 680 and AUD 353 680. CCS to families with income above AUD 189 390 are
capped at AUD 10 560 per child. The attached calculations assume no child care usage.
4.3. Other transfers
Income support payments in Australia are assessed on fortnightly income. The descriptions below present
annualised estimates of fortnightly rates and thresholds by summing up applicable rates across the 2020-
21 year. The modelled results presented in Taxing Wages 2020-21 reflect people who have constant
income over an entire year. In practice, it is common for fortnightly payment values to fluctuate as
recipients’ circumstances change.
JobSeeker Payment
JobSeeker Payment is the primary taxable payment payable to people aged from 22 years to Age Pension
age (66 years in 2020-21) who are unemployed or are regarded as unemployed. JobSeeker Payment is
also payable to a member of a couple if their youngest child is aged 6 years or more and to single parents
if their youngest child is aged 8 years or more. It is conditional on recipients fulfilling a personal Job Plan,
which typically involves taking part in activities such as job seeking or training. In 2020-2021 the annual
JobSeeker amount for singles without dependants was AUD 15 093.78 and for partnered individuals was
AUD 13 663. Recipients are also eligible for an Energy Supplement, and potentially other supplementary
payments. These payments taper out at a rate of AUD 0.50 per AUD 1 for incomes between AUD 3 064.10
and AUD 6 656.00, and reduce at a rate of AUD 0.60 per AUD for incomes over AUD 6 656.00. Under the
thresholds and taper rates that applied in 2020-2021, the JobSeeker payment may be available to some
full time workers under the OECD definition of 30 or more hours of work per week. The JobSeeker Payment
for partnered individuals reduced by AUD 0.60 for each AUD 1 of their partner’s income above AUD 28
988. For single principal carers with dependent child or children, it reduced at a rate of AUD 0.40 per AUD
1 for incomes over AUD 3 064.10.
Parenting Payment
Parenting Payment is a taxable payment payable to low income families with responsibility for the care of
a young child. Partnered persons are eligible if they have a qualifying child under six years of age, and
sole parents are eligible if they have a qualifying child under eight years of age.
In 2020-2021 the maximum annual amount of Parenting Payment (Partnered) (PP(P)) was AUD 13 663.
Only one parent in a couple can be entitled to PP(P). The maximum annual amount of Parenting Payment
(Single) (PP(S)) in 2020-21 was AUD 21 002.28. Recipients are also eligible for an Energy Supplement,
and potentially other supplementary payments. These payments are subject to income and assets tests.
The PP(P) tapers out at a rate of AUD 0.50 per AUD 1 of income over AUD 3 064.10 up to AUD 6 656.00,
and reduces at a rate of AUD 0.60 per AUD 1 for income over AUD 6,656.00. Under the PP(P) income
test, a spouse receives a reduced Parenting Payment, tapering at a rate of AUD 0.60, when the higher
earning partner’s income exceeds AUD 28
988. If the spouse has little or no income (less than
AUD 3 064.10 per annum), he or she would not receive any Parenting Payment when the higher earning
partner’s income exceeds AUD
52 760. PP(S) reduces by AUD 0.40 for each AUD 1 of income above
AUD 5 007.60 plus AUD 639.60 for each child other than the first.
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Pharmaceutical Allowance
Pharmaceutical Allowance (PA) is a non-taxable supplementary payment payable to eligible persons to
help with medicine costs; for example, persons who receive the PP(S). PA is added to the maximum basic
rate of PP(S) before a person’s PP(S)
entitlement is calculated. Anyone with a PP(S) entitlement, after PA
has been added, receives the full amount of PA. For 2020-2021, the payment is AUD 161.20 for singles
and AUD 80.60 for coupled individuals.
Telephone Allowance
A non-taxable Telephone Allowance is available on a quarterly basis to eligible individuals, including
individuals who receive PP(S). The basic rate of the Telephone Allowance is AUD 120.80 for 2020-2021.
Energy Supplement
The Energy Supplement (ES) is an extra payment to help with energy costs, paid alongside certain income
support payments. The ES is not indexed. The amount of the supplement varies depending on the main
income support payment. FTB(A) and FTB(B) recipients are only eligible for the ES if they have been
continuously eligible for their payment since 19 September 2016.
For eligible FTB(A) recipients, the maximum amount of ES is AUD 91.25 per year for each child
under 13 years and AUD 116.80 for each child aged 13 to 19 years.
For eligible FTB(B) recipients, the amount of ES is AUD 73.00 per year for each child under 5
years, and AUD 51.10 per year for each child aged 5 to 18 years.
Recipients of PP(P) receive AUD 205.40 annually, and recipients of PP(S) receive AUD 312.
For JobSeeker Payment recipients, the ES is AUD 228.80 annually for singles without dependents,
and AUD 205.40 for partnered individuals.
The calculations assume families and individuals are eligible for the energy supplement as a significant
proportion of FTB(A) and FTB(B) recipients were eligible for the supplement in 2020-2021.
5. Recent changes in the tax/benefit system
Permanent changes to working age income support payments
Permanent changes to the basic rate of a range of working age income support payments, including the
JobSeeker Payment and Parenting Payment, came into effect on 1 April 2021. From this date, the basic
rate of the payments was increased permanently by AUD 50 per fortnight and the income free area for
JobSeeker Payment and Parenting Payment (Partnered) was increased to AUD 150 per fortnight.
Other material changes made in response to the COVID-19 pandemic are described in section 5.1.
5.1. Changes to labour taxation due to the COVID pandemic in 2020 and 2021
Bringing forward personal income tax cuts
To provide additional support to Australian taxpayers, Stage 2 of the personal income tax plan was brought
forward from 1 July 2022 to 1 July 2020. This included increasing the Low Income Tax Offset to AUD 700,
and the following changes to rates and thresholds:
the upper limit of the 19% personal income tax bracket was raised from AUD 37 000 to
AUD 45 000 and,
the upper limit of the 32.5% personal income tax bracket was raised from AUD 90 000 to
AUD 120 000.
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Furthermore, the Low and Middle Income Tax Offset was retained for the 2020-21 and 2021-22 income
years.
Introduction of the JobKeeper Payment
On 30 March 2020, the Australian Government introduced the temporary JobKeeper Payment, a fortnightly
wage subsidy paid to employers and required to be passed on in full to each eligible employee.
In the first phase of JobKeeper (30 March to 27 September 2020) eligible businesses and not-for-profit
entities were able to receive AUD 1 500 (before tax) per fortnight per employee to cover the cost of wages.
To be eligible for the Payment, businesses had to project a decline in Goods and Services Tax turnover of
30 per cent (for employers with annual turnover of less than AUD 1 billion), 50 per cent (for employers with
annual turnover of more than AUD 1 billion), or 15 per cent (for certain charities). Self-employed individuals
were also eligible to receive the JobKeeper payment.
In the extension phase of JobKeeper (28 September 2020 to 28 March 2021) business eligibility was re-
tested with reference to actual declines in Goods and Services Tax turnover and the Payment was reduced
and paid at two rates. From 28 September 2020 to 3 January 2021 the payment rate was AUD 1 200 per
fortnight for employees who worked 20 hours or more a week on average in the reference period and
AUD 750 for employees who worked less than 20 hours a week on average in the reference period.
From 4 January 2021 to 28 March 2021, the payment rate was AUD 1 000 per fortnight for employees who
worked 20 hours or more a week on average in the reference period and AUD 650 for employees who
worked less than 20 hours a week on average in the reference period.
The JobKeeper Payment ended on 28 March 2021.
Introduction of COVID-19 Disaster Payments
The COVID-19 Disaster Payment was announced by the Australian Government on 3 June 2021 in
response to COVID-19 lockdown measures. It is a lump sum payment paid by the Australian Government
directly to claimants who have lost work or income because of a COVID-19 lockdown. The COVID-19
Disaster Payment has three different rates based on the number of hours of work lost by an eligible
recipient and whether or not they are receiving an income support payment:
AUD 200 per week for those in receipt of an income support payment who lost eight or more hours
of work per week or a full day of their usual hours per week (i.e. what the person was scheduled to
work, including shifts of less than eight hours) as a result of a lockdown;
AUD 450 for those who lost between eight and less than 20 hours of work per week or a full day of
their usual work hours per week as a result of a lockdown; and
AUD 750 for those who lost 20 hours or more of work as a result of a lockdown.
These are flat rates paid for those who lose work in an eligible lockdown period. Rates and eligibility for
the payment evolved substantially between the initial policy announcement and the end of the 2020-21
income year.
The modelled income earners in Taxing Wages 2020-21 are assumed to work full time, and not lose hours
during the COVID-19 pandemic. As such, modelled income earners would not meet the eligibility
requirements for the COVID-19 Disaster Payments. These payments have therefore not been modelled.
Introduction of Pandemic Leave Disaster Payment
The Pandemic Leave Disaster Payment (PLDP) was announced by the Australian Government on 3
August 2020 after several state governments introduced payments for those without access to paid leave
entitlements or Australian Government income support, and who were required to isolate or quarantine
due to COVID-19. The payment provides AUD 1 500 for each 14-day period a person must self-isolate,
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quarantine or care for a person with COVID-19. The payment is taxable. This payment has not been
modelled in Taxing Wages 2020-21, as it is paid on an ad-hoc basis.
Temporary changes to income support payments and introduction of the coronavirus supplement
From 27 April 2020, recipients of a range of income support payments including JobSeeker and Parenting
Payment received a taxable coronavirus supplement of AUD 550 per fortnight (14 day period) for the
remainder of the financial year. The coronavirus supplement was paid in addition to the standard means-
tested income support payment, and the full AUD 550 was paid in each fortnight the recipient qualified for
a non-zero amount of income support. This payment was made to eligible recipients for a maximum of 5
fortnights during the 2019-20 financial year, however some continuously eligible recipients received the
payment in 4 fortnights depending on their payment date. The AUD 550 supplement was continued until
24 September 2020, at which time it was reduced to AUD 250 between 25 September and 31 December
2020, and then to AUD 150 between 1 January and 31 March 2021. The supplement was discontinued
after 31 March 2021. The supplement is taxable and has been included in Taxing Wages 2020-21.
The taper rate for the partner income test for the JobSeeker Payment was temporarily reduced from AUD
0.60 to AUD 0.25 per AUD 1 of income over the income test threshold from 27 April 2020 to 24 September
2021. Similarly, some means tests and waiting periods, including the assets test, were also suspended for
most income support payments over this period, and payment eligibility was expanded. From 25
September 2020 to 31 March 2021, the partner income test taper rate was increased slightly to AUD 0.27
per 1 AUD over the designated partner income free areas. The partner income taper rate reverted to 0.60
AUD per 1 AUD from 1 April 2021.
From 25 September 2020 to 31 March 2021, the income free areas for the JobSeeker Payment were also
increased from AUD 106 (with a taper rate of AUD 0.50 per AUD 1) and AUD 256 (with a taper rate of AUD
0.60 per AUD 1), to a single larger income free area of AUD 300 with a single AUD 0.60 per AUD 1 taper
rate over this larger threshold. On 1 April 2021, thresholds for the JobSeeker income test reverted to two
thresholds, as part of a package of permanent changes to the working age income support payments.
One-off Economic Support Payments
Recipients of a range of income support payments and allowances, including the Age Pension and Family
Tax Benefit, were eligible for one-off non-taxable Economic Support Payments during 2020-21. These
payments were made in March 2020 (AUD 750), July 2020 (AUD 750), December 2020 (AUD 250) and
March 2021 (AUD 250). Economic Support Payments occurring in 2020-21 have been included in Taxing
Wages 2020-21.
6. Memorandum items
6.1. Identification of an average worker
The source of the information used in replying to the questionnaire was the Australian Bureau of Statistics
publication Average Weekly Earnings
—
Australia, catalogue number 6302.0. The survey is now
conducted on a biannual basis (it was previously conducted on a quarterly basis up to the June 2012
quarter) and is based on a representative sample of employers in each industry. As a result of this change
in frequency, average weekly earnings for the 2020-2021 income tax year have been calculated as the
average of the two biannual figures (November 2020 and May 2021 (released in August 2021)).
In August 2009 the Australian Bureau of Statistics (ABS) redesigned the survey and replaced the industry
classification based on the 1993 edition of the Australian and New Zealand Standard Industrial
Classification (ANZSIC), which had been in use since 1994, with the 2006 edition of ANZSIC. The 2006
edition of ANZSIC was developed to provide a more contemporary industrial classification system, taking
into account issues such as changes in the structure and composition of the economy, changing user
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demands and compatibility with major international classification standards. Accordingly, the average wage
figure for 2010 and later years is inconsistent with that provided for previous years.
All wage and salary earners who received pay for the reference period are represented in the Survey of
Average Weekly Earnings (AWE), except:
members of the Australian permanent defence forces;
employees of enterprises primarily engaged in agriculture, forestry and fishing;
employees of private households;
employees of overseas embassies, consulates, etc.;
employees based outside Australia; and
employees on
workers’ compensation who are not paid through the payroll.
Also excluded are the following persons who are not regarded as employees for the purposes of this
survey:
casual employees who did not receive pay during the reference period;
employees on leave without pay who did not receive pay during the reference period;
employees on strike, or stood down, who did not receive pay during the reference period;
directors who are not paid a salary;
proprietors/partners of unincorporated businesses;
self-employed persons such as subcontractors, owner/drivers, consultants;
persons paid solely by commission without a retainer; and
employees paid under the Parental Leave Pay Scheme.
The sample for the AWE survey, like most ABS business surveys, is selected from the ABS Business
Register which is primarily based on registrations with the Australian Taxation Office's (ATO) Pay As You
Go Withholding (PAYGW) scheme (and prior to 1 June 2000 the Group Employer (GE) scheme). The
population is updated quarterly to take account of:
new businesses;
businesses which have ceased employing;
changes in employment levels;
changes in industry; and
other general business changes.
Earnings comprise weekly ordinary time earnings and weekly overtime earnings.
Weekly ordinary time earnings
refers to one week’s earnings of employees for the reference period
attributable to award, standard or agreed hours of work. It is calculated before taxation and any other
deductions (e.g. board and lodging) have been made. Included in ordinary time earnings are award,
workplace and enterprise bargaining payments, and other agreed base rates of pay, over award and over
agreed payments, penalty payments, shift and other allowances; commissions and retainers; bonuses and
similar payments related to the reference period; payments under incentive or piecework; payments under
profit sharing schemes normally paid each pay period; payment for leave taken during the reference period;
all workers’ compensation payments made through the payroll; and salary payments
made to directors.
Excluded are overtime payments, retrospective pay, pay in advance, leave loadings, severance,
termination and redundancy payments, and other payments not related to the reference period.
Weekly overtime earnings refers to payment for hours in excess of award, standard or agreed hours of
work.
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6.2.
Employers’ contribution to private health and pension scheme
In Australia very few employers make any contributions towards health schemes for their employees,
especially where the employee is at a wage level comparable to that of an average production worker.
Employer contributions to pension schemes are primarily through the superannuation system. This is
described in section 2.2.
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2021 Parameter values
Average earnings/yr
Dependant Spouse Tax Offset
income limit
withdrawal rate
income limit (primary earner)
Low Income Tax Offset
Ave_earn
spouse_cr
sp_lim
sp_redn
sp_lim_p
low_inc_cr
low_inc_lim
low_inc_redn
low_inc_lim_2
low_inc_redn_2
low_inc_lim_3
tax_sch
93 313
0
0
0
0
700
37500
0.05
45000
0.015
66667
0.000
0.190
0.325
0.370
0.450
0.02
23226
39167
51094
3597
0.1
4942.1
1587.75
55626
98988
0.2
0.3
0
0
0
0
91.3
36.5
781.1
80000
3314.2
5767
0.2
100000
0
51.1
750
250
0
68000
0.025
120000
0.01
16000
0.15
Tax schedule
18200
45000
120000
180000
Medicare levy
exemption limits
married
sing parent receiving PPS
+ per child
shading-in rate
Part A FTB max
Part A FTB basic
part A income limit 1
part A income limit 2
reduction rate 1
reduction rate 2
additional limit2 per extra child
Large family supplement
Part A FTB Clean Energy Advance (CEA) max
Part A FTB CEA basic
Part A FTB Energy Supplement (ES) max
Part A FTB ES basic
Part A FTB max end of year supplement
Part A FTB max end of year supplement threshold
Part B FTB
part B partner income limit
reduction rate
income limit (primary earner)
Part B FTB CEA no child <5 years old
Part B FTB ES no child <5 years old
Economic Supplement (COVID-19 support payment) ($750)
Economic Supplement (COVID-19 support payment) ($250)
Single Income Family Supplement max rate
Single Income Family Supplement phase-in threshold
Single Income Family Supplement taper in Rate - primary earner
Single Income Family Supplement phase-out threshold (primary earner)
Single Income Family Supplement taper out rate (primary earner)
Single Income Family Supplement phase out threshold (secondary
earner)
Single income family supplement phase out taper - secondary earner
medic_rate
sing_lim
m_lim
SAPTO_lim
ch_lim
shade_rate
FTB_A_max
FTB_A_base
FTB_A_lim1
FTB_A_lim2
FTB_A_taper1
FTB_A_taper2
FTB_A_child
FTB_A_large
FTB_A_CEA_max
FTB_A_CEA_basic
FTB_A_CES_max
FTB_A_CES_basic
FTB_A_supp
FTB_A_supp_lim
FTB_B
FTB_B_lim
FTB_B_taper
FTB_B_lim_p
FTB_B_CEA_5
FTB_B_CES_5
Eco_supp_1
Eco_supp_2
SIFS_max
SIFS_in_lim_pr
SIFS_in_taper_pr
SIFS_out_lim_pr
SIFS_out_taper_pr
SIFS_out_lim_sec
SIFS_out_taper_sec
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Parenting payment single
reduction rate
income limit
additional limit per child
Parenting payment single CEA
Parenting payment single Energy Supplement (ES)
Pharmaceutical allowance
State pay-roll tax rate (NSW)
Additional parameters
JobSeeker Payment single rate
JobSeeker Payment single CEA
JobSeeker Payment single ES
JobSeeker Payment partnered rate
JobSeeker Payment partnered CEA
JobSeeker Payment partnered ES
reduction rate 1
reduction rate 2
income limit 1
income limit 2
Coronavirus supplement
Fortnightly Rate 1
Fortnightly Rate 2
Fortnightly Rate 3
Rate 1 start date (2020-21)
Rate 1 end date (2020-21)
Rate 1 days (2020-21)
Rate 2 start date (2020-21)
Rate 2 end date (2020-21)
Rate 2 days (2020-21)
Rate 3 start date (2020-21)
Rate 3 end date (2020-21)
Rate 3 days (2020-21)
Weighted average fortnightly supplement (2020-21)
Senior Australian and Pensioner Tax Offset
Senior Australian and Pensioner Tax Offset Maximum Section 159N
rebate
Senior Australian and Pensioner Tax Offset single threshold
Senior Australian and Pensioner Tax Offset taper rate
SchoolKids Bonus
Telephone allowance
Income Support Bonus - Single
Income Support Bonus - partnered
Low and Middle Income Tax Offset
Weighted_avg_CVS
SAPTO
SAPTO_Max_159N
SAPTO_thresh
SAPTO_taper
SKB
SKB_lim
Tele_A
ISB_s
ISB_p
LMITO_Base
LMITO_Taper1
LMITO_Taper2
LMITO_Max
LMITO_Thr1
LMITO_Thr2
231.10
2230
445
32279
0.125
0
120.80
0
0
255
0.075
0.03
1080
37000
90000
PPS
PPS_taper
PPS_lim
PPS_ch_lim
PPS_CEA
PPS_CES
PA
Pay_roll_rate
NSAS
NSAS_CEA
NSAS_CES
NSAP
NSAP_CEA
NSAP_CES
NSA_taper1
NSA_taper2
NSA_lim1
NSA_lim2
21002
0.4
5007.6
639.6
0
312
161.2
0.0485
15094
0
229
13663
0
205.4
0.5
0.6
3064
6656
550
250
150
01-07-2020
24-09-2020
85.00
25-09-2020
31-12-2020
97.00
01-01-2021
31-03-2021
89.00
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2021 Tax Equations
The equations for the Australian system in 2021 are mostly repeated for each individual of a married
couple. However, the spouse credit is relevant only to the calculation for the principal earner and the
calculation of the Medicare levy uses shading-in rules which depend on the levels of earnings of the
spouses. The basis of calculation is shown by the Range indicator in the table below.
The functions which are used in the equations (Taper, MIN, Tax etc) are described in the technical note
about tax equations. Variable names are defined in the table of parameters above, within the equations
table, or are the standard variables “married” and “children”. A reference to a variable with the affix “_total”
indicates the sum of the relevant variable values for the principal and spouse. And the affixes “_princ” and
“_spouse” indicate the value for the principal and spouse, respectively. Where the calculation for one
earner considers variables for the other earner, the affix "_oth" is used. Equations for a single person are
as shown for the principal, with
“_spouse” values taken as 0
Line in country table
and intermediate steps
1.
2.
3.
Earnings
Allowances
Credits in taxable
income:
Credits in taxable
income of principal
Variable name
earn
tax_al
B
Range
Equation
0
taxbl_cr_princ
B
IF(AND(Children>0,Married=0),Taper(PPS,earn_princ,PPS_lim+PPS_ch
_lim*(Children-
1),PPS_taper),IF(AND(Children=0,Married=0),taper2(NSAS,earn_princ,N
SA_lim1,NSA_lim2,NSA_taper1,NSA_taper2),IF(Married>0,taper3(NSAP
,earn_princ,earn_spouse,NSA_lim1,NSA_lim2,NSA_taper1,NSA_taper2,
0),,0)))
IF(AND(Children>0,Married=0),0,IF(AND(Children=0,Married=0),0,IF(Ma
rried>0,taper3(NSAP,earn_spouse,earn_princ,NSA_lim1,NSA_lim2,NSA
_taper1,NSA_taper2,0),0)))
earn+taxbl_cr+Coronavirus Supplement
Credits in taxable
income of spouse
4.
5.
CG taxable income
CG tax before credits
Medicare Levy
Tax liability
6.
Tax credits :
Spouse credit
Low Income Tax Offset
Senior Australian and
Pensioner Tax Offset
Beneficiary tax offset
Low and Middle Income
Tax Offset
taxbl_cr_spouse
B
tax_inc
B
med_levy
liab
B
P
medicare(tax_inc,sing_lim,m_lim,SAPTO_lim,ch_lim,shade_rate,medic_r
ate,Married,tax_inc_oth,Children)
Tax(tax_inc, tax_sch)
spouse_cr
low_cr
sap_cr
P
B
P
Taper(IF(Children>0,0,spouse_cr*Married),earn_spouse+taxbl_cr_spous
e,sp_lim,sp_redn)
LITO(Tax_Inc,low_inc_lim,low_inc_cr,low_inc_lim_2,low_inc_redn,low_in
c_lim_3,low_inc_redn_2)
IF(AND(taxbl_cr_princ>0,NOT(AND(Children>0,Married=0))),Tax(taxbl_c
r_princ,tax_sch),IF(taxbl_cr_princ>0,Taper(SAPTO,tax_inc,SAPTO_thres
h,SAPTO_taper),0)
IF(AND(taxbl_cr>0, NOT(AND(Children>0, Married=0))), Tax(taxbl_cr,
tax_sch), 0)
MAX(0,IF(Tax_Inc<LMITO_Thr1,LMITO_Base,MAX(IF(Tax_Inc<LMITO_
Thr2,MIN(LMITO_Max,LMITO_Base+(Tax_Inc-
LMITO_Thr1)*LMITO_Taper1),LMITO_Max-(Tax_Inc-
LMITO_Thr2)*LMITO_Taper2))))
spouse_cr+low_cr+sap_cr+ben_cr
Positive(liab-tax_cr) + med_levy + TBRL
0
0
ben_cr
lmito_cr
B
B
Total
7.
8.
9.
tax_cr
CG_tax
local_tax
SSC
B
B
B
B
CG tax
State and local taxes
Employees' soc security
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199
11.
Cash transfers:
Family Tax Benefit (Part
A)
ftbA
J
IF(PA>0,((FTB_A_max+FTB_A_CES_max+IF(earn_princ+earn_spouse<
FTB_A_supp_lim,FTB_A_supp,0))*Children+IF(Children>2,(Children-
2)*FTB_A_large,0)),MAX(((FTB_A_max+FTB_A_CES_max+IF(earn_prin
c+earn_spous<FTB_A_supp_lim,FTB_A_supp,0))*Children-
Positive((earn_princ+earn_spous+taxbl_cr_princ+taxbl_cr_spouse)-
FTB_A_lim1)*FTB_A_taper1),Positive((FTB_A_base+FTB_A_CES_basic)
*Children-
Positive((earn_princ+earn_spous+taxbl_cr_princ+taxbl_cr_spouse)-
(FTB_A_lim2+(Positive(Children-1))*FTB_A_child))*FTB_A_taper2)))
IF(earn_princ<FTB_B_lim_p,IF(Children>0,Taper((FTB_B+FTB_B_CES_
5),earn_spouse+taxbl_cr_spouse,FTB_B_lim,FTB_B_taper),0),0)
AND(Children>0,Married=0)*IF(Taper(PPS+PA+PPS_CES,earn_princ,PP
S_lim+PPS_ch_lim*(Children-1),PPS_taper)>0,PA,0)
IF(AND(Children>0,Married=0,Taper(PPS+PPS_CES,earn_princ,PPS_lim
+PPS_ch_lim*(Children-
1),PPS_taper)>0),PPS_CEA,IF(AND(Children=0,Married=0,taper2(NSAS
+NSAS_CES,earn_princ,NSA_lim1,NSA_lim2,NSA_taper1,NSA_taper2)>
0),NSAS_CEA,IF(AND(Married>0,taper3(NSAP,earn_spouse,earn_princ,
NSA_lim1,NSA_lim2,NSA_taper1,NSA_taper2,NSAP_CES)>0),NSAP_C
EA)))+IF(AND(taxbl_cr_princ>0,Married>0,taper2(NSAP+NSAP_CES,ear
n_princ,NSA_lim1,NSA_lim2,NSA_taper1,NSA_taper2)>0),NSAP_CEA,0)
+IF(AND(ftbA>0,ftbA>FTB_A_base*Children+IF(Children>2,(Children-
2)*FTB_A_large,0)),FTB_A_CEA_max*Children,0)+
IF(AND(ftbA>0,ftbA<=FTB_A_base*Children+IF(Children>2,(Children-
2)*FTB_A_large,0)),FTB_A_CEA_basic*Children,0)+IF(ftbB>0,FTB_B_CE
A_5,0)
IF(AND(Children>0,Married=0,Taper(PPS+PPS_CES,earn_princ,PPS_lim
+PPS_ch_lim*(Children-
1),PPS_taper)>0),MAX(0,Taper(PPS+PPS_CES,earn_princ,PPS_lim+PP
S_ch_lim*(Children-1),PPS_taper)-Taper(PPS,
earn_princ,PPS_lim+PPS_ch_lim*(Children-
1),PPS_taper)),IF(AND(Children>0,Married=0,Taper(PPS+PPS_CES,ear
n_princ,PPS_lim+PPS_ch_lim*(Children-
1),PPS_taper)=0),0,IF(AND(Children=0,Married=0,taper2(NSAS+NSAS_
CES,earn_princ,NSA_lim1,NSA_lim2,NSA_taper1,NSA_taper2)>0),taper2
(NSAS+NSAS_CES,earn_princ,NSA_lim1,NSA_lim2,NSA_taper1,NSA_ta
per2)-
taper2(NSAS,earn_princ,NSA_lim1,NSA_lim2,NSA_taper1,NSA_taper2),I
F(AND(Married>0,taper3(NSAP,earn_spouse,earn_princ,NSA_lim1,NSA_
lim2,NSA_taper1,NSA_taper2,NSAP_CES)>0),taper3(NSAP,earn_spous
e,earn_princ,NSA_lim1,NSA_lim2,NSA_taper1,NSA_taper2,NSAP_CES)-
taper3(NSAP,earn_spouse,earn_princ,NSA_lim1,NSA_lim2,NSA_taper1,
NSA_taper2,NSAP_CES-
NSAP_CES)))))+IF(AND(Married>0,taper2(NSAP+NSAP_CES,earn_princ
,NSA_lim1,NSA_lim2,NSA_taper1,NSA_taper2)>0),max(0,
taper2(NSAP+NSAP_CES,earn_princ,NSA_lim1,NSA_lim2,NSA_taper1,
NSA_taper2)-
taper2(NSAP,earn_princ,NSA_lim1,NSA_lim2,NSA_taper1,NSA_taper2)),
0)
0
sifs(tax_inc_princ,tax_inc_spouse,ftbA+ftbB,SIFS_max,SIFS_in_lim_pr,SI
FS_in_taper_pr,SIFS_out_lim_pr,SIFS_out_taper_pr,SIFS_out_lim_sec,S
IFS_out_taper_sec)
ftbA+ftbB+taxbl_cr_princ+PA+taxbl_cr_spouse+Tele_A+CEA=CES+SKB
+SIFS
IF(OR(ftbA>0,ftbB>0),Eco_supp_1+2*Eco_supp_2,0)
IF(taxbl_cr_princ>0,Weighted_avg_CVS*26,0)
IF(taxbl_cr_spouse>0,Weighted_avg_CVS*26,0)
Family Tax Benefit (Part
B)
Pharmaceutical
Allowance
Clean Energy Advance
ftbB
PA
CEA
J
J
J
Energy Supplement
CES
J
SchoolKids Bonus
Single Income Family
Supplement
SKB
SIFS
J
J
cash_trans
COVID-19 Economic
Support Payment
Coronavirus Supplement
(Principal)
Coronavirus Supplement
Eco_supp_1 and
Eco_supp_2
Weighted_avg_C
VS
Weighted_avg_C
J
B
B
B
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200
(Spouse)
VS
Telephone Allowance
Employer’s State pay-roll
tax
TA
tax_empr
B
B
IF(Married=0,IF(Children>0,IF(Taper(PPS+PA+PPS_CES,earn_princ,PP
S_lim+PPS_ch_lim*(Children-1),PPS_taper)>0,Tele_A,0),0),0)
earn*Pay_roll_rate
Key to range of equation B calculated separately for both principal earner and spouse P calculated for principal only (value taken as 0 for spouse
calculation) J calculated once only on a joint basis. Key refers to an optimisation of benefits i.e. Parenting payment for principal and Newstart
allowance for spouse versus Parenting payment for spouse and Newstart allowance for principal.
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201
Austria
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in the
tax/benefit system. The methodology also includes the parameter values and
tax equations underlying the data.
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Austria 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's wage dependent contributions and taxes
Employer's compulsory social security contributions
payroll taxes
Total
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
43.3%
n.a.
55.7%
n.a.
48.2%
n.a.
59.5%
n.a.
42.0%
n.a.
45.7%
n.a.
43.3%
n.a.
55.7%
n.a.
9.4%
18.0%
27.3%
43.3%
15.2%
18.0%
33.2%
47.8%
21.8%
16.4%
38.2%
51.1%
-1.5%
18.0%
1.2%
22.8%
7 153
2 333
9 486
10 677
3 482
14 158
16 292
5 814
22 107
7 153
2 333
9 486
0
0
24 569
0
0
33 719
0
0
52 057
5 168
5 168
33 406
6 078
9 239
9 071
16 741
13 842
32 211
6 078
5 570
6 078
9 071
13 842
6 078
0
0
0
400
400
3 161
0
0
0
0
400
400
7 670
0
0
0
0
400
400
18 368
0
0
669
3 000
400
4 069
- 508
0
0
6 078
132
0
6 210
0
27 598
3 561
0
9 071
132
0
9 203
0
41 256
8 070
0
13 842
132
0
13 974
0
70 293
18 768
0
6 078
132
0
6 210
0
27 598
3 561
0
0
0
0
67
none
33 808
100
none
50 460
167
none
84 268
67
2
33 808
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203
Austria 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5 - 6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's wage dependent contributions and taxes
Employer's compulsory social security contributions
Payroll taxes
Total
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
48.2%
29.3%
59.5%
44.8%
48.2%
43.3%
59.5%
55.7%
48.2%
48.2%
59.5%
59.5%
48.2%
43.3%
59.5%
55.7%
7.9%
18.0%
15.7%
34.1%
9.3%
18.0%
21.1%
38.4%
12.2%
18.0%
25.1%
41.5%
12.9%
18.0%
30.8%
46.0%
10 677
3 482
14 158
17 830
5 814
23 644
21 353
6 963
28 317
17 830
5 814
23 644
5 168
5 168
42 556
5 168
5 168
66 456
5 168
5 168
75 605
0
0
58 288
9 071
13 072
15 149
22 980
18 142
30 482
15 149
25 980
9 071
15 149
18 142
15 149
0
669
3 000
400
4 069
4 001
0
0
0
3 000
800
3 800
7 831
0
0
0
3 000
800
3 800
12 339
0
0
0
0
800
800
10 831
0
0
9 071
132
0
9 203
0
41 256
8 070
0
15 149
264
0
15 413
0
68 855
11 631
0
18 142
264
0
18 406
0
82 513
16 139
0
15 149
264
0
15 413
0
68 855
11 631
0
0
0
0
100-0
2
50 460
100-67
2
84 268
100-100
2
100 919
100-67
none
84 268
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The Austrian currency is the Euro (EUR). In 2021, EUR 0.84 was equal to USD 1. In that year, the average
worker in Austria earned EUR 50 460 (Secretariat estimate).
1. Personal Income Tax
1.1. Central government income tax
1.1.1. Tax unit
Each person is taxed separately.
However, the Austrian taxation system follows the “ability-to-pay”
principle. Several tax reliefs depend on non-personal characteristics but requirements related to special
life circumstances, including such connected to the family situation given.
1.1.2. Tax allowances
1.1.2.1. Standard tax reliefs
Work related expenses: a tax allowance of at least EUR 132 is available to all employees.
Social security contributions and connected contributions (see Section 2).
1.1.2.2. Non-standard tax reliefs
Mainly work related expenses (‘Werbungskosten’)
are - if qualified - deductible in the amount
effectively expended.
Traffic relief depending on the distance between home and working place as well as the availability
of public transport.
The following allowances are deductible from income (EUR per year):
Public transport
Available
more than
more than
more than
more than
2 km
20 km
40 km
60 km
0
696
1 356
2 016
Not available
372
1 476
2 568
3 672
Tax-free wage supplements exist for dirty, hard, dangerous, night, weekend and holiday work and
overtime. The supplement for 10 hours of overtime up to EUR 86 per month is tax free, while other
supplements are tax free up to EUR 360 (EUR 540 for night work) per month:
Special expenses (‘Sonderausgaben’): Tax allowances for contributions to state-approved
churches up to EUR 400 per year and for donations up to 10% of income for research and
humanitarian purposes, environmental protection, fire brigades, civil protection, etc.
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1.1.3. Rate Schedule
Since 2021 the tax schedule is:
Income (EUR) up to
11 000
18 000
31 000
60 000
90 000
1 000 000
Above
Marginal rate %
0
20
35
42
48
50
55 *)
* The top marginal tax rate of 55% applies only until 2025.
There is a special taxation other than the normal tax schedule for Christmas and leave bonus to the extent
that their sum does not exceed two average monthly payments (1/6 of current income) or EUR 83 333.
Otherwise the tax amount is calculated according to the following formula:
Income from Christmas and leave bonus (EUR) up to
2 000
2 345
25 000
50 000
83 333
Above
Marginal rate %
0
30
6
27
35.75
50/55
If income for Christmas and leave bonus exceeds EUR 83 333, the exceeding amount is added to current
income and taxed accordingly using the regular rate schedule (MTR of 50% or 55%, see above).
1.1.4. Tax credits
1.1.4.1. Standard tax credits:
Traffic (commuting) tax credit of up to EUR 800, composed by the basic traffic tax credit of EUR
400 and a supplement of EUR 400. In the case of a current income above EUR 15 500, the tax
credit is faded out uniformly to EUR 400 for income above EUR 21,500. For commuters with a
traffic allowance (see 1.1.2.2.) the basic traffic tax credit is EUR 690. Thus, the deductible amount
accumulates to a maximum of EUR 1 090.
If the overall income tax liability of current income is negative, a refund of social security
contributions applies. The refund amounts to the absolute value of the negative result of the tax
calculation for current income, limited to 50% of overall social security contributions paid. The
refundable amount is capped at EUR 900 (the case for commuters with a traffic allowance earning
below EUR 15 500). The standard case, however, only allows a refund of up to EUR 800.
The following tax credits exist for tax payers with children:
Non-payable family tax credit of EUR 1 500 each child (EUR 500 if the child is older than 18 years).
There exist several options for allocating the credit between the eligible parties. The parents can
split up the tax credit one half each or one parent receives the full benefit. For parents living apart
a third option is currently available: a 90%-10% split. The allocation can be defined for each child
separately.
Child tax credit of EUR 700.8 (EUR 58.40 per month) per child. This tax credit is paid together with
child allowances and is not connected with an income tax assessment. Therefore, it is treated as
a transfer in this Report (similar treatment as in the OECD Revenue Statistics).Sole earner or single
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parent tax credit for families with children: The sole earner credit is not given when a spouse’s
yearly income exceeds EUR 6 000. The single parent credit is not granted if the parent lives more
than 6 months per calendar year with a partner. This tax credit is EUR 494 for one child and
increases by EUR 175 for the second child and by EUR 220 for the third and every additional child.
This tax credit is non-wastable and can be paid as a negative income tax (in addition to the refund
of social security contributions in respect of the traffic tax credit).
Tax payers with an income tax liability below EUR 250 who qualify for the sole-earner or single-
parent receive an additional transfer, the so-called
‘Kindermehrbetrag’
If the income tax liability
(exclusive of tax credits) is lower than EUR 250 (in the case of one child), the difference of EUR
250 and the correspondent tax liability is refunded. The maximum amount payable is EUR 250 for
each child.
1.1.4.2 Non-standard tax credit
Additional traffic tax credit in case of entitlement to traffic relief according to the distance between
home address and working place (see 1.1.2.2.). In this case employees are entitled to an additional
traffic tax credit of EUR 2 per km distance from home to working place.
Tax payers who make legally required alimony payments to their child qualify for an alimony tax
credit of EUR 350 (EUR 29.2 per month). For a second child, the credit is EUR 43.8 per month.
For every other child the monthly deductible amount is EUR 58.4. The alimony tax credit is non-
payable.
A tax credit for retired persons which amounts to EUR 964 for single earners with income up to
EUR 19 930 if the spouse’s income does not exceed EUR 2 200. Otherwise, the tax credit is EUR
600. The tax credit is linearly reduced to 0 for incomes between EUR 17 000 (EUR 19 930 for sole
earners) and EUR 25 000. If the income tax liability is negative, a refund of social security
contributions applies. The refund is limited to 75% of total social security contributions paid,
respectively to EUR 300.
1.2. State and local income taxes
None.
2. Compulsory Social Security Contributions to Schemes Operated within the
Government Sector
2.1. Employee and Employer Social Security Contributions
Ceilings (EUR)
Regular wage per
Christmas and leave
month
bonus
Health insurance
Unemployment insurance
Pension insurance
Accident insurance
Contribution to the labour chamber
Contribution for the promotion of residential building
Addition to secure wage payments in the case of
bankruptcy
5500
5500
5500
5500
5500
5500
5500
11100
11100
11100
11100
(1)
(1)
Rates (%)
Employee Employer
(2)
(3)
3.87
(4)
11100
10.25
--
0.50
0.50
--
3.78
3.00
12.55
1. 20
--
0.50
0.2
1. No contribution on Christmas and leave bonus. In Revenue Statistics, the contribution to the labour chamber is accounted under Taxes on
Income of Individuals (1110).The total of contributions for the promotion of residential buildings is included in Taxes on payroll (3000).
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2. There is an income threshold for employee contributions of EUR 475,86 per month.
3. A new program has been introduced on 1 January 2004 for severance payments. Employers are required to pay 1.53% of gross wages for
employees whose employment started after 1 January 2003. of if the employer and employee opt to participate in the new program. This
contribution is seen as a non-tax compulsory wage-related payment.
4. Employees’ unemployment insurance rate is lower for small incomes. In 2021, it is zero for monthly earnings up to EUR 1790, 1% up to EUR
1953, 2% up to EUR 2117 and 3% above.
2.2. Payroll taxes
There are two payroll taxes which are levied on employers for all private sector employees with a monthly
gross wage total of more than EUR 1 095: the contribution to the Family Burden Equalisation Fund (3.9%)
and the Community Tax (3%). The wage-dependent part of the contribution to the Austrian Economic
Chamber (listed under heading 1000, Taxes on profits, OECD Revenue Statistics), which is levied,
together with the contributions to the Family Burden Equalisation Fund, at different rates depending upon
the Länder Chamber (average rate is approximately 0.4%), is not taken into account. The contribution for
the promotion of residential buildings (listed under heading 3000, Taxes on payroll, OECD Revenue
Statistics) is included in the social security contributions shown above. It is levied by the Health Insurance
Companies on monthly (current) income) along with the other social security contribution amounts.
3. Universal Cash Transfers
3.1. Transfers related to marital status
No recurrent payments.
3.2. Transfers for dependent children
A family allowance is granted for each child. The monthly payment is EUR 114.00 for the first child, EUR
128.20 for the second, EUR 152.00 for the third and is further increased for each additional child. It rises
by EUR 7.90 for children above 3 years of age, EUR 27.50 for children above 10 years of age and by EUR
51.10 for students (above 19 years of age). The taxing wages calculations only consider households with
2 children aged between 6 and 11 inclusive.
Parents are entitled to a childcare transfer, introduced in 2002. The flexibility of the childcare transfer was
again increased significantly. The entitled parent can choose the period of payments between 365 and 851
days (if they split up parental leave: 456 and 1,063 days) resulting in a transfer of EUR 14.53 (in case of
851/1,063 days) to EUR 33.88 per day (in case of 365/456 days). Also, instead of fixed amounts the
parents can opt for 80% of the last net-earning, limited to EUR 66 per day (14 months; 12 plus 2).
Additionally, parents receive a bonus of EUR 1,000 if the period of transfer payments is split at least at a
ratio of 40:60 between parents.
The child tax credit (EUR 58.40 per month, see section 1.1.4) is paid together with the family allowance
and therefore treated as a transfer.
There is a supplement to the family allowance of EUR 20.00 per month for the third and every additional
child if the family’s taxable income (i.e. the sum of the tax base
for the progressive income tax schedule)
in the preceding year did not exceed EUR 55 000. This supplement is paid on application after a tax
assessment of the very year.
An additional family allowance (“13th family allowance”) of EUR 100 is given for children
in the age between
6 and 15 years every September.
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Due to the covid-19 pandemic parents are entitled to additional EUR 360 family allowance each child in
2020. For beneficiaries of minimum income or social transfers, an additional EUR100 are paid out in 2020
and 2021, respectively
4. Main Changes in Tax/Benefit Systems Since 2004
In 2004, the first step of a comprehensive tax reform came into force. The general tax credit was increased
from EUR 887 to EUR 1 264 and the phasing-out rules were considerably simplified and harmonized for
all groups of taxpayers.
The tax reform in 2005 brought a new income tax schedule. Apart from the top rate of 50% for incomes
exceeding EUR 51 000, it shows the average tax rate for two amounts of income. The tax amounts for
incomes between these values have to be calculated by linear interpolation. The formulas that have to be
applied are defined in the tax law. The tax reform included some measures which were made retrospective
for 2004. These measures are an increase of the sole earner and the single parent tax credit depending
on the number of children (together with a higher income limit for the spouse of a single earner) and an
increase of traffic reliefs by about 15%. The maximum deductible amount for church contributions was
increased as well. In 2006, the traffic reliefs were raised again by about 10%.
In 2007, the traffic allowance was increased by 10% (effective from 1st July). Additionally, the maximum
negative tax for employees with traffic allowances was raised from EUR 110 to EUR 240 (for 2008 and
2009). In 2008, the family allowance for the third child and all subsequent children was increased.
Furthermore, the unemployment insurance contribution of low-earning employees was reduced (effective
from 1st July). Also in 2008, for monthly earnings up to EUR 1 100 the rate was set to zero, for earnings
below EUR 1 200 the contribution was set to 1%, below EUR 1 350 2% and above it was set to the current
rate of 3%. Since 2008, these income limits have been raised according to the increase of the ceiling levels
of social security contributions every year.
In September 2008, the parliament decided some measures to compensate for the strong increase of food
and energy prices: inter alia, the tax exemption of overtime supplements was increased and the 13th child
allowance was introduced.
The tax reform 2009 (effective from the 1st of January) brought an increase of the zero bracket (from EUR
10 000 to EUR 11 000), a reduction of the marginal income tax rates (except the top rate), an upward shift
of the top rate bracket (from EUR 51 000 to EUR 60 000) and several measures for families with children:
child allowance (EUR 220 or EUR 132 each parent p.a.), deductibility of cost for child care (up to EUR 2
300 p.a. per child), tax-free payments (up to EUR 500 p.a.) from employers to their employees for child
care and an increase of the child tax credit.
Starting in 2013 a progressive rate schedule is applied to Christmas and leave bonus instead of a flat rate
regime of 6% (see 1.1.3.)
The tax reform 2016 decreased all marginal tax rates significantly, notably the marginal tax rate of the first
tax bracket, which was reduced by 11.5 percentage points from 36.5% to 25%. Limited to the years 2016
to 2020 the top marginal tax rate is temporarily increased by 5% points to 55%. These 55% apply to those
parts of income exceeding EUR 1 million a year.
The tax credit for employees was increased from EUR 345 to EUR 400. The non-wastable tax credit
(reimbursement of social security contributions) for low earnings was extended. For employees the non-
wastable tax credit was increased to a maximum of 50% of social security contributions up to a ceiling of
EUR 400 a year. For commuters eligible for the commuter tax allowance the maximum amount of the non-
wastable tax credit is EUR 500. This system of a non-wastable tax credit was extended to pensioners too,
limited to EUR 110.
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Besides the already existing broad financial support for families (payable tax credit and transfers as well
as deductibility of cost for child care) the tax reform 2016 increased the tax allowance for children from
EUR 220 to EUR 440 per child. If both parents claim for this tax allowance, it increases to EUR 600 (two
times EUR 300).
Tax expenditures (tax allowances) for private insurances (e.g. health and pension insurances) and
mortgages were abolished for new contracts beginning with 2016. For existing contracts these tax
allowances are maintained for a transitional period of five years.
In 2019 a non-payable family tax credit of EUR 1 500 each child (EUR 500 if the child is older than 18
years) was introduced. The parents can split up the tax credit one half each. Sole- or single-earner with
low income, who cannot fully participate on that non-payable family tax credit, can apply for a payable sole-
or single-earner family tax credit up to EUR 250 each child.
In 2020 the positive entrance rate of the tax rate schedule was reduced to 20% and the refund of social
security contributions for low earners was increased.
From 2021 on, the standard tax allowance for special expenses of EUR 60 was abolished.
4.1. Changes to labour taxation due to the COVID pandemic in 2020 and 2021
Due to the covid-19 pandemic the already planned reduction of the entrance rate of the tax rate schedule
from 25% to 20 was set into force retroactively with beginning of 2020 (see 1.1.3.).
Extraordinary bonuses in connection with the pandemic up to EUR 3 000 are exempted from income-
taxation in 2020.
In the case of reduced-working hours, home-office or prevented work attendance due to the covid-19
pandemic tax exemptions or specific allowances (e.g. extraordinary payments for dirty, hard, dangerous,
night work, payments for overtime, higher commuting allowance, etc.), which are normally included in the
wage-bill of an employee, are exempted nevertheless the employee is not able to fulfil his work during the
pandemic.
5. Memorandum Items
5.1. Calculation of Earnings Data
Sector used: All private employees except apprentices employed full-time for the whole year
Geographical coverage: Whole country
Sex: Male and Female
Earnings base:
o
Items excluded:
o
Unemployment compensation
Sickness compensation
Vacation payments
Overtime payments
Recurring cash payments
Fringe benefits (taxable value)
Items included:
Basic method of calculation used: Average annual earnings
Income tax year ends: 31 December
Period to which the earnings calculation refers to: one year.
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210
2021 Parameter values
Average earnings/yr
Non current income as %
Tax schedule for nci
non_cur_pc
nci_sch
Ave_earn
0
0,3
50 460
14,29%
2000
2345
25000
50000
83333
0,06
0,27
Maximum non-current income tax base
Work related
Familiy tax credit
Sole-, single earner family tax credit
Max. neg. employee's tax credit
Max. neg. employee's tax credit rate
Traffic (commuting) tax credit
Lower Limit of traffic tax credit
Upper Limit of traffic tax credit
Children suppl.to SETC: 1st child
2nd child
3rd+ child
Spouse with children
Income tax schedule
nci_base_max
work_rel
fam_cr
fam_cr_sole
neg_wage_cr
neg_wage_cr_rate
traffic_cr
traffic_cr_ll
traffic_cr_ul
dsole1_cr
dsole2_cr
dsole3_cr
sole_lim1
Tax_sch
0,3575
132
0
1500
250
800
50%
800
15500
21500
494
175
220
6000
0
0,20
0,35
0,42
0,48
0,50
0,55
Ceiling f. soc. security contributions
lower limit
Employees' contr. rates
SSC_ceil
SSC_low
health_rate
unemp_rate
5500
475.86
3,87%
0,00%
1,00%
2,00%
3,00%
pension_rate
sum without unempl. and others
Employers' contr.rates
empl_14
others_rate
health_empr
unemp_empr
pension_empr
accident_empr
payinsur_empr
sum without others
Payroll taxes
Child benefit: 1st child
2nd child
suppl.>=3years
empr_14
others_empr
payroll_rate
CB_1
CB_2
CB03sppl
10,25%
14,12%
1,00%
3,78%
3,00%
12,55%
1,20%
0,2%
20,88%
0,50%
6,90%
1368,0
1538,4
94,8
11000
18000
31000
60000
90000
1000000
1790
1953
2117
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suppl.>=10years
5<suppl<16
Child tax credit
CB10sppl
CB6to15
child_cr_1
330,0
100
700,8
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2021 Tax equations
The equations for the Austrian system are, in principle, on an individual basis. The only variable which is dependent
on the marital status is the head of family (sole earner) tax credit, which is also given to single parents. For the
Christmas and leave bonus (both amounting to one monthly wage or salary) there are special rules for the calculation
of social security contributions (separate ceilings and slightly lower rate) and wage tax (reduced flat rate). The income
tax schedule and the tax credits are applied only for "current pays". The child tax credit is in principle given to the
mother (as a negative tax together with "family allowances" = transfer for children). The sole earner and the employee
tax credit are connected with negative income tax rules. Therefore, the tax finally paid may be different from tax liability
minus tax credits.
Bn
3
4
5
6
7
8
9
10
11
11
12
13
14
Variable
earnings (%AW)
number of
children
Gross earnings
Current income
SSC on curr.inc.
Work related
expenses
Tax-free income
Tax base for
schedule
Gross tax on
current income
Basic tax credit
Married or head
of family
code for docn equations
percent
child
earn
cearn
SSCc
work_rel
taxfrinc
ctbase
gtaxcur
btaxcr
headcr
Excel-Function
0, 67%, 1 or 167% in Taxing Wages output tables (but model can be applied to all
earnings levels)
0 or 2 in Taxing Wages output tables
=Ave_earn*percent
=(1-non_cur_pc)*earn
='(empl_14+unemp(earn,unemp_rate)+others_rate)*'
MIN(12*SSC_ceil;cearn)*(cearn>12*SSC_low)
=(earn>14*SSC_low)*work_rel
=tax_free*earn
='(cearn-Child_al_princ-' SSCc-work_rel-taxfrinc)+max(0;ncearn-SSCnc-
nci_base_max)
=Tax(ctbase;tax_sch)
=0
IF(Married=0,(Children>0)*((Children>0)*dsole1_cr+(Children>1)*dsole2_cr+(Childre
n>2)*(Children-2)*dsole3_cr),IF(cearn_s-SSCc_s-work_rel_s<=IF(Children>0,
sole_lim1,0),
((Children>0)*dsole1_cr+(Children>1)*dsole2_cr+(Children>2)*(Children-
2)*dsole3_cr), 0))+MAX(0,Children*fam_cr_sole-gtaxcur_p)
=Max(gtaxcr;fam_cr*child) in the case of single person
=MaxFABO(gtaxcur principal;gtaxcur spouse;1) in the case of parents
15
Children
fam_cr
16
17
18
19
20
21
22
23
2
25
26
Other
Interm. tax on
current income
Net tax on
current income
Non current
income
SSC on non-
curr. inc.
Non current
income-SSC
Tax schedule
Taxable income
Tax liability excl.
tax credits
Income tax
finally paid
Employee's SSC
othcr
itcur
ntaxcur
ncearn
SSCnc
ncearn_adj1
nci_sch
taxinc
inctax_ex
inctax
SSC
=(earn>14*SSC_low)*(wage_cr+traffic_cr*0,5+MIN(1;MAX(0;(traffic_cr_ul-
ctbase)/(traffic_cr_ul-traffic_cr_ll)))*traffic_cr*0,5)
=gtaxcur-btaxcr-headcr-othcr
=max(gtaxcur-btaxcr-other;-neg_wage_cr_rate*SSC;-neg-wage_cr)-child>0)-headcr
=earn-cearn
=(health_rate+unemp(earn,unemp_rate)+pension_rate)*
MIN(2*SSC_ceil;ncearn)*(ncearn>2*SSC_low)
=min(ncearn-SSCnc;nci_base_max)
=min(ncearn-SSCnc;nci_base_max)
=ctbase+ncearn_adj1
=gtaxcur+taxnc
=ntaxcur+taxnc
=SSCc+SSCnc
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213
Bn
27
28
29
30
31
Variable
Employer's SSC
Pay-roll taxes
Cash transfers
Take-home pay
Wage cost
code for docn equations
SSCf
payroll
cash
Excel-Function
=IF(earn'/14>=SSC_low;((empr_14+others_empr)*MINA(12*SSC_ceil;cearn)+empr_
14*MINA(2*SSC_ceil;ncearn));earn*accident_empr)
=payroll_rate*earn
==IF(child=0;0;IF(child=2;CB_1+CB_2+2*CB10sppl+2*(CB5to17+child_cr_1)))
=earn-inctax-SSC+cash
=earn+SSCf+payroll
Unemp is a Visual Basic Function which chooses lower unemployment SSC rates for low earnings.
Key to range of equation B calculated separately for both principal earner and spouse P calculated for principal only (value taken as 0 for spouse
calculation) J calculated once only on a joint basis.
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Belgium
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in the
tax/benefit system. The methodology also includes the parameter values and
tax equations underlying the data.
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Belgium 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
55.6%
n.a.
68.5%
n.a.
55.6%
n.a.
65.1%
n.a.
59.0%
n.a.
67.8%
n.a.
55.6%
n.a.
68.5%
n.a.
18.1%
13.9%
32.0%
46.2%
25.8%
14.0%
39.8%
52.6%
33.8%
13.9%
47.7%
58.9%
12.4%
13.9%
10.7%
29.4%
0
0
23 813
9 242
0
0
31 473
14 183
0
0
45 600
23 685
5 456
5 456
31 261
9 242
4 575
281
4 856
11 193
6 829
476
7 304
20 775
11 404
731
12 135
41 654
4 575
281
4 856
9 201
2 263
4 496
1 841
2 263
9 558
3 913
2 263
20 943
8 575
4 146
3 083
1 262
0
2 263
0
0
2 263
0
0
2 263
0
0
2 675
1 471
9 495
0
25 511
8 254
11 749
0
40 499
14 999
16 324
0
70 930
30 171
9 495
0
25 511
8 254
4 575
4 920
6 829
4 920
11 404
4 920
4 575
4 920
67
none
35 006
100
none
52 248
167
none
87 254
67
2
35 006
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Belgium 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
55.6%
45.7%
65.1%
57.0%
54.4%
54.4%
64.2%
67.7%
54.4%
54.4%
64.2%
64.2%
54.4%
54.4%
64.2%
67.7%
14.2%
14.0%
20.3%
37.3%
21.2%
13.9%
30.5%
45.2%
24.5%
13.8%
34.4%
48.4%
22.7%
13.9%
36.6%
50.0%
4 107
4 107
41 656
14 183
4 042
4 042
60 673
23 425
4 042
4 042
68 528
28 365
0
0
55 311
23 425
6 829
476
7 304
14 699
11 404
731
12 135
30 623
13 658
731
14 389
40 010
11 404
731
12 135
31 943
5 774
5 246
2 148
5 774
13 117
5 371
5 774
18 178
7 443
4 525
14 054
5 754
0
4 525
1 249
0
4 525
1 249
0
4 525
1 249
0
4 525
0
11 749
0
40 499
12 765
21 244
0
66 010
23 252
23 498
0
80 998
29 997
21 244
0
66 010
23 252
6 829
4 920
11 404
9 840
13 658
9 840
11 404
9 840
100-0
2
52 248
100-67
2
87 254
100-100
2
104 496
100-67
none
87 254
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The national currency is the Euro (EUR). In 2021, EUR 0.84 was equal to USD 1. The Secretariat has
estimated that in that same year the average worker earned EUR 52 248 (Secretariat estimate).
1. Personal income tax system
1.1. Federal government income tax
1.1.1. Tax unit
Spouses are taxed separately. As from 2004, the principle of separate taxation applies to all categories of
income. A non-earning spouse is taxed separately on a notional share of income that can be transferred
to him or her (see “non-earning spouse allowance”, below). Married couples nonetheless file joint income
tax returns.
1.1.1.1. Schedule
Taxable income (EUR)
0—13 540
13 540—23 900
23 900—41 360
41 360—and above
Marginal rate (%)
25
40
45
50
1.1.2. Tax allowances
1.1.2.1. Deduction of social security contributions
Unless stated otherwise, social insurance contributions are deductible from gross income.
1.1.2.2. Work-related expenses
Salaried employees are entitled to a standard deduction for work-related expenses; this is equal to 30% of
gross income (less social insurance contributions) and may not exceed EUR 4 920 per spouse.
For self-employed professionals:
Self-employed professionals are entitled to a standard deduction for work-related expenses. This
deduction may under no circumstances exceed EUR 4 920 per spouse.
Gross earnings less social insurance contributions (EUR)
Below 6 250
Between 6 250 and 12 430
Between 12 430 and 20 680
Above 20 680
Rate (%)
28.70
10
5
3
Paid company directors are also entitled to a standard deduction for work-related expenses; this is equal
to 3% of gross income (less social insurance contributions) and may not exceed EUR 2 590 per spouse.
An additional allowance may be granted to wage-earners if their workplace is more than a certain distance
from their home.
Actual expenses incurred in order to acquire or retain earned income are deductible if they exceed the
standard deduction. The deductibility of certain categories of work-related expenses (cars, clothing,
restaurant meals and business gifts) is limited, however. Taxpayers who report actual expenses may
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deduct EUR 0.24 per kilometre, up to 100 km per single journey, for travel between their home and their
workplace by means other than private car.
1.1.2.3. Non-earning spouse allowance (quotient conjugal)
A notional amount of income can be transferred between spouses if one of them earns no more than 30%
of the couple’s combined earned income. In this case, the amount transferred
is limited to 30% of
aggregate net earned income, less the individual income of the spouse to whom the notional share is
transferred. This allowance is limited to EUR 11 170.
1.1.2.4. Exempt income
The base amount is: 9 050. These amounts vary with regards to the family situation. Additional exemptions
for dependent children (a handicapped child counts as two children):
1 child: 1 650
2 children: 4 240
3 children: 9 500
4 children: 15 360
> 4 children: 5 860 per additional child
Dependent child exemptions in excess of available income give rise to a reimbursable tax credit. This
reimbursable tax credit is calculated at the marginal rate for the spouse with the highest income and capped
at EUR 470 per dependent child.
Additional special exemptions are also granted for certain household members (in euro):
Other dependants: 1 650
Handicapped / handicapped spouse: 1 650
Other handicapped dependants: 1 650
Widow(er) with dependent child(ren): 1 650
Single father or mother: 1 650
These additional exemptions are applied first to the taxable income of the spouse having the most income,
with any remainder then being applied to the income of the other spouse.
The basic exemption plus any additional exemptions for dependants and single parents is applied against
each bracket from the bottom up; in other words, the lowest brackets are depleted first.
1.1.2.5. Schedule
Basic exemption plus any additional exemption (EUR)
0—9 520
9 520—13 540
13 540—22 570
22 570—41 360
41 360—and above
Marginal rate (%)
25
30
40
45
50
The basic exemption plus any additional exemptions is applied from the bottom up.
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219
1.2. Regional and local government taxes
With the implementation of the sixth state reform, the Flemish Region, the Walloon Region and the
Brussels-Capital Region have been delegated several important competences with regard to the individual
income tax. As a result of this reform, as from 1 July 2014, the regional competences are:
the possibility to levy surcharges on the federal PIT (the supplementary regional tax on the personal
income tax). The surcharge may be proportional or vary with income but there are limits to ensure
that the tax remains progressive);
to grant (on the result of the surcharges) tax discounts;
to grant tax reductions, tax increases and tax credits;
to regulate exclusively some tax reductions.
Under the new tax model, the assumed federal income tax amount must first be calculated. The taxable
base is reduced by the exempt income (see 1.1.2.4.), the tax credits for pensions, unemployment, sickness
and other social benefits and the tax credit for income taxed abroad. Additionally, it is reduced by the tax
due on passive income for which the Federal State remains exclusively competent.
The remaining PIT liability is then split between the federal government and Regions according to a ratio
of 24.957% for the regional PIT and 75.043% for the Federal PIT. Expressed as % of the federal PIT, the
basic rate of the regional surcharge equals 33.257%. (0.24957/(1-0.24957)). Regions may change the rate
of the surcharge. This surcharge may vary per tax bracket, within certain limits
The modelling relies on the parameters that apply in the Brussels-capital Region. The actual regional rate
is set at 32.591% (Brussels-Capital rate).
The starting point for the calculation of the municipal (and agglomeration) surcharges is the individual
income tax ("impôt total", i.e. the sum of federal PIT and regional PIT), before taking into account the
surcharge resulting from insufficient prepayments, the foreign tax credit, federal and regional reimbursable
tax credits (among others for children and for low-income workers), advanced payments and withholding
taxes. The rate of this local surtax is set by each municipality, and there is no upper limit
The calculation of the regional and local surtax for the average worker study assumes that the worker lives
in the Region of Brussels-Capital. The weighted average local surtax of the 19 municipalities which form
the Brussels-Capital Region is 6.3%. The additional surcharge of 1% levied in the Brussels-Capital Region,
in addition to the municipal surcharge, is abolished as from income year 2016.
1.3. Tax credits
Refundable tax credit for low-income workers
A refundable tax credit is intended for low-income workers and company managers (subject to the
employees’ social security system) entitled to the employment bonus.
The refundable tax credit amounts to 33.14% as of 1
st
January 2020 of the "employment bonus" which is
actually granted on remunerations earned during the taxable period. It cannot exceed EUR 840 per taxable
period.
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220
2. Compulsory social security contributions to schemes operated within the
government sector
2.1. Rates and ceiling
a) Payroll deductions
The rates of employer and employee contributions are set by law. The applicable rates (in %) are as
follows (for businesses having 20 or more employees) :
The schedule applicable as from 01.01.2021 is as follows:
2021
Unemployment
Health insurance indemnities
Health care
Placement services
Family allowances
Pensions
Child care
Work-related illnesses
Work-related accidents
Education leave
Business closures
Wage restraint
Tax shift 2017
Total
Employee
0.87
1.15
3.55
Employer
3.16
2.35
3.8
0.05
7
8.86
0.05
1.01
0.32
0.05
0.31
5.23
-5.04
27.15
Total
4.03
3.5
7.35
0.05
7
16.36
0.05
1.01
0.32
0.05
0.31
5.23
-5.04
40.22
7.50
13.07
The schedule applicable as from 01.07.2021 is as follows:
2021
Unemployment
Health insurance indemnities
Health care
Placement services
Family allowances
Pensions
Child care
Work-related illnesses
Work-related accidents
Education leave
Business closures
Wage restraint
Tax shift 2017
Total
Employee
0.87
1.15
3.55
Employer
3.16
2.35
3.8
0.05
7
8.86
0.05
1.00
0.32
0.05
0.31
5.23
-5.04
27.14
Total
4.03
3.5
7.35
0.05
7
16.36
0.05
1.00
0.32
0.05
0.31
5.23
-5.04
40.21
7.50
13.07
Vacation pay is not subject to the social security contributions applicable to salaries, but a social security
levy of 13.07% is deducted when the money is attributed.
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b) Reduction of employer contributions
The schedule applicable as from 01.04.2020 is as follows:
Gross annual earnings (S) in EUR
0–36 862.80
36 862.80 and up
Fixed amount
0
0
Variable amount
0.140 (36 862.80–S)
0
c) Reduction of individual social security contributions
A reduction of individual social security contributions is granted monthly for low-income earners, depending
on wage level. The schedule below is restated in annual terms.
The schedule applicable as from 01.03.2020 is as follows:
Gross annual salary (S) in EUR
0 < S < 20 093.76
20 093.76 < S < 31 341.36
S > 31 341.36
Reduction in Euros
2 467.80
Min (2 467.80, (2 467.80–0.2194 (S–20 093.76))
0
d) Special social security contribution
All persons totally or partially subject to the social security scheme for salaried workers are liable for this
special contribution. In theory, the amount of the contribution is determined according to aggregate
household income. Aggregate household income is equal to combined gross earnings less ordinary social
security contributions and work-related expenses. The special social security contribution is not deductible
for PIT purposes. The amount of the contribution is as follows:
Taxable income (EUR)
from 0 to 18 592.02
from 18 592.02 to 21 070.96
from 21 070.96 to 60 161.85
60 161.85 and above
Amount due on the lower limit
0
0
223.10
731.29
% above the lower limit
0
9
1.3
0
e) Work accidents
All employers are required to insure their employees against accidents that occur in the workplace or while
travelling to or from the workplace. The insurance is written by a private company. The premiums depend
on the wage level as well as on sectoral risk indicators. A minimum (+/- 14% of AW in 2018) and maximum
(89% of AW) wage applies. The usual premiums are approximately 1% of the capped gross pay for office
workers and 3.3% for labourers. Higher rates apply in certain industries in which risks are greater. The
premium rate for construction workers, for example, varies between 7% and 8%.
2.2. Deductions according to family status or gender
None.
3. Universal cash transfers
With the implementation of the sixth state reform, the Flemish Region, the Walloon Region and the
Brussels-Capital Region have been delegated family allowances. We only indicates the changes that have
been implemented in the Brussels-capital region. Those apply from 1
st
January 2020
The previous system (hereafter “the old system”) is to a large extend grandfathered. For the children born
before 31
th
December 2019, if the old family allowance system is most advantageous than the new system,
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the old system still applies if the composition of the family has not been changed. The comparison is made
per family and not per child and only takes into account only the basic amounts and not the annual
supplements.
The Taxing Wages calculations assume that one child is aged between seven and ten years and that the
other child is aged between eleven and twelve years.
3.1. New regional system
–
Brussels-Capital region
Under the new system, family benefits consist in basic amount, age supplements, an income-related
supplement and a single parent supplement.
The basic annual amount per child is set at EUR 1 839.06 (But if the child is born before 1
st
January 2020,
the amount is reduced by EUR 122.60 until 31
th
December 2025).
Age supplement:
≥ 12 years
≥ 18 years and an enrolment in higher education
122.60
245,20
Number of children and income-related supplement, per child: (S = Gross income, net of deductible social
security contributions)
Children under the age of 12
S ≤ 31 989.27
31 989.27< S ≤ 46 436.25
S > 46 436.25
Children over the age of 11
S ≤ 31 989.27
31 989.27< S ≤ 46 436.25
S > 46 436.25
1 child
490.42
0
0
1 child
613.02
0
0
2 children
858.23
306.51
0
2 children
980.83
306.51
0
3 children or more
1348.65
882.75
0
3 children or more
1471.25
882.75
0
Single parent supplement, per child:
S ≤ 31 989.27
S > 31 989.27
1 child
0,00
0,00
2 children
122,60
0,00
3 children or more
245.21
0,00
Annual supplement, per child
< 3 years
20,40
3 – 5 years
0,00
But if pre-school education:
20,40
6 – 11 years
30,60
≥ 12 years
51,00
But if an enrolment in higher
education:
81,60
3.2. Old system
Family allowances are granted for children. The annual amounts of these benefits (in euro) are as follows:
<5 years
1
st
child
2
nd
child
3
rd
child
1 194.99
2 193.74
3 265.32
5–6 years
1 205.19
2 203.94
3 275.52
7–10 years
1 409.77
2 612.02
3 683.60
11–12 years
1 430.17
2 632.42
3 704.00
12–16 years
1 537.15
2 847.82
3 919.40
17–18 years
1 537.15
2 847.82
3 919.40
>18 years
1 584.75
3 017.06
4 088.64
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223
4. Main changes in the tax/benefit system since 2016
The “tax shift” has
been decided in 2015 and is shifting the taxation from labour to other bases, including
mainly consumption and income from savings. The reform is phased over the 2015-2019 period. The main
changes are the following
Employers’ social security contributions
will be reduced to 25%. Reductions will be abolished, apart
from the reduction for low wage earners that will be gradually increased.
On the side, the reform increases the standard deduction for work related expenses for wage
earners and the zero-rate band. The tax schedule will also be modified: the 25% will be extended
to the previous upper limit of the 30% bracket, so that the former 30% bracket will disappear. The
tax credit for low wage earners will also be increased.
4.1. Changes to labour taxation due to the COVID pandemic in 2020 and 2021
Although no specific covid-19 measures have a direct impact on labour taxation as modelled in the Taxing
Wages publication, some have an impact on payment facilities:
The covid-19 measures in Belgium include improved deferred social security contribution (SSC)
payments plans (Amicable repayment plans).
1
Such repayment plans already existed and are still
on demand, but access is made easier and conditions smoother. In principle all companies with
covid related financial problems can claim the deferral with respect to 2020 SSC-payments.
Regarding PIT, no particular measures apply to PIT assessments of employees. However a covid
measure provides for a lower rate of the earned income withholding tax (EIWT) for unemployment
benefits of temporary unemployed employees. Since the PIT rate schedule itself remains
unchanged, the total PIT due is not altered. But lower EIWT paid at source amounts to a partial
postponement of payment.
2
On top of several cases in which employers must not transmit all collected earned income
withholding tax (EIWT) to the Treasury, a new covid measure supporting companies retaining
temporary unemployed employees was introduced. There already existed different types and
conditions for such wage subsidies (e.g. with respect to night and shift work or for researchers).
3
5. Memorandum Items
5.1. Identification of AW and valuation of earnings
The Average Wage is based on an annual survey conducted by the Statbel division of the Ministry of
Economy. The survey is limited to enterprises with at least 10 employees. A two step approach is applied:
first the participating employers are selected, then the surveyed employees (sampling ratio of 5% to 7%).
All employees are covered by the survey but the estimate of the Average Wage is restricted to data of full
time employees only. The reference period is October but survey data is combined with social insurance
registers to obtain annual earnings. If applicable, the earnings of full time employees not employed during
the entire year, are uplifted proportionally to obtain annual estimates. Annual earnings include bonuses,
vacation and overtime pay, but no fringe benefits.
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2021 Parameter values
Ave_earn
Work-related expenses
work_rel_max
work_rel_sch
52 248
4 920
0
0
0.3
9 050
9 050
0
0
1 650
4 240
1 650
470
0
5 440
7 260
18 150
23 580
Ex_rate1
0.25
0.30
0.40
0.45
0.50
tax_rate1
0.00
0.25
0.40
0.45
0.50
11 170
0.3
0.24957
0.32591
0.063
0.00
0.0087
0.0115
0.0355
0.0750
0.1307
0
20 093.76
31 341.36
31 341.36
99 999 999
Secretariat estimate
0
0
Tax credits (exempt income)
single_cr
Married_cr
Supp_cr_base
supp_cr_thrsh1
child_cr1
child_cr2
s_parent_cr
child_cr_max
basic_cr_base
basic_cr_thrsh1
basic_cr_thrsh2
basic_cr_thrsh3
basic_cr_thrsh4
One child
Two children
Single parents
Maximum Child Credit Payment
Basic Credit
Basic exemption plus any additional exemption schedule
Ex_sch
9 520
13 540
22 570
41 360
Income tax schedule
tax_sch
0
13 540
23 900
41 360
quote_max
Regional tax
Local tax
Unemployment
Medical care
Sickness
Pension
Employee contribution
quote_rate
red_rate
reg_tax_rate
local_rate
add_local_rate
unemp_rate
med_rate
sickness_rate
pension_rate
SSC_rt
SSC_redn
(annual)
0
20 093.76
20 093.76
0
0
18 592.02
21 070.96
2 467.80
2 467.80
2 467.80
0
0
0.2194
0.2194
0
0
Special annual contribution
SSC_special
0.000
0.090
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0.013
Employer contributions
SSC_empr_rt
SSC_empr_red
0.000
0.27145
0
36 862.80
36 862.80
9 999 999
0.000
0.3314
840.00
1 430.17
2 612.02
3 683.60
1 747.06
0
31 989.27
46 436.25
99999999
0
31 989.27
99999999
0
0
0
0
0
0
0
0
1
490.42
0
0
0
0
0
0
2
858.23
306.51
0
0
122.60
0
0
3
1
348.65
882.75
0
0
245.21
0
0
60 161.85
0
0
0
0
0.1400
0
0
36 862.80
0
0
0
Structural reduction on the withholding tax on wages
Low-income credit
Child benefit (age 7-10) old system
second child (age 7-10) old system
third child (age 7-10) old system
Child benefit (age 6-12) (new sytem)
Social supplement (children < 12)
PrP_redn
LIC_rate
LIC_max
CB_1
CB_2
CB_3
CB
Number of children
CS_social
Single parent supplement
CS_Single
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2021 Tax equations
The equations for the Belgian system in 2021 are mostly calculated on an individual basis. But central
government tax for a married couple is calculated on two bases and the lower value is used. One of the
bases takes account of the combined income of the couple. Also, tax credits may be used against the tax
liability of the secondary earner if the principal earner is unable to use them.
The functions which are used in the equations (Taper, Tax etc.) are described in the technical note about
tax equations. Variable names are defined in the table of parameters above or are the standard variables
"married" and "children". A reference to a variable with the affix "total" indicates the sum of the relevant
variable values for the principal and spouse. And the affixes "princ" and "spouse" indicate the value for
the principal and spouse respectively. Equations for a single person are as shown for the principal with
"_spouse" values taken as 0.
Line in country table and
intermediate steps
Variable name
earn
tax_al
taxbl_cr
tax_inc_int
Q
tax_inc_adj_prin
c
tax_inc_adj_spo
use
CG_tax_excl
child_ex_inc
fam_ex_inc
Range
Equation
1.
2.
3.
4.
Earnings
Allowances:
Credits in taxable income
CG taxable income
Quote part
CG adjusted taxable
income - principal
CG adjusted taxable
income - spouse
CG tax before credits
Calculation of credits
Child exemption amount
Family exemption amount
B
B
B
J
P
S
J
P
B
MIN(work_rel_max, Tax(earn-SSC, work_rel_sch))+SSC
0
earn-tax_al
IF(married, Positive(MIN(tax_inc_int_total*quote_rate, quote_max)-
tax_inc_int_spouse), 0)
Positive(tax_inc_int_princ – Q)
Positive(tax_inc_int_spouse + Q)
Tax(tax_inc_adj, tax_sch)
(children=1)*child_cr1+(children=2)*child_cr2
IF(Married,married_cr,single_cr+(Children>0)*s_parent_cr)+IF(tax_inc_adj
<=0,0,IF(tax_inc_adj<=supp_cr_thrsh1,supp_cr_base,MAX(0,supp_cr_bas
e+supp_cr_thrsh1-tax_inc_adj)))
child_ex_inc+fam_ex_inc_princ
fam_ex_inc_spouse
married*IF(ex_inc_int_princ<tax_inc_adj_princ,
MIN(MAX((ex_inc_int_spouse-tax_inc_adj_spouse), 0), tax_inc_adj_princ-
ex_inc_int_princ), -(MIN(MAX((ex_inc_int_princ-tax_inc_adj_princ), 0),
MAX(0, tax_inc_adj_spouse-ex_inc_int_spouse))))
ex_inc_int_princ+ex_inc_tran
ex_inc_int_spouse-ex_inc_tran
Tax(ex_inc_fin, Ex_sch)
basic_cr_base*IF(tax_inc<='basic_cr_thrsh1,' 0,
IF(tax_inc<='basic_cr_thrsh2,' (tax_inc-basic_cr_thrsh1)/(basic_cr_thrsh2-
basic_cr_thrsh1), IF(tax_inc<='basic_cr_thrsh3,' 1,
IF(tax_inc<='basic_cr_thrsh4,' (basic_cr_thrsh4-tax_inc)/(basic_cr_thrsh4-
basic_cr_thrsh3), 0))))+IF(tax_inc='0;0;MIN(LIC_rate*(MIN(VLOOKUP('
earn, SSC_redn,3), VLOOKUP(earn, SSC_redn, 3)-VLOOKUP(earn,
SSC_redn, 4)*(earn-VLOOKUP(earn, SSC_redn, 2)))));LIC_max))
Positive(CG_tax_incl-tax_credits) *(1-red_rate)
MIN(Tax(MIN((children=1)*child_cr1+(children='2)*child_cr2),'
(positive(ex_inc_int-tax_inc_int), tax_sch), children*child_cr_max)
CG_tax_init-basic_cr_total-child_credit_nw
5.
6.
Initial exempt income -
principal
Initial exempt income -
spouse
Transferable amount
ex_inc_int_princ
ex_inc_int_spou
se
ex_inc_tran
P
S
J
Final exempt income -
principal
Final exempt income -
spouse
Tax credits
Basic Credit
ex_inc_fin_princ
ex_inc_fin_spou
se
tax_credits
basic_cr
P
S
J
B
7.
CG tax
Tax prior to non-wasteable
credits
Non-wasteable child credit
Final CG tax
CG_tax_init
child_credit_nw
CG_tax_final
B
J
J
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227
8.
State and local taxes
Regional tax
Local tax
Employees' soc security
9.
regional_tax
local_tax
SSC
B
J
B
11.
Cash transfers
SSC_special
SSC_total
cash_trans
J
J
13.
Employer's soc security
empr_sch
B
CG_tax_init*reg_tax_rate
(local_rate+add_local_rate)*(CG_tax_init+regional_tax)
Positive((earn)*SSC_rt-MIN(VLOOKUP( earn, SSC_redn,3),
VLOOKUP(earn, SSC_redn, 3)-VLOOKUP(earn, SSC_redn, 4)*(earn-
VLOOKUP(earn, SSC_redn, 2))))
positive(Tax(tax_inc_total, SSC_special)
SSC+SSC_special
MAX((Children>0)*CB_1+(Children>1)*CB_2,Children*(CB+VLOOKUP(ear
n-SSC,CS_Social,Children+2)+IF(Married,0,VLOOKUP(earn-
SSC,CS_Single,Children+2))))
Positive(earn*(SSC_empr_rt- PrP_redn)-(VLOOKUP(earn,
SSC_empr_redn, 2)-VLOOKUP(earn, SSC_empr_redn, 3)*(earn-
VLOOKUP(earn, SSC_empr_redn, 1))))
Key to range of equation B calculated separately for both principal earner and spouse P calculated for principal only (value taken as 0 for spouse
calculation) J calculated once only on a joint basis.
Notes
1
2
3
https://www.socialsecurity.be/site_fr/general/coronavirus/index.htm
(French, Dutch or German only).
https://finances.belgium.be/fr/particuliers/coronavirus/chomage-et-reprise-du-travail.
https://finances.belgium.be/fr/entreprises/coronavirus/pr%c3%a9compte-professionnel.
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Canada
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in the
tax/benefit system. The methodology also includes the parameter values and
tax equations underlying the data.
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Canada 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Other(CPP & EI)
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income (Provincial Health Care Levy)
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
35.2%
n.a.
41.6%
n.a.
29.7%
n.a.
31.9%
n.a.
43.4%
n.a.
44.5%
n.a.
74.3%
n.a.
76.9%
n.a.
13.4%
7.9%
21.3%
28.9%
18.6%
6.5%
25.1%
31.5%
26.3%
3.9%
30.2%
34.5%
6.6%
7.9%
-7.5%
2.8%
0
0
0
39 040
5 272
0
0
0
55 476
6 892
0
0
0
86 295
8 185
0
10 895
10 895
53 334
5 272
3 296
600
3 896
10 565
4 056
750
4 806
18 561
4 056
750
4 806
37 347
3 296
600
3 896
7 166
2 260
0
460
2 720
4 706
1 963
2 260
0
565
2 825
9 597
4 157
2 260
0
565
2 825
21 159
11 383
2 260
2 071
460
4 791
2 635
634
231
0
49 374
7 426
291
0
73 747
12 422
291
0
123 352
23 983
231
0
49 374
7 426
231
291
291
231
67
none
49 605
100
none
74 037
167
none
123 642
67
2
49 605
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Canada 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Other(CPP & EI)
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income (Provincial Health Care Levy)
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
35.3%
32.1%
37.4%
38.6%
35.3%
40.9%
37.4%
46.8%
35.4%
35.4%
37.4%
37.4%
29.7%
35.2%
31.9%
41.6%
15.2%
6.5%
13.0%
20.4%
16.5%
7.0%
20.7%
27.8%
18.6%
6.5%
23.6%
30.1%
16.5%
7.0%
23.6%
30.4%
0
6 373
6 373
64 387
6 892
0
3 559
3 559
98 075
12 164
0
2 170
2 170
113 123
13 784
0
0
0
94 516
12 164
4 056
750
4 806
16 023
7 352
1 350
8 702
29 126
8 112
1 500
9 612
37 122
7 352
1 350
8 702
29 126
2 260
2 071
565
4 896
7 526
3 691
4 520
0
1 025
5 544
14 303
6 120
4 520
0
1 130
5 649
19 195
8 315
4 520
0
1 025
5 544
14 303
6 120
291
0
73 747
12 422
521
0
123 121
19 848
581
0
147 493
24 844
521
0
123 121
19 848
291
521
581
521
100-0
2
74 037
100-67
2
123 642
100-100
2
148 074
100-67
none
123 642
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231
The national currency is the Canadian dollar (CAD). In 2021, CAD 1.25 was equal to USD 1. In that year,
the average worker earned CAD 74 037 (Secretariat estimate).
1. Personal Income Tax Systems
1.1. Central/federal government income taxes
1.1.1. Tax unit
Under the present system, tax is levied on individuals separately; certain tax reliefs depend on family
circumstances.
1.1.2. Tax allowances and credits
1.1.2.1. Standard reliefs
Basic personal amount: Individual taxpayers can claim a non-refundable credit in respect of the
Basic Personal Amount (BPA). Starting in 2020, there are two portions to the BPA, the original
portion and the increased portion. On December 9, 2019, the government announced gradual
increases to the BPA such that it would reach CAD 15 000 by 2023. These increases will
implemented over the 2020 to 2023 period through annual increases in excess of inflation. The
new, increased portion of the BPA will be subject to an income test beginning at a level of individual
net income equivalent to the fourth federal tax bracket threshold (CAD 151 978 in 2021), and be
fully phased out by the fifth federal bracket threshold (CAD 216 511 in 2021). Individuals with net
income at or exceeding the fifth bracket threshold will continue to receive the BPA, but will not
benefit from the supplemental increase. The maximum value of the credit (no reductions) in 2021
is CAD 2 071.20, which is calculated by applying the lowest personal income tax rate (15% in 2021)
to the sum of the original BPA (CAD 12 421 in 2021) and the full value of the increase (CAD 1 387
in 2021).
Credit for Spouse or Eligible Dependant: A taxpayer supporting a spouse or other eligible
dependant receives a tax credit, which is set equal to the BPA. The above announcement of
December 9, 2019 increased the credit for Spouse or Eligible Dependant in the same way as the
BPA. The increased portion of these credits will be subject to the same income-test as the BPA,
and will continue to be reduced dollar-for-dollar by the net income of the spouse or eligible
dependant. The maximum value of the Credit for Spouse or Eligible Dependant is CAD 2 071.20
in 2021.
Social security contributions: Starting in 2019, taxpayers were entitled to claim a deduction for the
newly enhanced portions of the Canada Pension Plan (CPP) and the Quebec Pension Plan (QPP)
(to a maximum amount of CAD 290.50 in 2021) (See Section 2.1.1. for more detail). The original
base contributions to the CPP or QPP continue to be eligible for a 15% credit (to a maximum
contribution of CAD 2 875.95 for the CPP and CAD 3 137.40 for the QPP). Taxpayers are also
entitled to claim a 15% tax credit for their Employment Insurance (EI) premiums to a maximum
contribution of CAD 889.54 outside Quebec; the EI premium rate is lower for Quebec residents,
who also pay into the Quebec Parental Insurance Plan; the maximum combined credit for a Quebec
resident is CAD 1 076.83.
Canada Workers Benefit
1
(CWB): The CWB was enhanced in 2021 and now provides a non-
wastable tax credit equal to 27% of each dollar of earned income in excess of CAD 3 000 to a
maximum credit of CAD 1 395 for single individuals without dependents and CAD 2 403 for families
(couples and single parents). The credit is reduced by 15% of net family income in excess of CAD
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232
22 944 for single individuals and CAD 26 177 for families. This is the default national design;
provinces may choose to propose jurisdiction-specific changes to this design, subject to certain
principles. Starting in 2021 the secondary earner exemption was introduced to allow the spouse
or common-law partner with the lower working income to exclude up to CAD 14 000 of their working
income in the computation of their adjusted net income, for the purpose of the CWB phase-out.
Canada Employment Tax Credit: A tax credit of up to CAD 188.55 on employment income.
1.1.2.2. Main non-standard tax reliefs applicable to an average worker:
A number of non-standard tax reliefs are available to the average worker in Canada. The main ones are:
Medical expenses credit: Taxpayers are entitled to a 15% tax credit for an amount of eligible
medical expenses that exceeds the lesser of 3% of net income or CAD 2 421.
Charitable donations credit: The credit is 15% on the first CAD 200 of eligible charitable donations
and 29% on eligible donations in excess of CAD 200, with the exception of donors with taxable
income exceeding CAD 216 511, who may claim a 33% tax credit on the portion of total annual
donations over CAD 200 made from taxable income greater than CAD 216 511. Eligible donations
are those made to registered charities, to a maximum of 75% of net income.
Registered pension plan contributions: Employees who are members of a registered pension plan
are entitled to deduct their contributions to the plan. Employee contributions required to fund the
actuarial benefit liabilities under a defined benefit registered pension plan are permitted (annual
benefit accruals are limited to a maximum of 2% of earnings up to a dollar amount of CAD 3 169).
Employee contributions to a defined contribution registered pension plan are limited to 18% of
earned income up to a maximum of CAD 28 521.
Registered retirement savings plan (RRSP) premiums: Individuals can deduct their contributions
to an RRSP up to a limit of 18% of the previous year’s earned income, to a maximum
of CAD 27
830 a year, unless they are also accruing benefits under a registered pension plan or a deferred
profit sharing plan. Members of those other plans are limited to RRSP contributions of 18% of the
previous year’s earned income to a maximum of
CAD 27 830, minus a pension adjustment amount
based on pension benefits accrued in the previous year.
Union and professional dues: Individuals with annual dues paid to a trade union or an association
of public servants or paying dues required to maintain a professional status recognised by statute
are allowed to deduct such fees in computing taxable income.
Moving expenses: Eligible moving expenses are deductible from income if the taxpayer moves at
least 40 kilometres closer to a new place of employment.
Child care expenses: A portion of child care expenses is deductible if incurred for the purpose of
earning business or employment income, studying or taking an occupational training course or
carrying on research for which a grant is received. The lower income spouse must generally claim
the deduction. The amount of the deduction is limited to the least of:
1. the expenses incurred for the care of a child;
2.
two thirds of the taxpayer’s earned income; and
3. CAD 8 000 for each child who is under age seven, and CAD 5 000 per child between
seven and sixteen years of age (or older if has a mental or physical impairment, but not
eligible for the Disability Tax Credit). The amount for a child who is eligible for Disability
Tax Credit is CAD 11 000.
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1.1.3. Tax schedule
2021 Federal Income Tax Rates
Taxable Income (CAD)
0—49 020
49 020—98 040
98 040—151 978
151 978—216 511
216 511 and over
Rate (%)
15
20.5
26
29
33
1.2. State and local income taxes
1.2.1. General description
All provinces and territories levy their own personal income taxes. All, with the exception of Quebec, have
a tax collection agreement with the federal government, and thus use the federal definition of taxable
income. They are free to determine their own tax brackets, rates and credits. Quebec collects its own
personal income tax and is free to determine all of the tax parameters, including taxable income. In
practice, its definition of taxable income is broadly similar to the federal definition.
1.2.2. Tax regime selected for this study
The calculation of provincial tax for the average worker study assumes the worker lives in Ontario, the
most populous of the 10 provinces and 3 territories. The main features of the Ontario tax system relevant
to this report are summarised below:
Tax Schedule
Income Bracket (CAD)
0—45 142
45 142 —90 287
90 287—150 000
150 000—220 000
Over 220 000
Rate (%)
5.05
9.15
11.16
12.16
13.16
Surtax
Provincial tax after accounting for wastable credits
Amounts Exceeding CAD 4 874
Amounts Exceeding CAD 6 237
Surtax Rate
20% of the excess amount
36% of the excess amount
Wastable tax credits
A basic tax credit of CAD 549.44.
A maximum credit of CAD 466.52 for a dependant spouse or eligible dependant that is withdrawn
as the income of the spouse or eligible dependant exceeds CAD 924 and is completely withdrawn
when the income of the spouse is at least CAD 10 162.
5.05% of contributions made to the Canada Pension Plan and of Employment Insurance premiums.
A maximum credit
2
of the lower of CAD 850 or 5.05% of earned income per filer with earned income
that is reduced by 10% of the greater of:
o
o
Adjusted individual net income over CAD 30 000
Adjusted family net income over CAD 60 000.
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Tax Reduction
An earner is entitled to claim a tax reduction where the initial entitlement is equal to CAD 251 plus CAD
464 for each dependent child under the age of 19. Where someone has a spouse, only the spouse with
the higher net income can claim the dependent child tax reduction. If this amount is greater or equal to the
liable provincial tax, then no tax is due. If the amount is less than the liable tax, then the actual tax reduction
is equal to twice the initial entitlement amount less the liable tax (if this calculation is zero or negative, the
reduction is equal to zero).
2. Compulsory Social Security Contributions to Schemes Operated Within the
Government Sector
2.1.
Employees’ contributions
2.1.1. Pensions
Generally, all employees are eligible for coverage under the CPP or QPP. Starting in 2019, as part of the
CPP and QPP enhancements announced in 2016 and 2017 respectively, a 1-percentage point increase in
employee and employer contributions will be phased-in over five years. Employee contributions with
respect to the enhanced portion of the CPP and QPP (i.e., the additional contributions associated with the
higher contribution rate
–
additional 0.15% of income for 2019, 0.30% for 2020, and 0.50% for 2021) can
be claimed as a deduction for federal tax purposes (a deduction for employee contributions to the
enhanced portion of the CPP and QPP will also be claimed for Quebec income tax purposes) to a maximum
of CAD 290.50 for a total maximum contribution of CAD 3 166.45 (CAD 3 427.90 in Quebec). Employee
contributions with respect to the base portion of the CPP at a rate of 4.95% of income (5.40% for the QPP)
will continue to be claimed as a wastable tax credit at the rate of 15% (to a maximum contribution of CAD
2 875.95 and CAD 3 137.40 for the CPP and QPP respectively). Income subject to contributions is
earnings (wages and salaries) less a CAD 3 500 basic exemption. The maximum base contribution of CAD
2 875.95 is reached at an earnings level of CAD 61 600 (i.e. (CAD 61 600 - CAD 3 500) x 4.95% = CAD 2
875.95). Employers are also required to contribute to the CPP or QPP on behalf of their employees at the
same rate and can deduct their contributions from taxable income (refer to Section 2.2.1).
Self-employed persons must also contribute to the CPP or QPP on their own behalf. However, the self-
employed are required to contribute at the combined employer/employee rate on their earnings. Self-
employed individuals will continue to pay both the employee and employer portion at a rate of 10.9% and
11.8% per cent respectively after the phase-in of increased contributions under the enhanced CPP and
QPP. Self-employed individuals will continue to claim a wastable tax credit at the rate of 15% on the
employee share of contributions to the base portion of the CPP and QPP (same as employees). For the
remaining amounts, the entire enhanced portion and the base employer portion, self-employed individuals
will claim a maximum deduction of CAD 3 166.45 (CAD 3 427.90 in Quebec).
2.1.2. Sickness
There is no national sickness benefit plan administered by the federal government. However, all provinces
have provincially administered health care insurance plans. Three provinces, Quebec, Ontario, and British
Columbia, levy health premiums on individuals separately from the personal income tax to help finance
their health programmes.
In the case of Ontario, the premium is determined based on taxable income. Individuals who earn up to
CAD 20 000 are exempt. The premium is phased-in with a number of different rates to a maximum of CAD
900 for taxable income levels greater than CAD 200 600. The following table provides further details on
the structure that is applicable in 2021.
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The Ontario Health Premium
Fixed Component
(CAD)
0
0
300
300
450
450
600
600
750
750
900
Taxable Income
0—CAD 20 000
CAD 20 000—CAD 25 000
CAD 25 000—CAD 36 000
CAD 36 000—CAD 38 500
CAD 38 500—CAD 48 000
CAD 48 000—CAD 48 600
CAD 48 600—CAD 72 000
CAD 72 000—CAD 72 600
CAD 72 600—CAD 200 000
CAD 200 000—CAD 200 600
Over CAD 200 600
Variable Component
6% of the taxable income in excess of CAD 20 000
6% of the taxable income in excess of CAD 36 000
25% of the taxable income in excess of CAD 48 000
25% of the amount of taxable income in excess of CAD 72 600
25% of the amount of taxable income in excess of CAD 200 000
2.1.3. Unemployment
In general, all employees are eligible for Employment Insurance (EI). Eligibility to receive benefits is
determined by insurable hours worked (with a minimum entry threshold of 420 to 700 hours, depending on
region and the unemployment rate at the time the claim for benefits starts). For 2021, employees outside
Quebec are required to contribute at the rate of 1.58% of insurable earnings. Insurable earnings are
earnings (wages and salaries) up to a maximum of CAD 56 300 per year. The maximum employee
contribution is therefore CAD 889.54 per year. EI contributions give rise to a tax credit equal to 15% of the
amount contributed. Employers are also required to contribute to the plan. (See Section 2.23)
Quebec residents contribute to EI at a rate of 1.18%; the same earnings ceiling applies. They also
contribute to the Quebec Parental Insurance Plan at a rate of 0.494% of insurable earnings; maximum
insurance earnings for 2021 are CAD 83 500. For a Quebec resident, the maximum employee contribution
(EI plus Quebec Parental Insurance Plan) is CAD 1 076.83.
2.1.4. Work injury
See section 2.2.4.
2.2.
Employers’ contributions
2.2.1. Pensions
Employers are required to contribute to the CPP on behalf of their employees an amount equal to their
employees' contributions. Thus, employers also contribute at the rate of 5.45% of earnings (less the CAD
3 500 earnings exemption) to a maximum of CAD 3 166.45. For the QPP, the contribution rate is 5.90% of
earnings, to a maximum of CAD 3 427.90.
3
2.2.2. Sickness
There is no national sickness benefit plan administered by the federal government. However, all provinces
have provincially administered health care insurance plans. Three provinces levy a special tax on employer
payrolls to finance health services (Québec and Ontario) or health services and education (Manitoba).
These payroll taxes are deductible from the employer’s income subject to tax. In the case of the province
of Ontario, employers pay an Employer Health Tax on the value of their payroll, tax rates varying from
0.98% on Ontario payroll less than CAD 200 000, up to 1.95% for payroll that exceeds CAD 400 000.
Certain employers are eligible for a higher exemption of CAD 1 000 000.
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2.2.3. Unemployment
Employers are required to contribute to the employment insurance scheme. The general employer
contribution is 1.4 times the employee contribution, that is, 2.21% of insurable earnings (outside Quebec).
Premiums are adjusted for employers who provide sick pay superior to payments provided under the
employment insurance regime. All employment insurance contributions are deductible from the employer’s
income subject to tax.
2.2.4. Work injury
There is no national work injury benefit plan administered by the federal government. However, employers
are required to contribute to a provincial workers’ compensation plan which pays benefits to workers (or
their families in case of death) for work related illness or injury. The employer contribution rates, which vary
by industry and province, are related to industry experience of work related illness and injury. Premiums
are deductible from the employer’s income subject to tax. In the case of Ontario, employers broadly
corresponding to industry Sectors B-N inclusive pay, on average, 1.40% of the wages paid to each
employee to a maximum of CAD 97 308.
3. Universal Cash Transfers
3.1. Transfers related to marital status
None.
3.2. Transfers for dependent children
3.2.1. Federal
Children’s benefits are provided through the Canada Child Benefit (CCB). In
the autumn of 2017, the
Government announced that the CCB benefit amounts and income thresholds will be indexed to inflation
starting with payments in July 2018. Entitlement to the CCB for the July 2021 to June 2022 benefit year is
based on 2020 adjusted family net income. The CCB provides a maximum benefit of CAD 6 922 per child
under age six and CAD 5 840 per child for those aged six through seventeen. On the portion of adjusted
family net income between CAD 32 445 and CAD 70 297, the benefit is phased out at a rate of 7% for a
one-child family, 13.5% for a two-child family, 19% for a three-child family and 23% for larger families.
Where adjusted family net income exceeds CAD 70 297, remaining benefits are phased out at rates of
3.2% for a one-child family, 5.7% for a two-child family, 8% for a three-child family and 9.5% for larger
families, on the portion of income above CAD 70 297. The Goods and Services Tax Credit provides a relief
of CAD 302 for each adult 19 years of age or older and CAD 159 for each dependent child under the age
of 19. Single tax filers without children and with an employment income higher than CAD 9 812 receive an
additional CAD 159 that is phased in at a rate of 2%. Single tax filers with children receive an additional
CAD 159 that is not subject to phase-in. The credit received for the first dependent child of a single parent
is also increased from CAD 159 to CAD 302. The total amount is reduced at a rate of 5% of net family
income over CAD 39 398. The amount is paid directly to families.
4
3.2.2. Provincial
For each child under eighteen, qualifying families can receive up to CAD 1 493 from the Ontario Child
Benefit. The benefit is withdrawn at a rate of 8% of family income that exceeds CAD 22 796.
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Ontario has a Sales Tax Credit that provides a relief of up to CAD 320 for each adult and each child. It is
reduced by 4% of adjusted family net income over CAD 24 648 for single people and over CAD 30 810 for
families. The amount is paid directly to families.
4. Main changes in the Tax/Benefit system since 2009
4.1. Changes to labour taxation due to the COVID pandemic in 2020 and 2021
5
4.1.1. CCB: extra payments
An extra CAD 300 per child was delivered through the Canada Child Benefit (CCB) to families already
receiving the CCB for the 2019-20 benefit year delivered in May 2020.
A temporary support of up to CAD 1 200 delivered to families which have children under the age of 6
6
and
are entitled to the CCB:
CAD 300 per child with family net income equal to or less than CAD 120 000, and
CAD 150 per child with family net income above CAD 120 000.
Payment dates are May, July, and October 2021.
4.1.2. GST credit: one-time supplementary payment and extending benefit payments
A one-time special payment through the Goods and Services Tax credit for low- and modest-income
families was delivered in April 2020. The amount was calculated based on information from
tax filers’
2018
income tax and benefit return. The maximum amounts for the 2019-20 benefit year were effectively doubled
increasing from:
CAD 443 to CAD 886 for singles
CAD 580 to CAD 1 160 for couples
CAD 153 to CAD 306 for each child under the age of 19 (excluding the first eligible child of a single
parent)
CAD 290 to CAD 580 for the first eligible child of a single parent.
4.2. Identification of an Average Worker
The earnings data refer to production workers in the industries B to N. To obtain the annual average wage
figure, the average weekly earnings for the year for employees (including overtime) are multiplied by 52.
7
4.3. Employer contributions to private health and pension schemes
These do exist but no information is available on the amounts involved.
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2021 Parameter values
Average earnings/yr
Tax credits BPA - original
Tax credits BPA - increased
First threshold
Second threshold
Reduction rate
withdrawal rate
Threshold
Canada Employment Tax Credit
Canada Child Benefit amount per child under 6
Canada Child Benefit amount per child aged 6-17
First threshold
Second threshold
Frist reduction rate – 1 child
Frist reduction rate – 2 children
Frist reduction rate – 3 children
Frist reduction rate – 4+ children
Second reduction rate – 1 child
Second reduction rate – 2 children
Second reduction rate – 3 children
Second reduction rate – 4+ children
Canada Workers Benefit (CWB)
CWB–Phase-in Threshold
CWB–Phase-in Rate
CWB–Maximum Credit (per Adult/Equiv.)
CWB–Addl. Maximum Credit (Fam.)
CWB–Reduction Rate
CWB–Threshold
CWB–Addl. Threshold (Fam.)
CWB-Secondary Earner Exemption
Federal tax schedule
Ave_earn
BPA_org
BPA_ins
BPA_ins_thrsh1
BPA_ins_thrsh2
BPA_ins_redn
Sp_crd_wth
Sp_crd_thrsh
Empl_crd
ccb_credit1
ccb_credit2
ccb_crd_thrsh1
ccb_crd_thrsh2
ccb_1st_redn1
ccb_1st_redn2
ccb_1st_redn3
ccb_1st_redn4
ccb_2nd_redn1
ccb_2nd_redn2
ccb_2nd_redn3
ccb_2nd_redn4
CWB_phzin_thrsh
CWB_phzn_rt
CWB_max
CWB_max_fam
CWB_phzout_rt
CWB_phzout_thrsh
CWB_phzn_thrsh_fam
CWB_see
Fed_sch
74 037
12 421
1 387
151 978
216 511
0.0215
0.15
0
188.55
6 922
5 840
32 445
70 297
0.070
0.135
0.190
0.230
0.032
0.057
0.080
0.095
3 000
0.27
1 395
1 008
0.15
22 944
3 233
14 000
0.15
0.205
0.26
0.29
0.33
0.0495
0.0050
3 500
61 600
2 875.95
0.0158
889.54
0.15
1.4
302
159
39 398
0.05
159
9 812
0.02
Secretariat estimate
49 020
98 040
151 978
216 511
Canada pension plan rate (creditable)
Canada pension plan rate – enhanced (deductible)
exemption
Upper bound
max contrib.(creditable portion)
Unemployment ins.rate
max contrib.
Social security tax credit rate
employer contrib. mult.
GST adult credit
child credit
threshold
reduction rate
single supplement
single supplement eligibility threshold
single supplement phase-in rate
CPP_rate
CPP_ratededuc
CPP_ex
CPP_up
CPP_max
Unemp_rate
Unemp_max
ssc_crd_rate
Unemp_emplr
GST_crd_ad
GST_crd_ch
GST_crd_thrsh
GST_crd_redn
GST_crd_sgsp
GST_sgsp_thrsh
GST_sgsp_rate
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239
Province: Ontario
Tax Credits
Spouse
withdrawal rate
threshold
Social security tax credit rate
Surtax rate 1
threshold
rate 2
threshold
Tax reduction
amount per dependent
Low-income Individuals and Families Tax Credit (LIFT)
amount
threshold for singles
threshold for couples
phase-in rate
phase-out rate
Provincial tax schedule
P_basic_crd
P_spouse_crd
P_sp_crd_wd
P_sp_crd_thr
P_ssc_tc_rt
P_sur_rt1
P_sur_thr1
P_sur_rt2
P_sur_thr2
P_tax_red
P_tr_chld
P_LIFT_crd
P_LIFT_sg_thr
P_LIFT_cp_thr
P_LIFT_phzn_rt
P_LIFT_phzout_rt
Prov_sch
549.44
466.52
0.0505
924
0.0505
0.20
4 874
0.36
6 237
251
464
850
30000
60000
0.0505
0.1
0.0505
0.0915
0.1116
0.1216
0.1316
1 493
22 796
0.08
320
320
24 648
30 810
0.04
20 000
25 000
36 000
38 500
48 000
48 600
72 000
72 600
200 000
200 600
900
0.0195
0.0140
97 308
45 142
90 287
150 000
220 000
Ontario Child Benefit
amount per child
threshold
reduction rate
Sales tax credits
sales tax credit adult
sales tax credit child
threshold
threshold seniors/families
reduction rate
Ontario Health Premium
P_ch_amt
P_ch_thresh
P_ch_redn_rate
P_sales_cred
P_salcr_chd
P_ps_thresh
P_ps_thr_sen
P_ps_red_rt
P_hlth_sch
0
0.06
0
0.06
0
0.25
0
0.25
0
0.25
0
0
300
300
450
450
600
600
750
750
maximum
Employer Health Tax
Employer Workers Compensation Levy
Employer Workers Compensation Levy Ceiling
P_hlth_max
emp_healthtax
emp_workcomp
emp_workcomp_ceil
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240
2021 Tax equations
The equations for the Canadian system are mostly repeated for each individual of a married couple. But
the spouse credit is relevant only to the calculation for the principal earner and the non-wastable credits
are calculated only once. This is shown by the Range indicator in the table below.
The functions which are used in the equations (Taper, MIN, Tax etc) are described in the technical note
about tax equations. Variable names are defined in the table of parameters above, within the equations
table, or are the
standard variables “married” and “children”. A reference to a variable with the affix “_total”
indicates the sum of the relevant variable values for the principal and spouse. And the affixes “_princ” and
“_spouse” indicate the value for the principal and
spouse, respectively. Equations for a single person are
as shown for the principal, with “_spouse” values taken as 0.
Line in country table and
intermediate steps
1.
2.
Earnings
Allowances
Enhanced CPP
contribution (deductible
portion)
Net income
Credits in taxable income
CG taxable income
CG tax before credits
Tax credits :
Basic credit
Variable name
earn
tax_al
CPP_deduc
Range
Equation
B
B
CPP_deduc
CPP_ratededuc*MINA(Positive(earn-CPP_ex),(CPP_up-CPP_ex))
3.
4.
5.
6.
Net_inc
taxbl_cr
tax_inc
CG_tax_bc
basic_cr
B
B
B
P
S
Earn - tax_al
0
Net_inc - taxbl_cr
Tax(tax_inc, Fed_sch)
BPA_org*0.15 +0.15*Taper(BPA_ins,
MINA(earn,BPA_ins_thrsh2),BPA_ins_thrsh1,BPA_ins_redn) + Empl_crd
IF(AND(Married=1, earn_spouse >0),BPA_org*0.15
+0.15*Taper(BPA_ins,
MINA(earn_spouse,BPA_ins_thrsh2),BPA_ins_thrsh1,BPA_ins_redn),0)
+IF(AND(Married=0, tax_inc_spouse >0),BPA_org*0.15-
Taper(BPA_org*0.15, tax_inc_spouse,Sp_crd_thrsh,Sp_crd_wth)
+0.15*Taper(BPA_ins,
MINA(earn_spouse,BPA_ins_thrsh2),BPA_ins_thrsh1,BPA_ins_redn),0)
+(earn_spouse>0)*Empl_crd
IF(OR(Married=1,Children>0),Taper(BPA_org*0.15
+0.15*Taper(BPA_ins,
MINA(tax_inc_spouse,BPA_ins_thrsh2),BPA_ins_thrsh1,BPA_ins_redn),
earn_spouse,Sp_crd_thrsh,Sp_crd_wth),0)
ssc_crd_rate*SSC
basic_cr+spouse_cr+ssc_cr
MAX(0,MIN((CWB_max+CWB_max_fam*OR(Married=1,Children>0)),(C
WB_phzn_rt*MAX(0,F_EARN-CWB_phzin_thrsh)))-
MAX(0,CWB_phzout_rt*MAX(0,(F_NETINC)-
MIN(CWB_see,S_EARN,S_NETINC)-
(CWB_phzout_thrsh+CWB_phzn_thrsh_fam*OR(Married=1,Children>0))
)))
Positive(CG_tax_bc-tax_cr)- CWB
Tax(tax_inc, Prov_sch)
P_basic_crd+P_ssc_tc_rt*SSC_princ+IF(AND(Married=0, Children>0),
P_spouse_crd, Married*Taper(P_spouse_crd, net_inc_spouse,
P_sp_crd_thr, P_sp_crd_wd))
(net_inc_spouse>0)*(P_ssc_tc_rt*SSC_spouse)+
OR(Married=1,Children>0)*P_basic_crd
P_sur_rt1*Positive(Prov_tax_sch-Prov_tax_cred-
Spouse credit
spouse_cr
P
Social security
Total (wastable) tax
credits
Canada Workers Benefit
ssc_cr
tax_cr
CWB
B
B
J
7.
8.
CG tax
State and local taxes
Liable provincial tax
Provincial tax credits
CG_tax
Prov_tax_sch
Prov_tax_cred
B
B
P
S
Provincial surtax
Prov_surtax
B
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241
P_sur_thr1)+P_sur_rt2*Positive(Prov_tax_sch-Prov_tax_cred-P_sur_thr2)
MAX(2*(P_tax_red+Children*P_tr_chld)-(Prov_tax_sch-
Prov_tax_cred+Prov_surtax), 0)
IF(Married=1,MIN(Taper(MIN(P_LIFT_crd,earn*P_LIFT_phzn_rt),
net_inc_total, P_LIFT_cp_thr, P_LIFT_phzout_rt),
Taper(MIN(P_LIFT_crd,earn*P_LIFT_phzn_rt),net_inc,P_LIFT_sg_thr,P_
LIFT_phzout_rt)),Taper(MIN(P_LIFT_crd,net_inc*P_LIFT_phzn_rt),net_in
c,P_LIFT_sg_thr,P_LIFT_phzout_rt))
Positive(Prov_tax_sch - Prov_tax_cred + Prov_surtax -Prov_tax_redn –
Prov_LIFT_crd)
CPP_rate*MINA(Positive(earn-CPP_ex),(CPP_up-CPP_ex))
Provincial tax reduction
Low-income Individuals
and Families Tax Credit
(LIFT)
Prov_tax_redn
Prov_LIFT_crd
B
J
Liable provincial tax
9.
Employees' soc security:
Canada Pension Plan
contribution (creditable
portion)
Canada Pension Plan
(total)
Unemployment insurance
State health premium
Total Employees' soc
security
Cash transfers
(nonwastable)
Canada Child Benefit
Prov_tax
B
CPP_cred
B
CPP
Unemp
Prov_health
SSC
B
B
B
B
CPP_deduc+CPP_cred
MIN(Unemp_rate*earn,Unemp_max)
MIN(Hstep(tax_inc,P_hlth_sch),P_hlth_max)
CPP+Unemp+Prov_health
11.
CCB
P
Taper(Taper(Children*ccb_credit2,MINA(net_inc_total, ccb_crd_thrsh2),
ccb_crd_thrsh1, IF(children=1, ccb_1st _redn1, IF(children=2, ccb_1st
_redn2, IF(children=3, ccb_1st _redn3, IF(children>3, ccb_1st _redn4,
0))))), net_inc_total, ccb_crd_thrsh2, IF(children=1, ccb_2nd _redn1,
IF(children=2, ccb_2nd _redn2, IF(children=3, ccb_2nd _redn3,
IF(children>3, ccb_2nd _redn4, 0)))))
Taper((GST_crd_ad+(Married=1)*(GST_crd_ad+Children*GST_crd_ch)+(
Married=0)*(Children>0)*(GST_crd_ad+GST_crd_sgsp+Positive(Children-
1)*GST_crd_ch)+(Married=0)*(Children=0) *Positive(MIN(GST_crd_sgsp,
(net_inc_total-GST_sgsp_thrsh)*GST_sgsp_rate))), net_inc_total,
GST_crd_thrsh, GST_crd_redn)
Taper((GST_crd_ad+(Married=1)*(GST_crd_ad)+(Married=0)*Positive(MI
N(GST_crd_sgsp, (net_inc_total-GST_sgsp_thrsh) *GST_sgsp_rate))),
net_inc_total, GST_crd_thrsh, GST_crd_redn)
GST_cr-GST_cr_adult
Taper(Children*P_ch_amt,net_inc_total,P_ch_thresh,P_ch_redn_rate)
Taper(IF(Married=1,2,1)*P_sales_cred+Children*P_salcr_chd,net_inc_tot
al,IF(Married+Children=0, P_ps_thresh,P_ps_thr_sen), P_ps_red_rt)
CCB + GST_cr_child +Prov_child_ben+Prov_sales_cr
CPP
Unemp*Unemp_emplr
earn*emp_healthtax
MIN(earn, emp_workcomp_ceil)*emp_workcomp
CPP_empr+Unemp_empr+Health_empr+Comp_empr
GST Credit - Total
GST_cr
P
GST Credit - Adult
GST_cr_adult
P
GST Credit - Child
Ontario Child Benefit
Ontario sales tax credit
Total Cash Transfers
Employer's soc security
Canada Pension Plan
Unemployment insurance
Ontario Employers Health
Tax
Ontario Workers
Compensation
Total Employer's soc
security
GST_cr_child
Prov_child_ben
Prov_sales_cr
Cash_tran
CPP_empr
Unemp_empr
Health_empr
Comp_empr
SSC_empr
P
P
P
P
B
B
B
B
B
13.
Key to range of equation B calculated separately for both principal earner and spouse P calculated for principal only (value taken as 0 for spouse
calculation) J calculated once only on a joint basis.
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242
Notes
1
The Canada Workers Benefit (CWB) represents a rebranding and enhancement to the previous Working
Income Tax Benefit (WITB) effective for the 2019 tax year. In 2021, it was again enhanced with increases
to the phase-in rate from 26 per cent to 27 per cent, the phase-out thresholds from CAD 13 194 to CAD
22 944 for single individuals without dependants and from CAD 17 522 to CAD26 177 for families, and the
phase-out rate from 12 per cent to 15 per cent. In addition, a secondary earner exemption was added to
allow the spouse or common-law partner with the lower working income to exclude up to CAD14,000 of
their working income in the computation of their adjusted net income, for the purpose of the CWB phase-
out.
2
Ontario implemented a new low-income credit in 2019 named the Low-income Individuals and Families
Tax (LIFT) credit.
3
Contributions rates will continue to gradually increase until the 2023 tax year as the 1-percentage-point
increase is phased-in as part of the enhancements to CPP and QPP.
4
The payments that relate to income from the 2020 tax year and shown in the 2020 model are payable
between July 2021 and June 2022. The amounts shown in this Report assume indexation of 1.9% for the
2020 tax year (and 2021-22 benefit year); the actual indexation parameter will be announced in December
2020.
5
Notwithstanding note 4, COVID-19 related temporary increases to the CCB and GSTC are captured in
the Canada 2020 Taxing Wages model even though the income eligibility for these new COVID-related
benefits is actually based on the
information from tax filers’ 2018 income tax and benefit returns
and they
were paid in April and May of 2020.
6
Due that in the OECD Taxing Wages model, any children in the household are assumed to be aged
between six and eleven inclusive, this policy does not have impact on the model for Canada.
7
The average wage is calculated by the Department of Finance using data from Statistics Canada’s Survey
of Employment, Payrolls and Hours.
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Chile
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in the
tax/benefit system. The methodology also includes the parameter values and
tax equations underlying the data.
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Chile 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
7.0%
n.a.
7.0%
n.a.
7.0%
n.a.
7.0%
n.a.
10.2%
n.a.
10.2%
n.a.
7.0%
n.a.
7.0%
n.a.
0.0%
7.0%
-6.5%
-6.5%
0.0%
7.0%
7.0%
7.0%
1.3%
7.0%
8.3%
8.3%
0.0%
7.0%
-24.4%
-24.4%
973 500
973 500
0
0
0
0
0
0
0
2 263 720
2 263 720
8 978 756
0
505 433
505 433
754 377
754 377
1 259 810
1 493 550
505 433
505 433
505 433
754 377
1 259 810
505 433
0
0
0
0
0
0
0
233 740
0
272 727
0
0
0
0
0
272 727
849 849
1 355 282
0
5 865 187
0
1 268 432
2 022 809
0
2 118 281
3 378 091
0
849 849
1 355 282
0
5 865 187
0
505 433
754 377
1 259 810
505 433
0
0
0
0
67
none
100
none
167
none
67
2
7 220 469
7 220 469 10 776 819 17 997 288
8 754 010 14 619 197
0
233 740
7 688 536 10 022 442 16 503 738
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Chile 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
7.0%
6.1%
7.0%
6.1%
7.0%
7.0%
7.0%
7.0%
7.0%
7.0%
7.0%
7.0%
7.0%
7.0%
7.0%
7.0%
0.0%
7.0%
-18.5%
-18.5%
0.0%
7.0%
-8.6%
-8.6%
0.0%
7.0%
-5.8%
-5.8%
0.0%
7.0%
-1.8%
-1.8%
2 750 000
2 750 000
0
2 813 720
2 813 720
0
2 750 000
2 750 000
0
1 578 500
1 578 500
0
754 377
754 377
1 259 810
1 259 810
1 508 755
1 508 755
1 259 810
1 259 810
754 377
1 259 810
1 508 755
1 259 810
272 727
0
0
272 727
0
0
272 727
0
0
0
0
0
272 727
272 727
272 727
0
1 268 432
2 022 809
0
2 118 281
3 378 091
0
2 536 863
4 045 618
0
2 118 281
3 378 091
0
754 377
1 259 810
1 508 755
1 259 810
0
0
0
0
100-0
2
100-67
2
100-100
2
100-67
none
10 776 819 17 997 288 21 553 638 17 997 288
8 754 010 14 619 197 17 508 020 14 619 197
0
0
0
0
12 772 442 19 551 198 22 794 883 18 315 978
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Chile’s national currency is the peso (CLP). For 2021, the average exchange rate was CLP 759.27 to
USD 1.
1
That same year, the average worker in Chile earned 10 776 819 (country estimate).
2
Taxes allowances and tax thresholds for the personal income tax system and upper earnings limits for
social security contributions are determined using and expressed in CPI-indexed units. As of December
30, 2021, the following currency values applied to these units:
Major revenue items
Social security contributions
Monthly tax thresholds
Annual tax thresholds
Fomento
1
Unit
Unidad de
(UF)
Unidad Tributaria Mensual (UTM)
Unidad Tributaria Anual (UTA)
CLP
30 991.74
54 171
650 052
USD
40.82
71.35
856.15
1. This amount is subject to daily adjustment in line with the CPI and is compared with monthly earnings in the assessment of social security
contributions
1. Personal income tax system
1.1. Central/federal government income taxes
1.1.1. Tax unit
Each family member declares and pays taxes separately.
1.1.2. Tax allowances and credits
1.1.2.1. Standard tax reliefs
Education tax credit: Parents with children attending preschool, primary, special or secondary
education, with a total annual taxable income (both parents) of up to CLP 24 545 458 (UF 792),
are entitled to a tax credit of CLP 136 364 (UF 4.4) per child, for expenses related to education.
Children shall have a minimal school attendance of 85% and the school must be recognized by the
State. This tax credit can be claimed by both parents, or only by one of them.
Relief for
social security contributions: Employee’s compulsory social insurance contributions are
deductible for income tax purposes regardless of whether they are paid to government or private
health insurers. (See section 2.1 below).
1.1.2.2. Main non-standard tax reliefs
Voluntary contributions and APV (Voluntary Pension Fund Savings): Voluntary contributions to
pension funds and voluntary pension savings fund (APV) may be deducted from taxable income,
with an annual upper limit of CLP 18 595 044 (UF 600.)
Mortgage Interest: Taxpayers whose annual income falls below CLP 58 504 680 (UTA 90) may
deduct from their taxable income 100% of interest paid within a year for mortgage loans. This
percentage is reduced in the case of taxpayers with higher incomes up to CLP 97 507 800 (UTA
150). This relief cannot be granted along-side the DFL2 Housing Mortgage Loan Payments benefit,
and cannot exceed CLP 5 200 416 (UTA 8) per annum.
1.1.3. Tax schedule
Tax rates are applied on monthly income and these taxes are retained and paid by employers. In order to
estimate taxes, tax rates are applied on an annual basis, on the annual average income (starting of 1
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January 2021, the maximum marginal tax rate was raised from 35% to 40%, and the number of tax brackets
was augmented from seven to eight):
Taxable income (UTA)
0 -13.5
13.5 - 30
30 - 50
50 - 70
70 - 90
90 - 120
120 - 310
310 and over
Taxable income (CLP thousands)
000 - 8 776
8 776 - 19 502
19 502 - 32 503
32 503 - 45 504
45 504 - 58 505
58 505 - 78 006
78 006 - 201 516
201 516 - and more
Tax rates
EXEMPT
4.0%
8.0%
13.5%
23.0%
30.4%
35.0%
40.0%
As of 1 January 2017, the President of the Republic, Ministers, Undersecretaries, Senators and Deputies
have tax thresholds and rates applicable specifically to their income, if it is higher than 150 UTA:
Taxable income (UTA)
013.5
13.530
3050
5070
7090
90120
120 – 150
150 and over
Taxable income (CLP thousands)
000 - 8 776
8 776 - 19 502
19 502 - 32 503
32 503 - 45 504
45 504 - 58 505
58 505 - 78 006
78 006 – 97 507
97 507 - and more
Tax rates
exempt
4%
8%
13.5%
23%
30.4%
35%
40%
1.2. State and local income taxes
No taxes apply to income at state or local government level.
2. Compulsory social security contributions to schemes operated within the
government sector
2.1.
Employees’ contributions
Employees have mandatorily to contribute 7% of their income to a health insurance plan subject to an
upper earnings limit of CLP 29 259 790 (UF 979.3). They are free to choose whether to pay into a
government-managed plan or alternatively to a private insurer
3
(Isapres). The public insurance is based
on a joint system that, in general, operates on an equal basis for all its beneficiaries, irrespective of the
risk and the amount of the individual contribution. Its financing is partly covered by the contributions and
partly by way of a government subsidy. Premiums paid to the plans offered by Isapres are based on the
contributors’ individual risk and these plans are exclusively financed with the employees’ contributions.
Public insurance contributions are included in the modelling as the majority of employees pay into plans
managed by the government sector.
Employee social security contributions in respect of pensions and unemployment are not classified as
taxes in this report; though they are included in modelling as deductions for income tax.
The mandatory contributions to pension funds and unemployment insurance plans are not
classified as taxes, since the payments are made to private institutions. In 1980, the public social
security system was replaced with a privately managed individual capitalisation system. This
system is obligatory to all employees who have joined the labour force since 1983 and free-lance
workers since 2012, and of a voluntary nature to all contributing to the former system. The
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contributions to the old government operated pension fund system are not included in the modelling
because they relate to a minority of employees and the system will eventually disappear once the
contributions and related benefit payments to those individuals remaining in it have ceased.
The modelling allows that the contributions to pension funds and unemployment insurance
managed by private institutions are deducted from gross income. In the case of their pension funds,
these payments amount to 10% of their gross income, with an upper earnings limit of 29 259 790
(UF 979.3). Added to that there is an amount that varies depending on the managing company that
covers the management of each pension fund account.
4
The monthly unemployment insurance
premium
is 0.6% of the employee’s gross income, with an upper earnings limit of
CLP 44 096 522 (UF 1 471.3). Employees do not pay the monthly unemployment insurance
premium when they have a fixed-term contract or after 11 years of labour relationship.
There are also mandatory contributions to managed funds by members of the police force and the
army which are classified as taxes but are not included in the modelling as they relate to a minority
of the overall workforce.
If the employee has a high risk job, that person has to make an additional contribution of 2% (heavy
work) or 1% (less heavy work) of the gross income with an upper earnings limit of CLP 29 259 790
(UF 979.3) to the pension fund account.
The pension and unemployment contributions are not included in the Taxing Wages calculations, as they
are not considered as taxes in the report. However, information on “non-tax compulsory payments” as well
as “compulsory payment indicators” is included in the OECD Tax Database, which is accessible at
www.oecd.org/ctp/tax-database.htm.
2.2.
Employers’ contributions
There are five categories of employer social security contribution, none of which are classified as tax
revenues in this report.
Employers make mandatory
payments of 0.90% of their employees’ gross income for an
occupational accident and disease insurance policy subject to an upper earnings limit. For the
majority of employees the payments are made to employers’ associations of labour security which
are private non-profit institutions. Those remaining are made to the Social Security Regularisation
Unit (ISL). Although this latter organisation is controlled by the government, the funds are invested
on the private institutions market. The employers also pay an additional contribution which depends
on the activity and risk associated to the enterprise (it cannot exceed 3.4% of the employees’ gross
earnings). This additional contribution could be reduced, down to 0%, depending on the safety
measures the employer implements in the enterprise. If health and safety conditions at work are
not satisfactory, this additional contribution could be applied with a surcharge of up to 100%.
Employers shall make a mandatory contribution of 0.03% of the employee’ gross income
to a fund
which finances insurance coverage for working parents of children aged 1 to 15, or ages 1-18,
whichever applies, that have a serious health condition, so that the parents can take a leave of
absence from their work in order to accompany and take care of them; therefore, during this period
the parents shall have the right to assistance financed by said fund (in Spanish, “Fondo SANNA”)
that will replace, in total or partially, their monthly earnings. The collection of this contribution is
initially
delegated to the ISL and to the employers’ association of labour security.
Employers make payments of 2.4% of each employee’s income (0.8% after 11
years of labour
relationship and 3% for fixed-term contracts) with an upper earnings limit of CLP 44 096 522
(UF 122.6 monthly) to finance unemployment insurance. These funds are managed privately.
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Employers are required to pay a disability insurance of 2.08% (as from October 1
st
2021) of the
employees’ gross income, with an upper earnings limit of CLP
29 259 790 (UF 979.3), collected by
the pension fund manager, and managed by an insurance company.
If the employee has a high risk job, the employer has to pay 2% (heavy work) or 1% (less heavy
work) of the employee’s gross income, with an upper earnings limit of
CLP 29 259 790 (UF 979.3)
to the pension fund account.
Employers must purchase an individual Covid-19 insurance for private-sector employees working
on-site. The estimated average price is CLP 8 683.
3. Universal cash transfers
3.1. Marital status-related transfers
No such transfers are paid.
3.2. Transfers related to dependent children
The “Family Allowance” is paid on a monthly basis to any employee making social security contributions
who has dependent children. The definition of dependants includes:
Adopted children as well as those born to the parents;
Children up to the age of 18 or 24 years provided they are single and are regular students in an
elementary, secondary, technical, specialised or higher education establishment;
The amount of the payment depends
on the number of dependent children and the beneficiary’s
level of income according to the table below. The modelling assumes that the benefit is assessed
on the spouse with the lower earning level where both spouses are working.
2021 Transfer by Dependant
Annual Income Range (CLP)
0 - 4 196 232
4 196 232 - 6 129 044
6 129 044 - 9 559 224
9 559 224 - and over
Annual Payment (CLP)
164 260
100 800
31 860
0
3.3. Income Tested Transfers
Middle Class Bonus (Bono
Clase Media)
was paid once during 2021 to workers with a
decrease of more than 20% in their incomes (not modelled because most workers don´t meet
this requirement) or with an average monthly income between the minimum wage
(CLP 337 000) and a threshold of CLP 408 125. The bonus wasof CLP 500 000.
3.4. Universal Transfers
Emergency Family Income (Ingreso
Familiar de Emergencia)
was an income received by
households with less than CLP 800 000 per month per capita incomes. It is received by the
head of family and the total amount depends on the number of household members according
to the following table:
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N° of family
members
1
2
3
4
5
6
7
8
9
10
Monthly IFE
177 000
287 000
400 000
500 000
546 000
620 000
691 000
759 000
824 000
887 000
Total IFE
973 500
1 578 500
2 200 000
2 750 000
3 003 000
3 410 000
3 800 500
4 174 500
4 532 000
4 878 500
4. Recent changes in the tax/benefit system
4.1. Changes to labour taxation due to the COVID pandemic in 2020 and 2021
None of the measures taken by the Chilean government due to COVID-19 to date, has a direct impact on
labour taxation and taxing wages model. However, it is important to mention the Employment Protection
Law No. 21,227/2000, in which the employer, under certain circumstances, puts the contract on hold,
keeps paying the SSC, and employees can get part of their wages through the unemployment insurance
fund. This measure ended in October 2021.
However, direct cash transfers regarding COVID pandemic mentioned in points 3.3 and 3.4, modified
general formulation of Taxing Wages model, as these transfers were not present on 2020 version of TW.
These measures were temporary and ended in 2021.
5. Memorandum items
5.1. Identification of an average worker
The source of information is a survey conducted by the National Statistics Institute (INE) to
determine the Salary and Labour Cost Index. This nationwide survey is carried out on a monthly
sample and gathers information on salaries and labour costs. It applies to companies with at least
5-worker payrolls grouped in accordance with ISIC4.CL 2012,
5
covering workers in industry sectors
B to R.
6
The average gross earning was obtained by multiplying the average hourly wage by the average
number of hours worked. It covers both full and part-time workers.
5.2.
Employers’ contribution to private health
and pension schemes
In Chile very few employers make any contributions towards health schemes for their employees,
and the relevant information is not available.
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2021 Parameter values
Average earnings/yr
Allowances
Income tax
Basic_al
Tax_sch
Ave_earn
10 776 819
0
0.0%
4.0%
8.0%
13.5%
23.0%
30.4%
35.0%
40.0%
136 364
24 545 458
7%
0
Country estimate
8 775 702
19 501 560
32 502 600
45 503 640
58 504 680
78 006 240
201 516 120
Education tax credit
Employees SSC
Upper threshold
edu_tax_cre
edu_tax_cre_lim
SSC_sch
29 259 790
Family Allowance
Child element
CTR_child
-
4 196 232
6 129 044
9 559 224
0
11.17%
0.00%
2.03%
0.6%
0
2.4%
365
-
4 044 000
4 897 500
1
2
3
4
5
6
7
8
9
10
164 260
100 800
31 860
-
Non-tax compulsory payments
DummyNTC
pensions
NTC_pens
NTC_pens_er
NTC_un
NTC_un_er
numdays
COVID_Insurance
BCM_Sch
29 259 790
unemployment
44 096 522
Days in tax year
COVID Measures
Universal IFE
IFE_Threeshold
IFE_Sch
8 683
-
500 000
-
9 600 000
973 500
1 578 500
2 200 000
2 750 000
3 003 000
3 410 000
3 800 500
4 174 500
4 532 000
4 878 500
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2021 Tax equations
The functions which are used in the equations (Taper, MIN, Tax etc) are described in the technical note
about tax equations. Variable names are defined in the table of parameters above, within the equations
table, or are the standard variables “married” and “children”. A reference to a variable with the affix “_total”
indicates the sum of the relevant variable values for the principal and spouse. And the affixes “_princ” and
“_spouse” indicate the value for the principal and spouse, respectively. Equations for a single person are
as shown for the principal, with
“_spouse” values taken as 0.
Line in country table
and intermediate steps
Variable name
Range
Equation
1.
2.
3.
4.
5.
6.
Earnings
Allowances:
Credits in taxable income
CG taxable income
CG tax before credits
Tax credits :
earn
Tax_al
taxbl_cr
tax_inc
CG_tax_excl
tax_cr
B
B
B
B
P
S
7.
8.
9.
11.
CG tax
State and local taxes
Employees' soc security
Family allowance
CG_tax
local_tax
SSC
cash_trans
B
B
B
P/S
13.
Employer's soc security
SSC_empr
Min(Basic_al,earn)
0
Positive(earn-tax_al)
Tax(tax_inc, tax_sch)
IF(taxinc_princ+taxinc_spouse<='edu_tax_cre_lim,IF(taxinc_spous
e' =0,edu_tax_cre*Children,edu_tax_cre*Children*0.5),0)
IF(AND(taxinc_princ+taxinc_spouse<=edu_tax_cre_lim,taxinc_spo
use>0),edu_tax_cre*Children*0.5,0)
Positive(CG_tax_excl-tax_cr)
0
Tax(earn, SSC_sch)
IF(Children=0;0;IF(Gross_earnings_spouce>0;VLOOKUP(Gross_e
arnings_spouce;CTR_child;2);VLOOKUP(Gross_earnings_principal
;CTR_child;2))*Children)+VLOOKUP(Gross_earnings_principal;BC
M_Sch;2;TRUE)+IF(SUM(Gross_earnings_principal:Gross_earning
s_spouce)/SUM(Married;Children;1)<IFE_Threeshold;VLOOKUP(S
UM(Married;Children;1);IFE_Sch;2;FALSE);0)"
DummyNTCP*((NTC_un_er+NTC_pens_er)*gross_earnings)+coun
tif(gross_earnings;">0")*COVID_Insurance
Key to range of equation B calculated separately for both principal earner and spouse P calculated for principal only (value taken as 0 for spouse
calculation) J calculated once only on a joint basis.
Notes
1
2
https://www.sii.cl/valores_y_fechas/dolar/dolar2021.htm.
Information of monthly earnings available up to November 2021. Earnings of December 2021 are
estimated and will be ratified by March 5
th
2021.
3
4
5
6
Enrollment in the private health system during 2019 amounted to 19.41% of all beneficiaries.
Average cost in 2021 was 1.17% of gross income.
ISIC4.CL 2012 is a Chilean classifier of economic activities, based on ISIC Rev.4.
O (8422) “Defense Activities” and O (8423) “Public
aorder
and safety activities” are not included.
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Colombia
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in the
tax/benefit system. The methodology also includes the parameter values and
tax equations underlying the data.
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COLOMBIA 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
0.0%
n.a.
0.0%
n.a.
0.0%
n.a.
0.0%
n.a.
0.0%
n.a.
0.0%
n.a.
0.0%
n.a.
0.0%
n.a.
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
-7.4%
-7.4%
0
0
0
0
0
0
0
0
0
956 822
956 822
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1 031 296
3 996 272
0
1 539 248
5 964 585
0
2 570 544
9 960 857
0
1 031 296
4 963 112
0
7 928 088
0
0
0
0
1 289 120
2 964 976
4 425 337
7 390 313
2 642 696
67
none
100
none
167
none
67
2
12 891 199 19 240 596 32 131 795 12 891 199
8 894 928 13 276 011 22 170 939
0
0
0
12 891 199 19 240 596 32 131 795 13 848 022
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COLOMBIA 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
0.0%
-7.4%
0.0%
-7.4%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
-5.0%
-5.0%
0.0%
0.0%
-6.0%
-6.0%
0.0%
0.0%
-5.0%
-5.0%
0.0%
0.0%
0.0%
0.0%
956 822
956 822
0
1 913 645
1 913 645
0
1 913 645
1 913 645
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1 539 248
0
2 570 544
0
3 078 495
0
2 570 544
9 960 857
0
7 407 629 11 403 901 13 372 214
1 924 060
1 924 060
1 924 060
0
3 944 322
6 909 298
8 369 659
7 390 313
100-0
2
100-67
2
100-100
2
100-67
none
19 240 596 32 131 795 38 481 192 32 131 795
11 832 967 20 727 894 25 108 978 22 170 939
0
0
0
0
20 197 418 34 045 440 40 394 837 32 131 795
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256
Colombia’s national currency is the peso (COP). For 2021,
the average exchange rate was COP 3 734.94
to USD 1. That same year, the average worker in Colombia earned COP 19 240 596 (Secretariat estimate).
Taxes allowances and tax thresholds for the personal income tax system and upper earnings limits for
social security contributions are expressed in SMLMV and UVT units. These indicators take into account
the inflation rate. At December 31 of 2021, the following currency values applied to these units are:
Major revenue items
Social security contributions
Annual tax thresholds
Unit
Salario mínimo legal mensual vigente (SMLMV)
Unidad de Valor Tributario (UVT)
COP
908 526
36 308
USD
247.77
9.90
1. Personal income tax system
1.1. Central/federal government income taxes
1.1.1. Tax unit
Each family member declares and pays taxes separately.
1.1.2. Tax allowances and credits
1.1.2.1.
Standard tax reliefs
Relief for social security contributions:
Employee’s compulsory
social insurance contributions are
non-taxable or excluded income for income tax purposes regardless of whether they are paid to
government or private sector (See section 2.1 below).
25% of total employment payments, up to a monthly maximum exemption of 240 UVT (annual limit
of COP 104 567 040). Pursuant to the 2012 tax reform act, in determining the 25% exempt income,
the taxpayer must take into account its employment income, less the amount of excluded items,
allowed deductions, and other exempt items of income.
Dependent deduction, up to a limit that cannot exceed 10% of the employees’ monthly income, nor
the equivalent to 32 UVT (annual limit of COP 13 942 272).
1.1.2.2
Main non-standard tax reliefs
Voluntary contributions to pension funds and deposits in the so-called
“AFC” bank accounts,
1
made
on behalf of employees by their employers up to a limit that cannot exceed 30% of the employees’
annual income (taking into account the mandatory payments to the general system on pensions),
nor the equivalent to 3 800 UVT (COP 137 970 000). According to tax code, non-compulsory
employee´s contributions to voluntary pension funds are considered exempted items.
The Act 1607 of 2012 (tax reform) allows taxpayers to deduct of their taxable income each one of
the next items:
‒
‒
Interest paid within a year for mortgage loans, with a monthly limit of 100 UVT (annual limit of
COP 43 570 000).
Payments made for voluntary health insurance that cover to the employee, spouse and two
children or dependent people, up to a monthly limit of 16 UVT (annual limit of COP 6 971
000).
1.1.3. Tax schedule
Because Law 1943 of 2018 was deemed unconstitutional by the Constitutional Court at October 2019, at
the end of that year the Congress approved the Law 2010, which kept the income tax regime to individuals
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in the same way as it was established in the previous tax reform. This tax regime split the individual’s
income
in three “baskets”: a general basket, that covers labor, capital and non-labor
income; a pension
basket, and a dividends basket.
The income
received by employees is reported in the general “basket”. The taxable income assessed
under this basket is the result of summing all earnings realized during the taxable year, minus: (a) all
excluded items (refunds, reductions, discounts, and earnings not considered taxable items of income), (b)
all allowed deductions (costs, expenses, and other deductions), and (c) all exempt items.
This system keeps the top introduced by Law 1819 of 2016 but now in the general basket, in which the
sum of allowed deductions and exempt items should be lower than COP 182 992 320 (5 040 UVT) or 40%
of the taxable income (earnings minus excluded items). However, the legislation allows the recognition of
costs and expenses related with capital and non-labor income that comply with the requirements for their
use into the assessment of the taxable base.
Regarding on the income tax rate, individuals must sum the taxable income that comes from the general
basket and the one comes from the pension basket. The income tax rate that applies to this final amount
is as provided in the table below:
Taxable income (UVT)
Lower limit
0
> 1 090
> 1 700
> 4 100
> 8 670
> 18 970
> 31 000
Taxable income (COP)
Lower limit
0
39 576 000
61 724 000
148 863 000
314 790 000
688 763 000
1 125 548 000
Marginal rate
UVT
0%
19%
28%
33%
35%
37%
39%
0
0
116
788
2 296
5 901
10 352
Fixed quota
COP
0
0
4 212 000
28 611 000
83 363 000
214 254 000
375 860 000
Upper limit
1 090
1 700
4 100
8 670
18 970
31 000
and over
Upper limit
39 576 000
61 724 000
148 863 000
314 790 000
688 763 000
1 125 548 000
and over
1.2. State and local income taxes
No taxes apply to income at state or local government level.
2. Compulsory social security contributions to schemes operated within the
government sector
The social security system in Colombia comprises three regimes: the general system on pensions
(“sistema general de pensiones”), the general social security system on healthcare (“sistema general de
seguridad social en salud”), and the general system on employment risks (“sistema general de riesgos
laborales”). The first two operate within the government sector.
The general social security system on healthcare, is financed by public and private funds. The private
funds belong essentially to the resources of contributions- contributive regime, which are paid by
employers and employees, as well as independent workers, retired persons, and copayments of affiliates
at the time of receiving healthcare services. The tax reform of 2016 eliminates the Pro Equity Income
Tax
–
CREE, that had a specific destination for healthcare and was another source of resources.
2
However, 9 points of the CIT rate will have a specific destination that replaced both two payroll contributions
and the portion of the mandatory contribution made by the employer to the healthcare system, regarding
on their employees whose individual earnings up to 10 SMLMV. For the rest of the companies, and for all
of the employees, the total contributions are 12.5% of the monthly wage, of which 8.5% is paid by
employers on behalf of their employees whose monthly earnings above 10 SMLMV and 4% by employees.
In the case of independent workers, the contribution is also 12.5% but the contribution base is 40% of the
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monthly income. Although the contributions to the contributive regime are mandatory, theyare not classified
as taxes but as a NTCP since more than 50% goes to private sector.
The Colombian pension system is a hybrid of two different systems, a defined-contribution and fully-funded
pension system and a pay-as-you-go system. The contribution rate is mandatory and the same for both
systems. The contributions are 16% of the monthly wage, which are paid 12% by employers and 4% by
employees. When the monthly wage is over 4 SMMLV the employee pays an additional rate that goes
from 1% up to 2% to Solidarity Fund. Workers can choose between both systems and can switch every 5
years until 10 years before mandatory retirement age. Although these contributions are mandatory, they
are not classified as taxes but as a NTCP since more than 50% goes to private sector.
The minimum and maximum base for compulsory contributions is 1 and 25 SMLMV (COP 908 526 and
COP 22 713 150) respectively. Voluntary contributions can be made to the general system on pensions,
and individuals are free to make contributions to a public or to a private pension fund of their choice.
Social security contributions
Pensions
Solidarity Fund
Health
Employment Risks
Base of contribution
Earnings or employment income
Earnings or employment income
Earnings or employment income
Employment income
Rate
16.0%
1.0 – 2.0%
4.0% or 12.5%
0.348% - 8.7%
2.1.
Employees’ contributions
For pensions, 4.0%
of the employee’s monthly earnings, plus a certain percentage between 1.0%
and 2.0% of the amount over 4 SMLMV (over COP 3 634 104).
The last is named “contributions to
the Solidarity Fund”.
For health, 4.0%
of the employee’s monthly earnings.
After the Act 1819 of 2016, both,
the employee’s contributions to pensions and health
are included
in the model as non-taxable income for income tax in the Colombian legislation.
2.2.
Employers’ contributions
For pensions, 12.0%
of the employee’s monthly earnings.
For health, 8.5%
of the employee’s monthly earnings if individual earnings above
10 SMLMV.
Otherwise, 0%
of the employee’s monthly earnings.
Payments for employment risks are mandatory only in respect of employment and are the sole
responsibility of the employer; the rate of this contribution ranges between 0.348% and 8.7%,
depending on the activity. A representative rate of 0.522% is used in the Taxing Wages
calculations.
3. Universal cash transfers
3.1. Marital status-related transfers
None.
3.2. Transfers related to dependent children
The “Family Subsidy” is paid on a monthly basis to an employee
that works monthly at least 96 hours and
receives monthly employment
payments that don’t excess
COP 3 634 104 (4 SMLMV). It is assessed on
both principal and spouse when they are working at the same time and one of the requirements to receive
this subsidy is that the sum of their gross earnings does not exceed COP 5 451 156 (6 SMLMV). The
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definition of dependents includes children, stepchildren, orphaned brothers and sisters, and parents over
60 years old, all of them economically dependent on the worker.
The amount of the payment is a constant value during the year; it does not have limit related with the
number of beneficiaries and it differs between the regions of the country. The annual average Family
Allowance or Subsidy to 2021 was COP 478 411 for one beneficiary.
4. Main Changes in Tax/Benefit Systems Since 2019
4.1. Changes to labour taxation due to the COVID pandemic in 2020 and 2021
Through Decree 558 of 2020, the Government reduced the pension contribution rate, from 16% to 3%,
decreasing the payment of both employers and employees for the contributions in April and May 2020, but
this Decree was deemed unconstitutional by the Constitutional Court in July 2020. This decision means
the full payment of the pension contribution at the normal rate for those months at a later time.
5. Memorandum items
5.1. Identification of an average worker and calculation of earnings
The source of information is The Great Integrated Household Survey conducted by the National
Administrative Department of Statistics (DANE) with the intention of gathering information about
employment conditions of people as well as about the general characteristics of the population.
This nationwide survey is carried out on a monthly sample.
The average gross earnings were obtained by multiplying the average hourly wage by the average
number of hours worked, according to the quarterly reports and expresses in a monthly frequency.
It covers full time workers (taking into account a person who works 40 hours or more in her/his
main job in a week).
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2021 Parameter values
Average earnings/yr
Allowances
Ave_earn
Basic_al
Depend_child
Exempt_labor_income_limit
Upper_limit_Ex_and_ded
Tax_sch
19 240 596
0
13 942 272
104 567 040
182 992 320
0
0.19
0.28
0.33
0.35
0.37
0.39
478 411
43 609 248
65 413 872
0.08
0.00
10 902 312
0.00
0.01
0.012
0.014
0.016
0.018
0.02
272 557 800
Secretariat estimate
Income tax
39 576 000
61 724 000
148 863 000
314 790 000
688 763 000
1 125 548 000
And more
4 212 000
28 611 000
83 363 000
214 524 000
375 860 000
Family allowance
Child element
CTR_child
CTR_child_limit1
CTR_child_limit2
NTC_hlth_pens
Low_limit_Income_NTC_hlth_pens
NTC_solid_fund
Non-tax compulsory payments
Health-pensions Employee
272 557 800
43 609 248
174 436 991
185 339 304
196 241 616
207 143 928
218 046 240
Upper_limit_Income_NTC_solid_fund
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2021 Tax equations
The equations for the Colombian system are mostly on an individual basis. But the Family Allowance is
assessed on both principal and spouse when they are working at the same time and the sum of their gross
earnings doesn’t exceed the limit to receive this subsidy, and otherwise on the principal's earnings. This
is shown by the Range indicator in the table below.
The functions which are used in the equations (Taper, MIN, Tax etc) are described in the technical note
about tax equations. Variable names are defined in the table of parameters above, within the equations
table,
or are the standard variables “married” and “children”. A reference to a variable with the affix “_total”
indicates the sum of the relevant variable values for the principal and spouse. And the affixes “_princ” and
“_spouse” indicate the value for the
principal and spouse, respectively. Equations for a single person are
as shown for the principal, with “_spouse” values taken as 0.
Line in country table and
intermediate steps
1. Earnings
2. Total reliefs:
Dependent Children
Exempt Labor Income
Variable name
earn
total_rel
dependent children
exempt labor income
Range
Equation
B
P/S
B
Allowed Allowances
tax_allow
B
Non taxable income NTCP
non_taxable_income
B
3. Credits in taxable income
4. CG taxable income
5. CG tax before credits
6. Tax credits
7. CG tax
8. State and local taxes
9. Employees' soc security
11. Cash transfer
taxbl_cr
tax_inc
CG_tax_excl
tax_cr
CG_tax
local_tax
SSC
cash_trans
B
B
B
B
B
B
B
J
12. Employer's soc security
SSC_empr
B
tax_allow + non_taxable_income
IF(earn_princ>=earn_spouse;IF((earn_princ*0,1)>depend_child;de
pend_child;earn_princ*0,1)*(IF(children>0;1;0));0))
IF((positive(earn_princ-(non taxable income ntcp+dependent
children))*0,25)>exempt_labor_income_limit;exempt_labor_income
_limit;(positive(earn_princ-(non taxable income ntcp+dependent
children))*0,25))
IF((40%*(earn_princ-non taxable income
ntcp))>='upper_limit_ex_and_ded;' IF((dependent children+exempt
labor
income)>='upper_limit_ex_and_ded;upper_limit_ex_and_ded;'
(dependent children+exempt labor income)); IF((dependent
children+exempt labor income)>(40%*(earn_princ-non taxable
income ntcp));40%*(earn_princ-non taxable income
ntcp);(dependent children+exempt labor income)))
IF(earn_princ<low_limit_income_ntc_hlth_pens;0;tax(earn_princ;nt
c_hlth_pens))+(IF(earn_princ>upper_limit_income_ntc_solid_fund;(
upper_limit_income_ntc_solid_fund*ntc_solid_fund_r6);IF(earn_pri
nc>ntc_solid_fund_w5;(earn_princ*ntc_solid_fund_r6);IF(earn_prin
c>ntc_solid_fund_w4;(earn_princ*ntc_solid_fund_r5);IF(earn_princ
>ntc_solid_fund_w3;(earn_princ*ntc_solid_fund_r4);IF(earn_princ>
ntc_solid_fund_w2;(earn_princ*ntc_solid_fund_r3);IF(earn_princ>nt
c_solid_fund_w1;(earn_princ*ntc_solid_fund_r2);IF(earn_princ>ntc
_solid_fund_w0;(earn_princ*ntc_solid_fund_r1);(earn_princ*ntc_sol
id_fund_r0)))))))))
0
Positive(earn_princ- Total reliefs+ cred_tx_inc)
Tax(tax_inc, tax_sch)
0
Positive(CG tax before credits- tax_cr)
0
n.a.
IF(children=0;0;IF(earn_spouse>0;IF((earn_princ+earn_spouse)>ct
r_child_limit2;0;IF((earn_princ+earn_spouse)>=ctr_child_limit1;ctr_
child*children;IF((earn_princ+earn_spouse)>0;ctr_child*children*2))
);IF(earn_princ>ctr_child_limit1;0;ctr_child*children)))
n.a.
Key to range of equation B calculated separately for both principal earner and spouse; P/S calculated for principal or spouse only (value taken
as 0 for the other earner calculation); J calculated once only on a joint basis. T calculated on a joint basis when both principal and spouse are
workers, and otherwise on the principal's earnings.
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Notes
1
The so-called
“AFC” bank accounts (“cuentas
de ahorro para el fomento a la construcción - AFC”)
are
savings bank accounts specially provided for the acquisition of real estate property, so the funds
deposited in such accounts can only be used for the acquisition of the aforementioned property.
The 2012 tax reform act introduced this new tax to alleviate the costs of hiring formal labour incurred by
private employers. These companies had to be taxpayers into the income tax in order to access to this
benefit. In particular, both the companies inside the free trade zones regime and the non-profit entities
had to follow with the contribution to the healthcare system, regardless of the earnings of their employees.
2
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Costa Rica
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in the
tax/benefit system. The methodology also includes the parameter values and
tax equations underlying the data.
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Costa Rica 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
10.5%
n.a.
29.2%
n.a.
10.5%
n.a.
29.2%
n.a.
19.7%
n.a.
36.5%
n.a.
10.5%
n.a.
29.2%
n.a.
0.0%
10.5%
10.5%
29.2%
0.0%
10.5%
10.5%
29.2%
2.3%
10.5%
12.8%
31.0%
0.0%
10.5%
10.5%
29.2%
0
0
5 253 787
1 555 591
0
0
2 321 777
0
0
3 877 368
0
0
5 253 787
1 555 591
616 366
616 366
919 949
919 949
1 536 315
1 868 813
616 366
616 366
616 366
919 949
1 536 315
616 366
0
0
0
0
0
0
0
332 498
0
37 680
0
0
0
0
0
0
0
0
0
0
0
0
0
37 680
482 478
482 478
0
5 387 675
0
720 117
720 117
0
1 202 595
1 202 595
0
482 478
482 478
0
5 387 675
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
67
none
5 870 153
100
none
167
none
67
2
5 870 153
8 761 423 14 631 576
8 041 306 13 428 980
0
332 498
7 841 473 12 762 762
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Costa Rica 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
10.5%
10.5%
29.2%
29.2%
10.5%
10.5%
29.2%
29.2%
10.5%
10.5%
29.2%
29.2%
10.5%
10.5%
29.2%
29.2%
0.0%
10.5%
10.5%
29.2%
0.0%
10.5%
10.5%
29.2%
0.0%
10.5%
10.5%
29.2%
0.0%
10.5%
10.5%
29.2%
0
0
2 321 777
0
0
3 877 368
0
0
4 643 554
0
0
3 877 368
919 949
919 949
1 536 315
1 536 315
1 839 899
1 839 899
1 536 315
1 536 315
919 949
1 536 315
1 839 899
1 536 315
66 120
0
0
66 120
0
0
66 120
0
0
28 440
0
0
0
28 440
37 680
0
28 440
37 680
0
28 440
37 680
0
28 440
0
720 117
720 117
0
1 202 595
1 202 595
0
1 440 234
1 440 234
0
1 202 595
1 202 595
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
100-0
2
100-67
2
100-100
2
100-67
none
8 761 423 14 631 576 17 522 845 14 631 576
8 041 306 13 428 980 16 082 611 13 428 980
0
0
0
0
7 841 473 13 095 260 15 682 946 13 095 260
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The national currency is the Costa Rican colon. In 2021, in average the CRC 621.86 equalled a 1 US
dollar. The average worker earned CRC 8.761.423 on an annual basis.
1. Personal income tax system
The fiscal year begins on January 1
st
and ends the following December 31
th
.
1.1. Central government income tax
The Costa Rica Income tax is applied to the income in cash or in kind, continuous or occasional, from any
Costa Rican source perceived or accrued by individuals or legal entities domiciled in the country;
Costa Rica's labor legislation provides for payment of an additional salary or "bonus" paid in December of
each year, the benefit is determined on the monthly average wage of the worker's other concepts be paid
as overtime. This concept is not subject to social security contributions and is not taxed on the income tax.
Exempt income:
The most noteworthy types of exempt income include:
Inheritances, bequests and other forms of inherited property.
Lottery prizes
The annual bonus paid up one twelfth of the annual income.
1.1.1. Tax unit
Domestic natural persons who receive income of Costa Rican source, whether or not they have resided in
the country during the respective fiscal period. Resident individuals are also subject to social security
contributions to the Costa Rican Social Security Fund (CCSS) and fees to the Popular Bank.
1.1.2. Tax allowances and tax credits
1.1.2.1. Standard tax allowances and tax credits
CRC 18.840 for each children in the household.
CRC 28.440 for the spouse, which can only be claimed by one of the spouses.
Those tax credits are wastable.
1.1.2.2. Main non-standard tax allowances and tax credits
None.
1.1.3. Tax schedule
The annual income tax schedule is determined on the taxable income according to the following schedule
for 2021:
From
0
CRC 10.104.000
CRC 14.832.000
CRC 26.028.000
CRC 52.044.000
Up to
CRC 10.104.000
CRC 14.832.000
CRC 26.028.000
CRC 52.044.000
Onwards
Rate
0%
10%
15%
20%
25%
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1.2. State and local taxes
No state or local taxes are levied on wages.
2. Compulsory social security contributions to schemes operated within the
government sector
2.1. Employee contributions
Program
Oldage, disability and death program (IVM)
Healthcare and Maternity Insurance (SEM)
Popular Bank Fee
Rate (%)
4.00
5.50
1.00
2.2. Employer contributions
Employers are required to contribute to the following public programs.
Program
Oldage, disability and death program (IVM)
Healthcare and Maternity Insurance (SEM)
Popular Bank Fee
Unemployment insurance
Family allowances
Complementary pensions
Learning National Institute (INA)
Joint Institute for Social Aid (IMAS)
Rate %
5.25
9.25
0.50
3.00
5.00
1.50
1.50
0.50
3. Universal cash transfers
3.1. Marital status-related transfers
None.
3.2. Transfers related to dependent children
None.
4. Recent changes in the tax/benefit system
4.1. Changes to labour taxation due to the COVID pandemic in 2020 and 2021
None.
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5. Memorandum items
5.1. Identification of an average worker
The average worker’s wage was calculated according to the official data of the
CCSS that represents the
official salaries of the formal sector.
2021 Parameter values
Average earnings/yr
Allowances
Basic_al
Spouse_al
Child_al
T_days
Bonus
Income tax
Tax_sch
0
0
0
365
30
0.00
0.10
0.15
0.20
0.25
18,840
28,440
0.0400
0.0550
0.0100
0.1050
3,814,980
0.0525
0.0925
0.0050
0.0300
0.0500
0.0150
0.0150
0.0050
0.2650
10,104,000
14,832,000
26,028,000
52,044,000
Ave_earn
8 761 423
Country estimate
Tax credits
Tax_cr_ch
Tax_cr_sp
SSC_IVM_ee
SSC_SEM_ee
SSC_PBF_ee
SSC_total_ee
Min_wage
Employees SSC
Employers SSC
SSC_IVM_er
SSC_SEM_er
SSC_PBF_er
SSC_ump_er
SSC_fam_er
SSC_com_pen_er
SSC_INA_er
SSC_IMAS_er
SSC_total_er
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269
2021 Tax equations
The functions which are used in the equations (Taper, MIN, Tax etc) are described in the technical note
about tax equations. Variable names are defined in the table of parameters above, within the equations
table, or are the standard variables “married” and “children”. A reference to a variable with the affix “_total”
indicates the sum of the relevant variable values for the principal and spouse. And the affixes “_princ” and
“_spouse” indicate the value for the principal and spouse, respectively. Equations
for a single person are
as shown for the principal, with “_spouse” values taken as 0.
Line in country table
and intermediate steps
Variable name
Range
Equation
1.
2.
3.
4.
5.
6.
7.
8.
9.
11.
13.
Earnings
Allowances:
Credits in taxable income
CG taxable income
CG tax before credits
Tax credits :
CG tax
State and local taxes
Employees' soc security
Cash transfers
Employer's soc security
earn
Tax_al
taxbl_cr
tax_inc
CG_tax_excl
tax_cr
CG_tax
local_tax
SSC
cash_trans
SSC_empr
B
B
B
P
B
B
B
MIN(earn/12,earn/T_days*Bonus)
-
Positive(earn-tax_al)
Tax(tax_inc,tax_sch)
IF(Married=1,Tax_cr_sp,0)+ Tax_cr_ch*Children
Positive(CG_tax_excl-tax_cr)
-
MAX(Min_wage,earn)*SSC_total_ee
-
MAX(Min_wage,earn)*SSC_total_er
Key to range of equation B calculated separately for both principal earner and spouse P calculated for principal only (value taken as 0 for spouse
calculation) J calculated once only on a joint basis.
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Czech Republic
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in the
tax/benefit system. The methodology also includes the parameter values and
tax equations underlying the data.
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Czech Republic 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3 + 13)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
26.0%
n.a.
44.7%
n.a.
26.0%
n.a.
44.7%
n.a.
26.0%
n.a.
44.7%
n.a.
26.0%
n.a.
44.7%
n.a.
5.5%
11.0%
16.5%
37.6%
8.6%
11.0%
19.6%
39.9%
11.2%
11.0%
22.2%
41.8%
-12.6%
11.0%
-12.1%
16.2%
0
0
243 668
98 581
0
0
349 971
147 135
0
0
565 799
245 716
30 480
30 480
326 872
98 581
32 083
47 991
47 884
85 341
79 967
161 173
32 083
- 4 733
32 083
47 884
79 967
32 083
27 840
27 840
15 909
0
27 840
27 840
37 457
0
27 840
27 840
81 206
0
80 564
80 564
- 36 815
0
0
0
291 659
43 749
0
0
435 312
65 297
0
0
726 971
109 046
0
0
291 659
43 749
67
none
291 659
100
none
435 312
167
none
726 971
67
2
291 659
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Czech Republic 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3 + 13)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
11.0%
25.1%
33.5%
44.0%
26.0%
26.0%
44.7%
44.7%
26.0%
26.0%
44.7%
44.7%
26.0%
26.0%
44.7%
44.7%
-8.6%
11.0%
-4.6%
21.8%
0.5%
11.0%
7.3%
30.7%
2.9%
11.0%
10.4%
33.0%
7.8%
11.0%
18.8%
39.3%
30 480
30 480
455 432
147 135
30 480
30 480
673 843
245 716
30 480
30 480
780 146
294 271
0
0
590 639
245 716
47 884
10 360
79 967
83 609
95 769
120 958
79 967
136 333
47 884
79 967
95 769
79 967
105 404
105 404
- 37 524
0
80 564
80 564
3 642
0
80 564
80 564
25 190
0
27 840
27 840
56 366
0
0
0
435 312
65 297
0
0
726 971
109 046
0
0
870 624
130 594
0
0
726 971
109 046
100-0
2
435 312
100-67
2
726 971
100-100
2
870 624
100-67
none
726 971
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273
The national currency is the Czech koruna (CZK). In 2021, CZK 21.6 were equal to USD 1. In that year,
the average worker earned CZK 435 312 (Secretariat estimate).
1. Personal Income Tax System
1.1. Central government income taxes
1.1.1. Tax unit
The tax unit is the individual.
1.1.2. Tax allowances and tax credits
1.1.2.1. Standard reliefs
Relief for social and health security contributions. Employees' social security contributions (see
Section 2.1.) are not deductible for income tax purposes.
1.1.2.2. Main non-standard tax reliefs applicable to an AW
Charitable donations allowance: A tax allowance of up to 10% of taxable income is available for
donations made to municipalities or legal entities for the financing of social, health, cultural,
humanitarian, religious, ecological and sport activities. The minimum limit for donations is the lesser
of 2% of taxable income or CZK 1 000. A similar procedure shall apply for gratuitous performance
to finance the removal of the consequences of a natural disaster occurring in the territory of an EU
Member State, Norway or Iceland. The total deduction may not exceed 15% of the tax base. As
gratuitous performance for healthcare purposes, the value of one blood donation from an unpaid
donor is valued at a sum of CZK 2 000 and the value of an organ donation from a living donor is
valued at a sum of CZK 20 000.
Interest payments: Taxpayers may claim an allowance of up to CZK 150 000 for mortgage interest
payments or other interest payments related to the purchase or the improvement of their house.
The total sum of interest by which the tax base is reduced on all credits of payers in the same
jointly managed household must not exceed CZK 150 000.
Supplementary pension scheme contributions: In a period of taxation, the tax base may be reduced
by a contribution, in the maximum total amount of CZK 24 000, paid by a taxpayer to their
supplementary pension insurance with a State contribution under a contract on supplementary
pension insurance with a State contribution entered into between the payer and a pension
company; the sum that may be deducted in this manner equals the total amount of contributions
paid by the payer for their supplementary pension insurance with a State contribution in the period
of taxation, reduced by CZK 24 000.
Private life insurance premiums: Taxpayers may claim an allowance of up to CZK 24 000 for
premiums paid according to a contract between the taxpayer and an insurance company if the
benefit (lump sum or recurrent pension) is paid out 60 months after the signature of the contract
and in the year in which the taxpayer reaches the age of 60.
1.1.2.3. Tax schedule
Since 2008, the Czech Republic has used a concept of the so-called 'super-gross salary' in determining
the personal income tax (PIT) base from employment income. As of 1 January 2021, the Czech Republic
is abandoning this concept of the super-gross salary. Instead, the tax base is now determined based on
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274
gross income only. For the period 2008-2020, the tax base, reduced by the non-taxable part of the tax
base (see 1.1.2.2. - Main non-standard tax reliefs), rounded down to whole hundreds of CZK was subject
to tax at the rate of 15%.
As of 2021, the Czech Republic returns to progressive taxation, with the introduction of marginal rate of
23 %, as follows:
Gross income up to the social security payment cap (the threshold for 2021 is CZK 1 701 168
–
the
48 times the average wage for that year) will be subject to a 15% rate
Gross income exceeding CZK 1 701 168 will be subject to a rate of 23%
As the progressive tax rate will be applicable to all types of income, some passive income, like capital
gains or rental income (combined with employment income), may incur a higher tax burden. However, for
most individuals with employment income only, this change will lead to effective lower employment
taxation.
After that, tax credits (see 1.1.2.4.) can be used to directly reduce a person´s tax liability.
1.1.2.4. Tax credits
Credit of CZK 27 840 per taxpayer.
Credit of CZK 24 840 per spouse (husband or wife) living with a taxpayer in a common household
provided that the spouse’s own income does not exceed CZK
68 000 in the taxable period.
Credit of CZK 15 204 for first child, credit of CZK 22 320for second child, credit of CZK 27 840 for
third and each additional child (irrespective of the child’s own income) living with a taxpayer in a
common household on the territory of a Member State of the EU, Norway or Iceland, if the child
satisfies one or more of the following criteria (in force since July 1, however, with retroactive effect
from January 1):
‒
‒
‒
age below 18 year of age,
age below 26 year of age and receiving full-time education,
age below 26 year of age and physically or mentally disabled provided that the child is
not in receipt of a state disability payment
If the child is a “ZTP-P” card holder (the child with a certain type of disabilities), the tax
credit is doubled. The taxpayer can claim the tax credit in the form of tax reliefs or tax
bonuses or their combination.
Credit of CZK 2 520 if the taxpayer is in receipt of a partial disability pension or is entitled to both
an old-age pension and a partial disability pension
Credit of CZK 5 040 if the taxpayer is in receipt of a full disability pension, or another type of pension
conditional on his full disability pension, or if the taxpayer is entitled to both old-age pension and
full disability pension or deemed to be fully disabled under statutory provisions, but his application
for a full disability pension was rejected for reasons other than that he was not fully disabled
(handicapped).
Credit of CZK 16 140 if the taxpayer is a “ZTP-P” card holder.
Credit of CZK 4 020 if the taxpayer takes part in a systematic educational or training programme
under statutory provisions in order to prepare for his future vocation (profession) by means of such
studies or prescribed training until completion of his/her 26 or 28 years (Ph.D. programme).
The annual tax credit for placing a child into a preschool child care institution in the amount of the
expenditure proven to be incurred for attending the preschool, up to the amount of the minimum
wage for each placed child (for the year 2021: MW CZK 15 200)
The non-standard tax are not included in the tax equations underlying the Taxing Wages results.
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1.2. State and local income tax
There are no regional or local income taxes.
2. Compulsory Social Security Contributions to Schemes Operated within the
Government Sector
The maximum annual earnings used to calculate social security contributions are 48 times the national
average monthly wage. The maximum ceiling for social security contributions is CZK 1 701 168 for the
year 2021. The maximum ceiling for health insurance has not existed since 2013.
2.1.
Employees’ contributions
Compulsory contributions of 11% of gross wages and salaries are paid by all employees into government
operated schemes. The total is made up as follows (in %):
Health insurance
Social insurance
4.5
6.5
2.2.
Employers’ contributions
The total contribution for employers is 33.8% of gross earnings.
The contribution consists of the health insurance contribution (9% of gross wages and salaries) and social
insurance (24.8 %).
3. Universal Cash Transfers
3.1. Transfers related to marital status
None.
3.2. Transfers for dependent children
Non-taxable child allowances are the basic income-tested benefit provided to a dependent child with the
objective to contribute to the coverage of costs incurred in his upbringing and sustenance. Entitlement to
the child allowance is bound with certain income criteria. The central government pays this allowance in
respect of each dependent child based on the family income level and provided that family’s income does
not exceed 3.4 times the relevant family’s living minimum (LM) and simultaneously fulfils the
minimum
income condition of CZK 3860/monthly/one of parents. Family income includes the earnings of both
parents net of income tax and the employees’ social security and health insurance contributions. Child
allowances are provided at three levels depending on the age of the child and are paid as follows:
Family Income
Age of child
below 6 year of age
6–15 years
15–26 years
up to 3.4 LM
Total payment CZK per month
1 130
1 270
1 380
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The monthly family’s LM for the AW-type
family with children can be calculated by summing the following
amounts (in CZK):
Living minimum
Basic personal requirement
Single
First person in household
Second and other persons who are not a dependent child
Child aged below 6
Child aged between 6 and 15
Child aged between 15 and 26
3 860
3 550
3 200
1 970
2 420
2 770
3 860
6750
8 720
11 140
13 910
Household expenses
One person household
Two person household
Three person household
Four person household
Five person household
The LM is required by law. In case that family income (income of persons assessed together) is not
achieved, the amount of family’s LM can be put in a request for state social support (housing benefit, family
benefits, social assistance and other). The system applies the solidarity principle between the high-income
families and low-income families, as well as between the childless families and those with children.
The term “social allowance” was abolished from 1 January 2012. However, this fact has no effect on the
tax-benefit system for low-income families. The system of personalized payment was simplified and
extended. For examples, in case of loss of income (social allowance) some people may put in a request
for increase care allowance up to CZK 2 000. This allowance is addressed for recipients who are
dependent children below 18 years of age and parent of dependent children below 18 years of age if the
income of the family is under 2.0 family’s living minimum. Protection in the housing sector is also addressed
in the context of state social support system (housing allowances-benefit) and the system of assistance in
material need as additional housing. Also foster care benefits create a separate benefit system; since 1
January 2013 they have ceased to be a component of the state social support system. These allowances
(housing, care and foster care) are not included in the Taxing Wages models.
3.3. Additional transfers
Additional allowances (means-tested benefits in material need) are paid by the central government to low
income families in adverse social and financial situation. The amount transferred is derived from the LM
and varies according to total family income including family allowances and own efforts, opportunities and
needs are taken into account. This allowance is not included in the computation.
4. Main Changes in Tax/Benefit Systems since 2021
In 2018, there were two changes that have a significant effect on the current calculation of Taxing Wages.
List of main changes that have impact on the current computation of Taxing Wages:
Abolition of the super gross wage concept
Basic tax rate of 15% for gross income up to CZK 1.7 million annually remains
Marginal rate of 23% for income over CZK 1.7 million annually was introduced
Increasing the tax credit for the taxpayer from CZK 24 840 to CZK 27 840 (see chapter 1.1.2.4)
Increasing the tax credit for the second child from CZK 19 404 to CZK 22 320 (see chapter 1.1.2.4)
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Increasing the tax credit for the third and each additional child from CZK 24 204 to CZK 27 840
(see chapter 1.1.2.4)
The tax credit can be applied in the amount of the expenditure prove to be incurred for attending
the preschool, up to the amount of the minimum wage for each child increased to CZK 15 200 for
the year 2021. The tax authority only verifies the name of a preschool childcare institution on the
list approved by the MEYS. The age of the child does not effect on the entitlement to the tax credit
for pre-school children. The children in preschool institutions are normally between 2 and 5 years
old, but postponement of school attendance is possible. Introduction of this relief is a part of the
Act on provision of childcare in a child society and also the Act on Maternal, Basic, High, Higher
Professional, and other Education (see chapter 1.1.2.4.)
Increasing the child benefit from CZK 900 to CZK 1 270 (see chapter 3.2)
Increase in the proportion of social benefits paid in relation to the minimum living standards
–
from
2.7 to 3.4 (see chapter 3.2)
4.1. Changes to labour taxation due to the COVID pandemic in 2020 and 2021
No changes
5. Memorandum Items
5.1. Identification of AW and valuation of earnings
The Ministry of Finance estimates the average earnings of the AW based on the data supplied by the
Czech Statistical Office. The calculation of the average earnings is made by CZ-NACE division, which is
compatible with ISIC classifications Ver. 4.
5.2. Employers' contributions to private pension, health and related schemes
There are supplementary private pension schemes only, but employers ‘contributions vary. Relevant
information is not available.
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2021 Parameter values
Ave_earn
Income tax rate - base
Income tax rate – second bracket
Social security – social insurance
Social security – health insurance
Employers - social insurance
Employers - health insurance
Child Tax credit - first child
- second child
- third child
Tax credit for individuals
Tax credit for spouse
Tax credit for spouse income ceiling
Living minimum (LM)
basic_adult
basic_household
basic_child
house_exp
3 860
6 750
2 420
1
2
3
4
5
1 270
1 701 168
15 200
tax_rate_base
Tax_rate_secbracket
SSs_rate
SSh_rate
SSs_empr_rate
SSh_empr_rate
child_cr_1
child_cr_2
child_cr_3
tax_cr_base
tax_cr_spo
Tax_cr_spo_inc_ceil
435 312
0.15
0.23
0.065
0.045
0.248
0.09
15 204
22 320
27 840
27 840
24 840
68 000
Secretariat’s estimate
3 860
6 750
8 720
11 140
13 910
Cash transfers
Social security, social insurance - ceiling
Minimum Wage
transf_1
soc_sec_si_ceil
tax_cr_preschool
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2021 Tax equations
The equations for the Czech system are on an individual basis. But the spouse tax credit is relevant only
to the calculation for the principal earner and cash transfers are calculated only once. This is shown by the
Range indicator in the table below.
The functions which are used in the equations (Taper, MIN, Tax etc) are described in the technical note
about tax equations. Variable names are defined in the table of parameters above, within the equations
table, or are the standard variables “married” and “children”. A reference to a variable with the affix “_total”
indicates the sum of the relevant variable values for the principal and spouse. And the affixes “_princ” and
“_spouse” indicate the value for the principal and spouse, respectively. Equations
for a single person are
as shown for the principal, with “_spouse” values taken as 0.
Variable name
1.
2a
2b
Earnings
CG taxable income base
CG taxable income second
bracket
CG tax before credits
CG tax before credits
principal
Tax credits:
Tax credit for children
earn
tax_inc_princ_base
Tax_inc_princ_sec
Range
B
B
B
Equation
IF(earn<soc_se_si_ceil;earn;IF(earn>soc_se_si_ceil;soc_sec_si_ceil))
IF(earn>soc_se_si_ceil;earn-soc_se_si_ceil;0)
CG_tax_excl_princ
B
Tax(tax_inc_princ_base,
tax_rate_base)+Tax(tax_inc_princ_se,tax_rate_sec)
If (number of children>3; (number of children -
3)*child_cr_3+child_cr_1+child_cr_2+child_cr_3; If (number of
children>2;child_cr_1 +child_cr_2 + child_cr_3; If (number of
children>1;child_cr_1+child_cr_2; If (number of children=0;0)))))
tax_cr_preschool*positive(children-1)
tax_cr_bas
Married*tax_cr_spo
Max(CG_tax_excl_princ - tax_cr_bas_princ - tax_cr_spo-tax_cr-
preschool , 0 ) - tax_cr_ch
0
MIN(earn,soc_sec_si__ceil)*SSs_rate
earn*SSh_rate
earn_total-CG_tax_total-SSC_total
(1-Married)*basic_adult+Married*basic_household
+Children*basic_child+ VLOOKUP((1+Married+Children), house_exp, 2,
FALSE)
Children*IF(net_inc<='(3,4)*LM*12,' transf_1*12)
MIN(earn,soc_sec_sir_ceil)*SSs_empr_rate
earn*SSh_empr_rate
4.
tax_cr_ch
P
5.
Tax preschool credit
Basic tax credit
Tax credit for spouse
CG tax
CG tax principal
State and local taxes
Employees' social security
Cash transfers
Net family income
Living minimum (monthly)
Tax_cr_preschool
tax_cr_bas
tax_cr_spouse
CG_tax_princ
local_tax
SSs
SSh
net_inc
LM
B
B
P
B
B
B
B
J
J
6.
7.
8.
9.
10.
11.
Total cash transfers
Employer's social security
cash_trans
SSs_empr
SSh_empr
J
B
B
Key to range of equation: B calculated separately for both principal earner and spouse; P calculated for principal only (value taken as 0 for
spouse calculation); J calculated once only on a joint basis.
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Denmark
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in the
tax/benefit system. The methodology also includes the parameter values and
tax equations underlying the data.
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Denmark 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
Tax credits or cash transfers included in taxable income
Earnings tax credit deduction
Total
4.
5.
6.
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Green check
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
38.7%
n.a.
38.7%
n.a.
41.7%
n.a.
41.7%
n.a.
55.5%
n.a.
55.5%
n.a.
36.9%
n.a.
36.9%
n.a.
32.8%
0.0%
32.7%
32.7%
35.5%
0.0%
35.4%
35.4%
41.1%
0.0%
41.1%
41.1%
31.0%
0.0%
5.3%
5.3%
0
525
525
206 492
0
0
525
525
295 469
0
0
0
0
449 992
0
78 144
765
78 909
290 314
0
0
100 633
0
162 669
0
314 222
0
95 196
0
0
0
0
7 548
51 083
49 551
8 165
79 343
83 326
9 418
160 463
153 759
7 548
51 083
44 113
7 548
8 165
9 418
7 548
24 528
0
36 931
- 36 931
245 141
34 103
36 609
0
40 600
- 40 600
380 404
50 899
61 137
0
40 600
- 40 600
662 477
108 743
24 528
0
58 707
- 58 707
223 366
34 103
24 528
0
36 609
0
61 137
0
24 528
0
67
none
306 601
100
none
457 613
167
none
764 214
67
2
306 601
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Denmark 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
Tax credits or cash transfers included in taxable income
Earnings tax credit deduction
Total
4.
5.
6.
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Green check
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
41.7%
38.6%
41.7%
38.6%
41.7%
38.7%
41.7%
38.7%
41.7%
41.7%
41.7%
41.7%
41.7%
38.7%
41.7%
38.7%
31.8%
0.0%
25.7%
25.7%
34.5%
0.0%
30.9%
30.9%
35.5%
0.0%
32.5%
32.5%
34.5%
0.0%
34.3%
34.3%
26 196
1 570
27 766
340 017
0
26 196
1 290
27 486
528 397
0
26 196
1 290
27 486
617 374
0
0
1 050
1 050
501 961
0
0
145 362
0
263 303
0
325 339
0
263 303
0
0
0
0
19 457
73 697
71 665
15 713
130 426
132 877
16 330
158 687
166 652
15 713
130 426
132 877
19 457
15 713
16 330
15 713
36 609
0
40 600
- 40 600
380 404
50 899
61 137
0
40 600
- 40 600
625 545
85 002
73 218
0
40 600
- 40 600
760 808
101 799
61 137
0
40 600
- 40 600
625 545
85 002
36 609
0
61 137
0
73 218
0
61 137
0
100-0
2
457 613
100-67
2
764 214
100-100
2
915 226
100-67
none
764 214
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The national currency is the Kroner (DKK). In 2021, DKK 6.27 were equal to USD 1. In that year, the
average worker earned DKK 457 613 (Secretariat estimate).
1. Personal income tax system
In the Danish personal income tax system, the income of the individual taxpayer is split into three
categories:
Personal income, which consists of employment income, business income, pensions,
unemployment benefits etc. and with fully deductibility of Labour Market Contributions and pension
contributions (except lump sum savings).
Capital income (e.g. interest income and some capital gains) is calculated as a net amount (the
sum of positive and negative capital income net of interest expenses). Dividend income and the
property value of owner-occupied dwellings are taxed at different tax rates.
Taxable income
–
the aggregate of personal income and capital income less deductions (e.g. work-
related expenses etc.).
All three categories are relevant for various tax rates, see Section 1.2.1.
Regarding the tax unit, the earned income of each spouse is taxed separately. However, as is mentioned
in Section 1.2.1, some unutilised personal allowances can be transferred between them.
1.1. Tax allowances and tax credits
1.1.1. Standard reliefs
Wage or salary earners can deduct certain expenses with some relation to earning their income (e.g.
transport expenses, trade union membership dues, unemployment premiums) from taxable income.
Certain standard tax allowances are automatically issued. Working taxpayers receives an employment
allowance of 10.6% of earned income (including pension contributions) to a maximum of DKK 40 600 when
calculating taxable income. Single parents get an extra employment allowance of 6.25% in 2021 with a
maximum allowance of DKK 23 400. The effective value of the credit is equal to the average municipality
tax (24.97%) multiplied by the value of the allowance.
Additionally from 2018, working taxpayers with an income (including pension contributions) of at least DKK
200 300 receives a job allowance of 4.50% on taxable income. The maximum allowance of DKK 2 600 is
achieved at an income of DKK 256 822 and the effective value of the credit is equal to about DKK 650
(24.97% x DKK 2 600 = DKK 650).
Pension contributions are deductible in personal income (however not relieved from labor market tax).
From 2018, taxpayers receive an extra pension allowance in their taxable income based on pension
contributions. Even though pension contributions are an NTCP, the related allowance is considered a
standard tax relief. Pension contributions are made to privately managed funds and are annually around
12% of the total wage (i.e. pension contribution formula: gross wage earnings / 0,88 * 0,12) where
employees pay 4% and employers pay 8%. The allowance is 12% of the pension contributions for
employees with more than 15 years to retirement and 32% for employees with less than 15 years to
retirement. The allowance applies only to pension contributions up to DKK 74 700.
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1.1.2. Main non-standard tax reliefs applicable to an AW
Interest payments are fully deductible from capital income.
The non-standard deduction for wage and salary earners: The work-related expenses are
deductible from taxable income, however case law is quite strict in requiring that the expense is
necessary for employees’ earning of income in the third category (“other costs”). The main items
are:
‒
‒
The actual costs to contributions to unemployment insurance and trade unions (limit for the
latter DKK 6 000);
Expenses to transportation to the workplace are deductible at standardised rates: Up to 24 km.
per day: no deduction. 25–120 km.: DKK 1.90 per km. Above 120 km.: DKK 0.95 per km. as a
standard, but transport from municipalities placed in the outskirts of the country gives a credit
of DKK 1.90 per km. also above 120 km. The deduction is only applicable for the days, where
the transport is actually performed;
Other costs above DKK 6 500, if the costs are necessary in order to earn income.
‒
Contributions/premiums paid to private pension saving plans except lump sum savings are
deductible from personal income. From 1999 onwards, contributions/premiums paid to private
pension saving plans with sum payments are no longer deductible from income subject to the top
tax bracket rate. From 2013 onwards, contributions/premiums paid to private pension saving plans
with sum payments are no longer deductible.
Other reliefs:
‒
‒
‒
Alimonies, if according to contract, are deductible from taxable income;
Contributions to certain non-profit institutions are deductible from taxable income (limit DKK 17
000);
Losses incurred from unincorporated business in earlier years are, in principle, deductible from
personal income.
1.1.3. Tax credits
Each individual is granted a personal allowance, which is converted into a wastable tax credit by applying
the marginal tax rate of the first bracket of the income tax schedule. For taxpayers who are 18 years of
age or are older, the tax credit amounts to:
For central government income tax
For municipal income tax
12.09% of DKK 46 700 = DKK 5 646
24.97% of DKK 46 700 = DKK 11 661
Special personal allowance for an individual younger than 18: DKK 36 900.
If a married person cannot utilise the personal allowance, the unutilised part is transferred to the spouse.
1.2. Central government income taxes
1.2.1. Tax schedule
Individuals pay an 8% Labour Market Contribution levied on the gross wage or other income from work
before the deduction of any allowance.
Before 2008, the revenue was earmarked for certain social security expenditures through the Labour
market Fund, but this system was abolished from 2008, and the tax enters the budget in the same way as
any other income taxes. From 2011 the last links regarding social security of the tax were removed making
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all taxpayers working in Denmark pay the labour market contribution. The labour market contribution is
thus treated as a PIT in Taxing Wages from 2008.
Low tax bracket to the central government is assessed on the aggregate of personal income and positive
net capital income at the rate of 12.11%.
From 2010 and onwards the medium tax bracket was abolished.
Top tax bracket to the central government is assessed on the excess of DKK 544 800 of the aggregate of
personal income and positive net capital income in excess of DKK 56 500 at the rate of 15%. If a married
individual cannot utilise the total allowance of DKK 544 800, the unutilised part is not transferred to the
spouse.
If the marginal tax rate including local tax exceeds 52.06%, the top tax bracket rate is reduced by the
difference between the marginal tax rate and 52.06%.
1.3. State and local income taxes
1.3.1. General description
Local income taxes are levied only by the municipalities. The rates vary across jurisdictions.
1.3.2. Tax base
The tax base is taxable income (see Section 1). Tax credit varies with tax rates. The average amount is
given below.
1.3.3. Tax rates
Lowest rate: 22.8% (municipalities);
Highest rate: 26.3% (municipalities);
Average rate: 24.97% (municipalities);
The average rate is used in this study. It is applied to the tax base less personal allowances (see Section
1.1).
2. Compulsory Social Security Contributions to Schemes Operated Within the
Government Sector
2.1.
Employees’ contributions
Employees make a contribution of DKK 12 170 for unemployment insurance. From 1999 onwards, the
contribution for unemployment insurance is split into two: one part consists of the contribution for
unemployment insurance (DKK 4 416) while the other part consists of a voluntary contribution to an early
retirement scheme (DKK 6 240). In addition an administration fee of DKK 1 514 on average is added.
Contributions to unemployment funds are not mandatory. Nevertheless, these payments have up until the
implementation of ESA 2010 and the major revision of the Danish national accounts in the autumn 2014
been defined as social security contributions and classified as taxes in the Danish national accounts
because there is no direct link between what members pay to the schemes and what they receive and the
funds are subsidized by the state. The contributions to the unemployment funds and the church tax are no
longer classified as taxes in the Danish national accounts.
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3. Universal Cash Transfers
The transfers for each dependent child are as follows:
Age group
0–2
3–6
7–17
Quarterly amount (DKK) for each child
4 629
3 666
2 883
The transfer is reduced when the tax base of the top-bracket tax of a parent exceeds DKK 818 300. There
are additional special amounts for single parents: the transfer for each dependent child is DKK 5 996 per
year and a yearly transfer of DKK 6 112 regardless of the number of children. In addition, there is a state
transfer of DKK 17 316 per year for each dependent child in case an ‘absent parent’ does not contribute
(this amount) to the family.
This transfer is included in this Report’s calculations for single parents.
Individuals older than 18 years receive a ‘green check’ of DKK 525; this amount is increased with DKK 120
per child for up to two children. Only one partner in a married couple receives
the increased ‘green check’
for children. The ‘green check’ is nominally fixed and is phased out at a rate of 7.5% for income above
DKK 431 700. If the yearly income of the individuals is lower than DKK 247 900 the individuals receive an
‘additional green check’ of DKK 280.
4. Main Changes in Tax/Benefit Systems
From 2000 to 2002, the low tax bracket rate has been reduced from 7% to 5.5%. The low tax bracket is
assessed on the aggregate of personal income and positive net capital income.
After the parliamentary elections in 2001, the Conservative/Liberal government adopted a tax freeze policy,
which implied that tax rates could not be increased, either in nominal or relative terms, during that
government term. Taxes were therefore not increased during the period 2002-2005. After the parliamentary
elections in February 2005, the Conservative/Liberal government and the tax freeze policy were confirmed.
In order to respect the “tax freeze”, the low tax bracket has been reduced by 0.36% from 2004 to 2010 as
a compensation for increases in local income taxes from 33.31% in 2004 to 33.66% in 2011.
In the spring of 2003, the government agreed with one of the opposition parties to implement a tax package.
The aim of this package was to decrease the level of labour taxation in Denmark, and thereby to reduce
the distortions in the labour market and to improve the incentives to work. The package contained two
main elements: an increase of the threshold for the medium tax bracket of nearly DKK 50 000 and the
introduction of a tax credit scheme whereby the taxpayer can deduct 2.5% of earned income to a maximum
of DKK 7 500 (in 2007) in the calculation of taxable income.
Before 2004, a compulsory contribution of 1% of employees’ gross earnings was paid to an individual
Labour Market Supplementary Pension Scheme established for the employee
–
this contribution is not
considered as a social security contribution but rather as savings being made by the individual. However,
from 2004 to 2010, this contribution was suspended and finally abolished and the deposits paid out as of
April 2010.
In September 2007, the tax cuts from the 2003-package was extended. The threshold for the medium tax
bracket was to be raised with DKK 57 900 in 2009 to meet with the top tax bracket threshold. The deductible
tax credit was increased to 4.0% of earned income in 2008 and to 4.25% in 2009; thus raising the maximum
to 12 300 in 2008 and to 13 600 in 2009. The effective value of the credit and of the personal income
allowance is equal to the local income tax rate, the church tax plus the health care tax rate (31.63% on
average in 2013) multiplied by the value of the deduction.
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From the 1st of January 2007 a Local Government Reform has come into force, which changes the
structure of labour taxation. The reform however had only a minimal impact on the overall level of taxation.
The number of municipalities has been cut from 270 to 98 and five regions have replaced the 14 counties.
The regions will not impose taxes but will be financed through state subsidies and by contributions from
the municipalities. The reform implied an increase in the average municipal tax rate from 22.1% in 2006 to
24.577% in 2007. Since then, there has been a further increase in the average municipal tax to 24.907%
in 2013. The county tax has been replaced by a new health care tax of 8% which is levied by central
government. The health care tax rate is decreased to 6% in 2013. The levels of taxation have thus been
reduced from three to two: only the central and local governments now levy taxes.
In the spring of 2009, the government and one of the opposition parties agreed upon a major tax reform to
be phased in from 2010 to 2019. The reform aims at reducing the high marginal tax rates on personal
income and thus to stimulate labour supply in the medium to long-term. The reform decreases income
taxes by DKK 29 billion in 2010. The tax reform is planned to be revenue neutral as a whole, but was
underfinanced in the short run (2010-12) in order to stimulate the economy. The main measures taken in
2010 include the reduction of the rate of the bottom tax bracket from 5.26% to 3.67%, abolition of the
medium tax bracket with the 6% rate altogether, and increase the top tax bracket threshold by DKK 28 800
to DKK 389 000. The reform will decrease the lowest marginal tax rate from 42.4% to 41.0% and the
highest marginal tax rate on labour income from 63.0% to 56.1%. The marginal tax rate on positive net
capital income (up to 51.5 after abolition of the middle tax bracket) is further reduced for the vast majority
by introduction of an extra allowance of DKK 40 000 (DKK 80 000 for married couples) for positive net
capital income in the top bracket tax.
The reform is partly financed by higher energy, transport and environmental taxes to support the energy
and climate policy objectives of the government, and also by increases of excise rates on health-related
goods (fat, candy, sugary drinks, tobacco). These increases are partly compensated by giving a ‘green
check’ to households (see section
3). The tax reform is also partly financed by base broadening measures.
The measures include a gradual reduction from 2012 to 2019 of the tax value (from 33.5% to 25.5%) of
assessment oriented deductions and limitations of the tax deductibility of net interest payments over a
nominal threshold of DKK 50 000 (DKK 100 000 for married couples). Also the deductibility of payments
above DKK 100 000 a year to individual pension insurance schemes with less than life-long coverage has
been limited, as well as tightening of the tax treatment of company cars and other fringe benefits.
Furthermore, a 6% tax is imposed from 2011 on pension payments exceeding DKK 362 800.
To consolidate the budget, a
Fiscal Consolidation Agreement
was reached in May 2010, somewhat
modifying the prescriptions of the Spring Package of 2009.
The specific provisions of the
Fiscal Consolidation Agreement
include:
The suspension from 2011 until 2013 of automatic adjustments in various tax thresholds (including
personal allowances).
Postponing from 2011 to 2014 the increase of the threshold for the top income tax rate (15%) from
DKK 389 900 to 409 100 (EUR 52 316 to 54 892). The increase was an element of the 2009 tax
reform.
The labour union membership fees’ tax deductibility is limited to
DKK 3 000 (EUR 403) from the
year 2011. The threshold is not adjusted.
From 2011, the annual amount of child allowance is limited to DKK 35 000 (EUR 4 696),
irrespective of the number of children. This was abolished by the new government by 2012. Child
allowances will be gradually reduced by 5% until 2013.
As part of the Finance Act 2012 it was decided to introduce an ‘additional green check’ to people beyond
18 years with low income (less than DKK 212 000). The ‘additional green check’ is DKK 280.
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In June 2012 a tax reform was reached. Included in the reform were changes in the earned income tax
credit and the top tax bracket. The earned income tax credit is gradually raised from 4.40% in 2012 to
10.65% in 2022 (6.95% in 2013) where the maximum limit of earned income tax credit is raised from DKK
14 100 in 2012 to DKK 34 100 in 2022 (DKK 22 300 in 2013). Furthermore, a special earned income tax
credit for single parents was decided from 2014. This will be gradually introduced to the amount of 6.25%
in 2022 with a maximum limit of DKK 20 000. In The Tax Reform 2012 it was also decided to gradually
raise the top tax bracket from DKK 389 900 in 2012 to DKK 467 000 in 2022 (DKK 421 000 in 2013).
As part of the Finance Act 2013 an agreement, The Excise Duty and Competition Package, was reached.
This agreement includes a decrease in the excise duty on electricity, an abolition of the fat tax and a
planned expansion in the excise duty on sugar, which will reduce expenses of both consumers and
companies. This was financed by an increase in the bottom tax rate of 0.19 percentage points and a
reduction in the personal allowance by DKK 900 for all persons (under and over 18 years) introduced from
the income year 2013. As a consequence the marginal tax ceiling was increased from 51.5% to 51.7%. It
is estimated that the abolished excise duties and the increased income taxes will have similar effects on
distribution and labour supply.
Certain elements of the tax reform from 2012 were accelerated in the 2014 Budget. The employment
allowance is adjusted upwards to 7.65% (2014), 8.05% (2015), 8.3% (2016) and 8.75% (2017), with a
simultaneous increase of the maximum allowance from DKK 25 000 in 2014 to DKK 28 600 in 2018. The
extra employment allowance for single parents is increased to 5.40% in 2014 (instead of 2.60%) with a
maximum allowance of DKK 17 700.
Growth Plan 2014 contained measures to reduce the public service obligation on electricity and roll back
an increase in excise duty on fossil fuel. As part of the financing of Growth Plan 2014 the low tax bracket
rate is increased by 0.28 percentage point over the next five years, including 0.25 percentage point in
2015, with a parallel increase in the tax ceiling. Also, the green check and the supplementary green check
are reduced over the next five years, starting in 2015.
In the autumn 2014, the new ESA 2010 guidelines (European System of National and Regional Accounts)
and a major revision of the Danish national accounts were implemented which changed the classification
of a few taxes. For example, the church tax and contributions to the unemployment fund are no longer
classified as taxes, but as volunteer contributions (see Section 2.1).
As part of the Finance Act 2015 the tax deductibility of labour union membership fees is increased from
DKK 3 000 to DKK 6 000 in 2015.
The Finance Act of 2016 included an abolishment of the so-called PSO-excise duty. To finance the
abolishment the tax rate for the bottom tax bracket will be increased with 0.05 percentage point from 2018
increasing to 0.09 percentage point in 2022. Fully phased-in the tax rate for the bottom tax bracket will be
12.20% in 2022. Additionally, the tax ceiling will be increased from 51.95% in 2017 to 52.07% in 2022. The
‘green check’ will be reduced with 190 DKK from 2018 increasing to 380 DKK in 2022. The ‘additional
green check’ will be lowered proportionally. Low-income
earners such as senior citizens and early retirees
are exempt from the decrease in the ‘green check’.
In February 2018, an agreement on lower tax on labour income and larger deductions for pension
payments was made. The agreement will gradually be introduced from 2018 to 2020 and consists of the
following elements: 1) Additional tax deductions for pension payments. The deduction will be 12% for
persons with more than 15 years until they reach state pension age and 32% if they have 15 years or less
- up to DKK 70,000. 2) A new job allowance of 4.5% of labour on income over DKK 187 500 to a maximum
of DKK 2 500. 3) Expansion of the basis of the employment allowance to also cover pension payments. 4)
Increase of the ceiling for the employment allowance from DKK 37 400 to 38 400. 5) Lowering of the
bottom-bracket tax rate with 0.02 percentage points.
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In March 2018 it was agreed to gradually abolish the media license towards 2022. The agreement was
financed by reducing personal allowance for persons over the age of 18 by DKK 2 900.
The Finance Act of 2019 and 2020 included a reduction of the bottom tax of 0.03 percentage points each
as compensation for an increase in the municipal tax.
The Finance Act of 2021 included a reduction of the bottom tax from of 0.02 percentages points relative to
baseline in 2021 and 2022
–
so the bottom tax went from expected 12,11 and 12,12 percentages
respectively to 12,09 and 12,10 percentages respectively
–
as compensation for an increase in the
municipal tax.
4.1. Changes to labour taxation due to the COVID pandemic in 2020 and 2021
By Act No. 871 of 14 June 2020, the Danish Parliament introduced several temporary amendments to the
income taxation legislation due the covid-19 pandemic. The aim of the amendments is generally to ensure
that extended stays in or outside Denmark due to the covid-19 pandemic do not have severe
consequences in terms of tax.
A person who is resident in Denmark or a non-resident who is staying in Denmark more than 180 days
within a period of 12 months will be fully liable to taxation in Denmark. One of the amendments entails that
a non-resident who was staying in Denmark under the national lock down caused by the covid-19 pandemic
may choose not to be fully liable to taxation in Denmark provided that the stay was from 9 March to 30
June 2020. In addition, personal income from work performed in Denmark from 9 March to 30 June 2020
may be taxable to Denmark. The effect of this rule may be limited by Danish agreements for the avoidance
of double taxation.
Residents in Denmark who primarily are working abroad may, under certain conditions, be exempted from
the payment of income taxation in Denmark. One of the other temporary amendments entails that the
resident may stay in Denmark from 9 March to 30 June 2020 without forfeiting the right to the tax
exemption.
Finally, some temporary amendments are related to the conditions for applying the Tax Scheme for Foreign
Researchers and Highly-paid Employees (27 per cent tax scheme).
5. Memorandum Items
5.1. Identification of an AW
The AW is identified as an average worker employed at firms which are members of the Danish Employers’
Confederation.
5.2.
Employer and employee’s contribution to private schemes
Employees typically participate in a private occupational (labour market) pension scheme to which both
the employee and the employer contribute. The employee’s contribution is deductible for income
tax
purposes until payment. The employer’s contribution is not included in the gross wage income of the
employee.
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2021 Parameter values
Ave_earn
Central taxes
Ave_pens
Health_tax_rate
Low_rate
Medium_thrsh
Medium_rate
Top_thrsh
Top_rate
Marg_rate_ceil
Adj_top_rate
Temp_tax_rate
Temp_tax_thrsh
Personal_al
Job_deduc_min
Job_deduc_rate
Job_deduc_max
Pens_deduc_rate_o_15
Pens_deduc_rate_u_15
Pens_deduc_max
green_check
1 child
child max
Green_check_thrsh
Green_check_taper_rate
Extra_green_check
Extra_green_check_thrsh
gener_rate
church_rate
Local_rates
earncredit_rate
earncredit_max
Sing_par_earncredit_rate
Sing_par_earncredit_max
Child_3to6
Child_7to14
Child_limit
Child_red
Sing_par_basic
Sing_par_ch
Labour_market_rate
457 613
61131
0
0,1209
0
0
544.800
0,15
0,5206
0,1500
0
0
46.700
200.300
0,0450
2.600
0,12
0,32
74.700
525
120
240
424.700
0,075
280
247.900
0,2497
0
0,24970
0,106
40.600
0,0625
23.400
14.664
11.532
818.300
0,02
5.996
22.976
0,08
Secretariat estimate
Pension payments tax credit scheme
The green check
Local taxes
total local tax rate
Earned income tax credit scheme
for single parents
Child transfers
for single parents
Labour Market Contribution
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2021 Tax equations
The equations for the Danish system in 2020 are mostly on an individual basis but there is an interaction
in the calculation of Central Government tax between spouses and the child benefit is calculated only once.
This is shown by the Range indicator in the table below.
The functions which are used in the equations (Taper, MIN, Tax etc) are described in the technical note
about tax equations. Variable names are defined in the table of parameters above, within the equations
table, or are the standard variables “married” and “children”. A reference to a variable with the affix “_total”
indicates the sum of the relevant variable values for the principal and spouse. And the affixes
“_princ” and
“_spouse” indicate the value for the principal and spouse, respectively. Equations for a single person are
as shown for the principal, with “_spouse” values taken as 0.
Line in country table and
intermediate steps
1.
2.
Earnings
Allowances:
Variable name
Earn
tax_al
earncredit
Range
Equation
B
B
3.
4.
5.
Credits in taxable income
CG taxable income
Personal income
CG tax before credits
taxbl_cr
tax_inc
pers_inc
CG_tax_excl_princ
B
B
B
P
CG_health_tax_excl_princ
CG_tax_excl_spouse
P
S
6.
Tax credits :
CG_health_tax_excl_spouse
tax_cr_princ
S
P
health_tax_cr_princ
tax_cr_spouse
P
S
7.
8.
Labour Market Contribution
CG tax
State and local taxes
health_tax_cr_spouse
Labour_market_contr
CG_tax
local_tax_princ
local_tax_spouse
SSC_total
tot_payments
S
B
B
P
S
B
J
9.
10.
Employees' soc security
Total payments
Labour_market_contr
Min((earn+((earn/Pension_base_adjust)-
earn))*earncredit_rate,
earncredit_max)+(Children>0)*(Married=0)*Min((earn+((ear
n/Pension_base_adjust)-earn))*Sing_par_earncredit_rate;
Sing_par_earncredit_max)
0
Positive(earn-tax_al-earncredit+taxbl_cr)
Positive(earn-Labour_market_contr)
Low_rate*tax_inc_princ+Medium_rate*Positive(tax_inc_prin
c-Medium_thrsh-Married*Positive(Medium_thrsh-
pers_inc_spouse))+Adj_top_rate*Positive(tax_inc_princ-
Top_thrsh)
Health_tax_rate*tax_inc_princ
Low_rate*tax_inc_spouse+Medium_rate*Positive(tax_inc_s
pouse-
Medium_thrsh)+Adj_top_rate*Positive(tax_inc_spouse-
Top_thrsh)
(Married=1)*Health_tax_rate*tax_inc_spouse
Personal_al*Low_rate+Married*Positive(Personal_al-
pers_inc_spouse)*Low_rate+(MIN(Positive((earn_princ+((ea
rn_princ/Pension_base_adjust)-earn_princ))-
Job_deduc_min)*Job_deduc_rate,Job_deduc_max)+
+MIN(((earn_princ/ Pension_base_adjust)-
earn_princ)*Pens_deduc_rate_o_15,Pens_deduc_max))*(g
ener_rate+Health_tax_rate)
Health_tax_rate*(Personal_al+Married*Positive(Personal_al
-tax_inc_spouse))
Personal_al*Low_rate+(MIN(Positive((earn_spouse+((earn_
spouse/Pension_base_adjust)-earn_spouse))-
Job_deduc_min)*Job_deduc_rate,Job_deduc_max)
+MIN(((earn_spouse/ Pension_base_adjust)-
earn_spouse)*Pens_deduc_rate_o_15,Pens_deduc_max))*(
gener_rate+Health_tax_rate)
(Married=1)*Health_tax_rate*Personal_al
Labour_market_rate*earn
Positive(CG_tax_excl-tax_cr)+Positive(CG_health_tax_excl-
health_tax_cr)+Labour_market_contr
Positive((Local_rates)*(tax_inc_princ-Personal_al-
Married*Positive(Personal_al-tax_inc_spouse)))
(Local_rates)*Positive(tax_inc_spouse-Personal_al)
0
Positive(CG_tax_total+local_tax_total+SSC_total)
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Line in country table and
intermediate steps
11.
Cash transfers
Variable name
cash_trans
Range
J
Equation
Positive(((Children>0)*(Child_3to6+(Children>1)*(Children-
1)*Child_7to17+(Married=0)*(Sing_par_basic+Children*Sing
_par_ch)))-(Positive(earn_princ-Child_limit)*Child_red)-
(Positive(earn_spouse-
Child_limit)*Child_red))+IF(Married=1,(Taper(green_check,p
ers_inc_princ,Green_check_thrsh,Green_check_taper_rate)
+Taper(green_check+MIN(Children*_1_child,child_max),per
s_inc_spouse,Green_check_thrsh,Green_check_taper_rate)
),Taper(green_check+MIN(Children*_1_child,child_max),per
s_inc_princ,
Green_check_thrsh,Green_check_taper_rate))+
IF(Married=1,(IF(pers_inc_princ<Extra_green_check_thrsh,
Extra_green_check,0)+IF(pers_inc_spouse<Extra_green_ch
eck_thrsh,Extra_green_check,0)),IF(pers_inc_princ<Extra_g
reen_check_thrsh,Extra_green_check,0))
0
13.
Employer's soc security
SSC_empr
B
Key to range of equation B calculated separately for both principal earner and spouse P calculated for principal only (value taken as 0 for spouse
calculation) J calculated once only on a joint basis.
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Estonia
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in the
tax/benefit system. The methodology also includes the parameter values and
tax equations underlying the data.
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Estonia 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
21.3%
n.a.
41.2%
n.a.
32.4%
n.a.
49.5%
n.a.
21.3%
n.a.
41.2%
n.a.
21.3%
n.a.
41.2%
n.a.
9.9%
1.6%
11.5%
33.9%
15.5%
1.6%
17.1%
38.1%
19.7%
1.6%
21.3%
41.2%
6.9%
1.6%
-7.0%
20.0%
0
0
10 867
4 151
0
0
15 192
6 195
0
0
24 095
10 346
1 900
1 900
13 137
4 151
196
1 413
293
3 137
490
6 514
196
1 044
196
293
490
196
0
1 217
0
0
2 844
0
0
6 024
0
0
847
0
0
0
0
0
6 196
0
6 084
1 217
4 111
0
14 218
2 844
490
0
30 119
6 024
8 044
0
4 236
847
196
293
490
196
6 000
3 817
0
7 848
67
none
12 280
100
none
18 329
167
none
30 609
67
2
12 280
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Estonia 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
32.4%
15.0%
49.5%
36.5%
32.4%
21.3%
49.5%
41.2%
32.4%
32.4%
49.5%
49.5%
32.4%
21.3%
49.5%
41.2%
11.1%
1.6%
4.9%
28.9%
12.1%
1.6%
9.0%
32.0%
14.5%
1.6%
12.2%
34.4%
13.3%
1.6%
14.9%
36.4%
1 440
1 440
17 433
6 195
1 440
1 440
27 868
10 346
1 440
1 440
32 193
12 390
0
0
26 059
10 346
293
2 335
490
4 181
587
5 904
490
4 550
293
490
587
490
0
2 042
0
0
3 691
0
0
5 318
0
0
4 060
0
0
0
0
0
8 119
0
10 210
2 042
12 155
0
18 454
3 691
10 069
0
26 588
5 318
10 307
0
20 302
4 060
293
490
587
490
7 825
11 665
9 483
9 817
100-0
2
18 329
100-67
2
30 609
100-100
2
36 657
100-67
none
30 609
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The Estonian currency is the Euro (EUR). In 2021, EUR 0.84 was equal to USD 1. In 2021, the average
worker in Estonia earned EUR 18 329 (Secretariat estimate).
1. Personal income tax system
1.1. Central government income tax
1.1.1. Tax unit
The tax unit is the individual since January 1
st
2017.
1.1.2. Tax allowances
1.1.2.1. Standard tax reliefs
A general (basic) allowance of EUR 6000 is deductible from individual income in 2021. It starts
declining from income of 14 400 and reaches EUR 0 at EUR 25 200. From 1 January 2017, the
supplementary basic allowance for the spouse came into force. The spouse’s yearly income
must
be below EUR 2 160 and the family`s total yearly income must be below EUR 50 400.
A child allowance of EUR 1 848 is also deductible from income for each of the second and EUR
3 048 for third any subsequent children up to and including the age of 16.
Relief for social security contributions: Employee’s compulsory contributions for unemployment
insurance are deductible for income tax purposes.
Tax credits: was abolished from 2017.
1.1.2.2. Non
–
standard tax reliefs applicable to income from employment
II pillar pension contributions: In 2021, these represent compulsory payments to private funds for
employees born in 1983 or after and are paid at a rate of 2% of earnings. In December 2020, these
payments became wholly voluntary and will remain so until August 31, 2021. Only about 10
thousand employees stopped their payments. In 2021, different opt-out options were introduced,
making the II pillar, in effect, voluntary. People have four basic options: 1. Continue as is; 2. The
accumulated pension assets will be transferred to a special private investment account, the 2%
and 4% payments will continue to that account, people will basically become their own second
pillar pension fund investment manager; 3. Stop the payments into the pillar, existing assets remain
invested in the fund, the person can opt in with their payments again after 10 years; 4. Stop the
payments and take out assets (pay income tax), the person can opt in again after 10 years. New
entrants to the labour market are automatically added to the second pillar, but have the same opt-
out options. About 153 000 persons younger than pension age chose to leave the scheme from
Sept, 2021. Also pension age people are leaving the scheme.
Housing loan interest, educational costs, gifts and donations are deductible from taxable income
within upper limits of EUR 1 200 and 50% of taxable income per year. Housing loan interest
deductions upper limit is EUR 300 within that EUR 1 200 from 2017. There are ongoing discussions
on the abolishment of the latter in 2022.
Voluntary pension contributions (III pillar): Contributions paid by a resident to the provider of a
pension plan based in Estonia or in another EU Member State according to a pension plan that is
approved and entered into a special register in accordance with the pension legislation are
deductible from taxable income. In 2021 such deductions are subject to an annual limit of a sum
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297
equal to 15% and maximum of EUR 6 000 of the employee’s, public servant`s or members of legal
person management or control body income in a calendar year.
1.1.3. Tax schedule
The rate of 20% applies for all levels of taxable income.
1.2. Regional and local income tax
There are no regional or local income taxes.
2. Compulsory social security insurance system
The compulsory social security insurance system consists of three schemes as follows:
pension insurance;
health insurance;
unemployment insurance.
2.1.
Employees’ contributions
Employees pay 1.6% of their earnings in contributions for unemployment insurance. The taxable base is
the total amount of the gross wage or salary including vacation payments, fringe benefits and remuneration
of expenses related to work above a certain threshold. The assessment period is the calendar month.
2.2.
Employers’ contributions
Social security insurance contributions are also paid by employers on behalf of their employees. The
taxable base and the assessment period are the same as for employees’ contributions. The employers’
contribution rates are applied in two parts:
Unemployment insurance
–
0.8% of employee earnings.
Pension and health insurance
–
as follows for monthly earnings above EUR 584.
Scheme name
Pension insurance
Health insurance
Total
Rate of contribution (%)
20.00
13.00
33.00
In addition there is a lump sum payment for each employee of EUR 192,72 per month (split between
pensions and health insurance on a 20:13 basis).
3. Payroll tax
None.
4. Universal cash transfers
4.1. Transfers related to marital status
None.
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4.2. Transfers for dependent children
Estonia’s family benefits are designed to provide partial
coverage of the costs families incur in caring for,
raising and educating their children.
The state pays family benefits to all children until they reach the age of 16. Children enrolled in basic or
secondary schools or vocational education institutions operating on the basis of basic education have the
right to receive family benefits until the age of 19. Applications for the allowance are made on an annual
basis and the payments are not taxable. The values of these benefits in 2021 are shown in the table below.
The single parent child allowance is paid for each child. From 1
st
of July 2017 the parents allowance for
families with three to six children was introduced, EUR 300 per month. Parents allowance for families with
seven or more children was increased from EUR 168.74 per month to EUR 400 per month from 1
st
of July
2017.
In addition, there are nine other types of family benefits for which payment depends on either the age of
the child(ren) and/ or the status of the person(s) looking of them: parental benefit; additional parental
benefit for fathers and 30 days of paternity leave, childbirth allowance and allowance for multiple birth of
three or more children;
maintenance allowance, conscript’s child allowance;
adoption allowance (single
payment), guardianship allowance, child care allowance. These are not included in the modelling.
Type of benefit
Child allowance (paid until children turn 16 or until the end of the academic year in which
they turn 19 if they continue studying).
- For the first and second child
- For the third and any subsequent children
- Single parent’s child allowance
- Parents allowance for families with three to six children
- Parents allowance for families with seven or more children
Annual amount of benefit (in EUR)
720.00
1 200.00
230.16
3 600.00
4 800.00
In addition to existing benefits, from 1
st
of July, 2013 the need-based child benefits were introduced. Need-
based family benefit income threshold was based on Statistical Office relative poverty threshold published
by the 1
st
of March in a year before current budget year. In 2017 the need based threshold was EUR 394
in a month for the first household member. For every other at least 14-years old member the threshold was
EUR 197 and for the younger members EUR 118.2 in a month. Need-based family benefit was in 2017
EUR 45 in a month for single child family and EUR 90 for families with two or more children. These need-
based benefits were abolished from 2018.
5. Main changes in tax/benefit system since 2005
The personal income tax rate was steadily reduced from 24% in 2005 to 21% in 2008. In 2015 it
was reduced to 20%.
The child tax allowance applied for the third and subsequent children for 2005 and the second and
subsequent children in 2006 and 2007. It applied to all children in 2008 and then returned to the
2007 position in 2009.
The employee unemployment contribution rate was reduced from 1% to 0.6% in 2006 and then
raised in 2 stages to 2.8% at the end of 2009. The corresponding rates for employers were a
reduction from 0.5 % to 0.3% in 2006 increasing to 1.4%. In 2013 the employee unemployment
contribution rate was reduced from 2.8% to 2.0% and the corresponding rate for employers from
1.4% to 1.0%. In 2015 the employee unemployment contribution rate was reduced from 2.0% to
1.6% and the corresponding rate for employers from 1.0% to 0.8%.
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In addition to existing benefits, from 1
st
of July, 2013 the need-based child benefits were introduced.
Further details in section 4.2 on cash transfers. These were abolished from 2018.
From 2016, a non-payable tax credit for low-income
earners (“madalapalgaliste tagasimakse”) was
introduced. Further details in section 1.1.2. on tax allowances. It was abolished from 2017.
From 2017 the possibility to use spouse`s basic tax-free allowance was reformed. From 1
st
of
January 2017, the supplementary basic allowance for the spouse came into force. The spouse’s
yearly income must be below EUR 2 160 and the family`s total yearly income must be below
EUR 50 400.
From 2020 the additional child allowance for third any subsequent children up to and including the
age of 16 was increased to EUR 3 048 per year.
There are ongoing discussions on the abolishment of the housing loan interest deduction (EUR 300
per year) in 2022.
5.1. Changes to labour taxation due to the COVID pandemic in 2020 and 2021
Labour taxation did not change but there were some measures supporting self-employed, employees and
employers:
The state pays the advance payment of social tax for self-employed persons for the first quarter of
2020.
Temporary cancellation of social tax minimum for employers for three months. Here social tax
minimum is the lump sum payment for each employee of EUR 178.20 per month mentioned above.
The employer was released of this obligation for three months (March, April and May 2020) and
social tax had to be paid from actual payment to employee. It included the unpaid vacation and
part-time work.
Temporary suspension of contributions to the second pillar pension funds. The state suspended
pension payments to the second pillar that are made at the expense of social tax from 1 July 2020
until 31 August 2021. In October 2020, everyone who had joined the mandatory funded pension,
was able to decide whether to waive their contribution as well. To do this, an application had to be
submitted in October and payments will be stopped from December. There is a compensation
mechanism for people who decide to continue their contributions. Only about 10 thousand
employees stopped their payments.
Unemployment Insurance Fund measure for labour market support within 4 months (wage support
measure). Wage support measure will help to maintain the income of employees during the
emergency situation. It was continued in 2021 for 3 months (from March to May).
State reimbursement of sick days for workers from the first to the third day of sickness insurance
(currently without pay) from March to May 2020. In 2021 state reimburses 6
th
+ sick day (normally
from 9
th
day).
6. Memorandum items
6.1. Average gross annual wage earnings calculation
In Estonia the gross earnings figures cover wages and salaries paid to individuals in formal employment
including payment for overtime. They also include bonus payments and other payments such as pay for
annual leave, paid leave up to seven days, public holidays, absences due to sickness for up to 30 days,
job training, and slowdown through no fault of the person in formal employment.
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The average gross wage earnings figures of all adult workers covering industry sectors B–N by NACE
Rev.2 are estimated with average wage growth rate forecast of Estonian Ministry of Finance.
6.2. Employer contributions to private pension and health schemes
Some employer contributions are made to private health and pension schemes but there is no relevant
information available on the amounts that are paid.
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2021 Parameter values
Average earnings/yr
Allowances
Ave_earn
Basic_al
Basic_al_thrs_1
Basic_al_thrs_2
Suppl_al
Incoome_lim
Child_al
Tax_rate
SSC_rate1
Threshold
lump_sum
SSC_rate2
SSC_rate3
CA_first&second
CA_others
CA_onepar
numdays
18 329
6 000
14400
25200
2160
50 400
1 848
0.20
0.33
7 008
2 312.6
0.008
0.016
720
1 200
230.16
365
Secretariat estimate
Income tax
Employers SSC
Employees SSC
Child allowances
First & second child
Other children
Additional for children
of lone parents
Days in tax year
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2021 Tax equations
The equations for the Estonian system are mostly on an individual basis.
The functions which are used in the equations (Taper, MIN, Tax etc) are described in the technical note
about tax equations. Variable names are defined in the table of parameters above, within the equations
table, or are the standard variables “married” and “children”. A reference to a variable with the affix “_total”
indicates
the sum of the relevant variable values for the principal and spouse. And the affixes “_princ” and
“_spouse” indicate the value for the principal and spouse, respectively. Equations for a single person are
as shown for the principal, with “_spouse” values
taken as 0.
Line in country table and
intermediate steps
1.
2.
Earnings
Allowances:
Variable name
earn
tax_al
Range
Equation
P
MINA(Positive(Basic_al-(Positive(earn-
Basic_al_thrs_1)*(Basic_al/(Basic_al_thrs_2-
Basic_al_thrs_1))))+IF(spouse_earn<Suppl_al,IF(AND(househol
d_earn<income_lim,Married>0),Positive(Suppl_al-
spouse_earn),0),0)+SSC_empee+(Children>1)*(Child_al*(Childr
en-1)),earn)
MINA(IF(earn>0,Positive(Basic_al-(Positive(earn-
Basic_al_thrs_1)*(Basic_al/(Basic_al_thrs_2-
Basic_al_thrs_1)))),0)+SSC_empee,earn)
0
Positive(earn-tax_al)
Tax_inc*tax_rate
0
CG_tax_excl
0
earn*SSC_rate3
IF(Children<3,CA_firstsecond*Children,(2*CA_firstsecond)+(CA_
other*(Children-2)))+(Married='0)*Children*CA_onepar
IF(earn>0,IF(earn>threshold,earn*SSC_rate1,lump_sum),0)+ear
n*SSC_rate2
S
3.
4.
5.
6.
7.
8;
9.
11.
13.
Credits in taxable income
CG taxable income
CG tax before credits
Tax credits :
CG tax
State and local taxes
Employees' soc security
Cash transfers
Employer's soc security
taxbl_cr
tax_inc
CG_tax_excl
tax_cr
CG_tax
local_tax
SSC_empee
cash_trans
SSC_empr
B
B
B
B
B
B
B
J
B
Key to range of equation B calculated separately for both principal earner and spouse P calculated for principal only (value taken as 0 for spouse
calculation) J calculated once only on a joint basis.
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Finland
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in the
tax/benefit system. The methodology also includes the parameter values and
tax equations underlying the data.
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Finland 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
45.0%
n.a.
54.5%
n.a.
46.9%
n.a.
56.1%
n.a.
50.5%
n.a.
59.0%
n.a.
45.0%
n.a.
54.5%
n.a.
12.6%
10.3%
23.0%
36.2%
20.3%
10.5%
30.8%
42.7%
28.0%
10.5%
38.5%
49.1%
12.6%
10.3%
10.8%
26.1%
0
0
24 732
6 671
0
0
33 155
9 957
0
0
49 178
16 628
3 916
3 916
28 647
6 671
3 181
132
3 314
7 371
4 748
274
5 023
14 759
7 930
481
8 411
30 840
3 181
132
3 314
7 371
1 840
163
3 895
1 572
1 661
8 076
966
8 274
14 155
1 840
163
3 895
0
0
0
0
1 840
1 572
966
1 840
3 931
0
28 171
613
5 498
0
42 416
3 070
8 680
0
71 338
9 077
3 931
0
28 171
613
3 181
750
4 748
750
7 930
750
3 181
750
67
none
32 103
100
none
47 915
167
none
80 018
67
2
32 103
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Finland 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
46.9%
23.0%
56.1%
36.2%
46.9%
45.0%
56.1%
54.5%
46.9%
46.9%
56.1%
56.1%
46.9%
45.0%
56.1%
54.5%
20.3%
10.5%
25.8%
38.6%
17.2%
10.4%
24.7%
37.6%
20.3%
10.5%
28.3%
40.6%
17.2%
10.4%
27.7%
40.1%
2 397
2 397
35 552
9 957
2 397
2 397
60 284
16 628
2 397
2 397
68 708
19 913
0
0
57 887
16 628
4 748
274
5 023
14 759
7 930
407
8 336
22 131
9 497
549
10 045
29 519
7 930
407
8 336
22 131
1 572
1 661
8 076
3 412
1 824
11 971
3 145
3 322
16 152
3 412
1 824
11 971
0
0
0
0
1 572
3 412
3 145
3 412
5 498
0
42 416
3 070
9 430
0
70 588
3 683
10 997
0
84 833
6 140
9 430
0
70 588
3 683
4 748
750
7 930
1 500
9 497
1 500
7 930
1 500
100-0
2
47 915
100-67
2
80 018
100-100
2
95 829
100-67
none
80 018
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The national currency is the Euro (EUR). In 2021, EUR 0.84 was equal to USD 1. In that year, the average
worker earned EUR 47 915 (Secretariat estimate).
1. Personal Income Tax System
1.1. Central government income taxes
1.1.1. Tax unit
Spouses are taxed separately for earned income.
1.1.2. Standard tax allowances and tax credits
1.1.2.1. Standard reliefs
Work-related expenses: A standard deduction for work related expenses equal to the amount of
wage or salary, with a maximum amount of EUR 750 is granted.
Tax credit: An earned income tax credit is granted against the central government income tax. If
the credit exceeds the amount of central government income tax, the excess credit is deductible
from the municipal income tax and the health insurance contribution for medical care. The credit is
calculated on the basis of taxpayers’ income from work. The credit amounts to 12,7% of income
exceeding EUR 2 500, until it reaches its maximum of EUR 1 840. The amount of the credit is
reduced by 1.89% of the earned income minus work related expenses exceeding EUR 33 000.
The credit is fully phased out when taxpayers’ income is about EUR
130 000.
1.1.2.2. Main non-standard tax reliefs applicable to an AW
Interest: Interest on loans associated with the earning of taxable income, 10% of the interest on
loans for the purchase of owner-occupied dwellings, and student loans guaranteed by the state
can be deducted against capital income. Of the excess of interest over capital income, 30% (32%
for first-time homebuyers) can be credited against income tax up to a maximum of EUR 1 400.
Membership fees: Membership fees paid to employees' organisations or trade unions.
Travelling expenses: Travelling expenses from the place of residence to the place of employment
using the cheapest means in excess of EUR 750 up to a maximum deduction of EUR 7 000.
Double housing expenses: If the place of employment is located too far from home in order to
commute (distance > 100km), the taxpayer can deduct the costs of hiring a second dwelling located
near the place of work up to EUR 450 per month. This deduction can be claimed only by one
person per household.
Other work-related outlays: Outlays for tools, professional literature, research equipment and
scientific literature, and expenses incurred in scientific or artistic work (unless compensated by
scholarships).
Travelling expenses and other work related outlays are deductible only to the extent that their total amount
exceeds the amount of the standard deduction for work related expenses.
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1.1.3. Rate schedule
Central government income tax:
Taxable income (EUR )
18 600-27 900
27 900-45 900
45 900-80 500
80 500
Tax on lower limit (EUR )
8
566
3 671
11 023.50
Tax on excess income in bracket (%)
6
17.25
21.25
31.25
1.2. Local income tax
1.2.1. Tax base and tax rates
The tax base of the local income tax is taxable income as established for the income tax levied by central
government.
Municipal tax is levied at flat rates. In 2021 the tax rate varies between 17.00 and 23.50%, the average
rate being approximately 20.02%.
Municipal tax is not deductible against central government taxes. Work-related expenses and other non-
standard deductions are deductible, as for purposes of the central government income tax.
1.2.2. Tax allowances in municipal income taxation
An earned income tax allowance is calculated on the basis of taxpayer’s income from work. The
allowance amounts to 51% of income between EUR 2 500 and EUR 7 230 and 28% of the income
exceeding EUR 7 230, until it reaches its maximum of EUR 3 570. The amount of the allowance is
reduced by 4.5% on earned income minus work related expenses exceeding EUR 14 000.
A basic tax allowance is granted on the basis of taxable income remaining after the other
allowances have been subtracted. The maximum amount, EUR 3 630, is reduced by 18% on
income exceeding the aforementioned amount.
2. Compulsory Social Security Contributions to Schemes Operated within the
Government Sector
2.1. Employee contributions
2.1.1. Rate and ceiling
In 2020, the rate of the health insurance contribution for medical care paid by an employee is 0.68%. The
tax base for this contribution is net taxable income for municipal income tax purposes.
In addition, there is an employees’ pension insurance contribution that amounts to 7.15% of gross salary,
an employees’
unemployment insurance contribution equal to 1.40% of gross salary and a health
insurance contribution for daily allowance equal to 1.36% of gross salary. For employees aged 53 to 62,
the pension insurance contribution amounts to 8.65% of gross salary. These contributions are deductible
for income tax purposes.
2.1.2. Distinction by marital status or sex
The rates do not differ.
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2.2.
Employers’ contributions
The average rate of the employers’ social security contribution in 2021
is 20.78% of gross wage.
Contribution rates (%)
Health insurance
Unemployment insurance (avg)
Earnings-related pension insurance
Accident insurance (avg)
Group life insurance (avg)
Total
1,53
1,43
16,95
0,8
0,07
20,78
3. Universal Cash Transfers
3.1. Amount for marriage
None.
3.2. Amount for children
The central government pays in 2021 the following allowances (EUR):
For the first child
For the second child
For the third child
For the fourth child
Fifth and subsequent child
1 138.56
1 258.08
1 605.48
1 958.88
2 192.28
The child subsidy for a single parent is increased by an annual amount of EUR 759.6 for each child.
4. Main Changes in the Tax/Benefit System since 2020
Adjustments for inflation and rise of earnings levels were made to the central government tax scale in
2021.
The maximum amount of the basic allowance in municipal taxation was raised from EUR 3 540 to EUR
3 630. The maximum amount of the earned income tax credit in state taxation was raised from EUR 1 770
to EUR 1 840.
Home-loan interest counts at 10%, down from 15%, as deductible/creditable interest.
4.1. Changes to labour taxation due to the COVID pandemic in 2020 and 2021
There are no specific personal income tax measures due to the covid-19 pandemic. Financial support for
individuals and households has been granted in the form of direct benefits rather than through tax
measures.
The Finnish tax deferral scheme concerning payment arrangements with eased terms was based on a
temporary legislative amendment, which allowed for a late-payment interest rate of 2.5% (lowered from
the standard 7%) to be applied on all and any taxes (incl. PITs and SSCs) included in a payment
arrangement that fell due between 1 March and 31 August 2020 as well as on repaid VAT. In addition, the
temporary amendment allowed for the first payment instalment to be postponed until three months after
the start of the arrangement. In 2021 the tax deferral scheme was renewed with similar terms as in 2020
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to be applied on all and any taxes (incl. PITs and SSCs) included in a payment arrangement that fell due
between 1 March and 31 August 2021.
5. Memorandum Items
5.1. Calculation of average gross annual wage
The Finnish figures are generally calculated as follows:
Gross annual earnings are calculated at an individual level on the basis of the hour’s usually
worked, average hourly pay for the fourth quarter, and the share of annual periodic bonuses.
The earnings exclude sickness and unemployment compensations, but include all normal overtime
compensations, bonuses, holiday remunerations and remunerations for public holidays.
5.2. Employer contributions to private pension and health schemes
No information is available.
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2021 Parameter values
Average earnings
Expenses
Allowances
State tax
Tax schedule
Ave_earn
Work_exp_max
Work_exp_rate
al_SSC_rate
Tax_min
Tax_sch
47 915
750
1
0.0991
8
0
0.06
0.1725
0.2125
0.3125
0.025
14000
163
2 500
0.127
33 000
0.0189
1840
0
0
0
2 500
7 230
0.51
0.28
14 000
0.045
3 570
3630
0.18
0.2002
0
0.2002
0,0068
0.2078
1138.56
1258.08
1605.48
1958.88
2192.28
0
759.6
Secretariat estimate
18600
27900
45900
80500
Broadcasting tax
Earned income tax credit
Child tax credit
Earned income tax allowance
low income
Local intax
Soc sec taxpayer
soc.sec empr
Cash transfer
brdcst_tax_rate
brdcst_tax_thres
brdcst_tax_max
eitc_thrsh
eitc_rate
eitc_redn_thrsh
eitc_redn_rate
eitc_max
child_cr
child_thres
child_red
al_thrsh
al_thrsh2
al_rate
al_rate2
al_redn_thrsh
al_redn_rate
al_max
SL_max
SL_rate
Local_rate
Church_rate
Local_tot
SSC_rate
SSC_empr
ch_1
ch_2
ch_3
ch_4
ch_5
ch_small
ch_lone
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2020 Tax equations
The equations for the Finnish system are mostly on an individual basis except for the child benefit which
is calculated only once. This is shown by the Range indicator in the table below. The functions which are
used in the equations (Taper, MIN, Tax etc) are described in the technical note about tax equations.
Variable names are defined in the table of parameters above, within the equations table, or are the
standard variables “married” and “children”. A reference to a variable with the affix “_total” indicates the
sum of the relevant variable values for the principal and spouse. And the affixes “_princ” and “_spouse”
indicate the value for the principal and spouse, respectively. Equations for a single person are as shown
for the principal, with “_spouse” values taken as 0.
Line in country table and
intermediate steps
Variable
name
Range
Equation
1.
2.
3.
4.
5.
6.
Earnings
Work related expenses
SSC deduction
Allowances:
Credits in taxable income
CG taxable income
CG tax before credits
Tax credits :
Child tax credit
earn
work_rel
SSC_al
tax_al
taxbl_cr
tax_inc
CG_tax_ex
cl
tax_cr
child_cr
B
B
B
B
B
B
B
P
S
MIN(Work_exp_max, Work_exp_rate*earn)
earn*al_SSC_rate
work_rel+SSC_al
0
Positive(earn-tax_al)
='Tax(tax_inc,' Tax_sch)+Tax_min* (tax_inc>Tax_thrsh)
MINA(eitc_max,eitc_rate*Positive(earn-eitc_thrsh))-
MINA(eitc_max,eitc_redn_rate*Positive(earn-work_rel-eitc_redn_thrsh))
taper(child_cr*(1+(married=0))*children,earn_p-
work_rel,child_thres,child_red)
If(tax_inc_s>0,taper(child_cr*children,earn_s-
work_rel,,child_thres,child_red),0)
IF((earn-(work_rel+brdcst_tax_thrsh))*brdcst_tax_rate<0,0,IF((earn--
(work_rel+brdcst_tax_thrsh))*brdcst_tax_rate>brdcst_tax_max,brdcst_tax
_max,( earn---(work_rel+brdcst_tax_thrsh))*brdcst_tax_rate))
Positive(CG_tax_excl - tax_cr-child_cr)+broadcasting_tax
MIN(al_max, IF(earn>al_thrsh2, al_rate*(al_thrsh2-
al_thrsh1)+al_rate2*(earn-al_thrsh2), Positive(earn-al_thrsh)))-
MIN(al_max, al_redn_rate* Positive(earn-work_rel-al_redn_thrsh))
Positive(MIN(earn-work_rel-low_al-SSC_al, SL_max)-
SL_rate*Positive(earn- work_rel- low_al-SSC_al-SL_max))
tax_inc-earninc_al-low_inc
Positive(tax_inc_l*Local_tot- (local_tot/(local_tot+SSC_rate))*If((Tax_cr-
CG-tax_excl)>0,(Tax_cr-CG-tax_excl)+child_cr,0)
Positive(SSC_rate*tax_inc_l -
(SSC_rate/(local_tot+SSC_rate))*IF((Tax_cr-CG-tax_excl)>0,(Tax_cr-CG-
tax_excl)+child_cr,0)) + SSC_prog_rate* Positive(tax_inc_l-
SSC_prog_thrsh)+SSC_al
(Children>0)*ch_1+(Children>1)*ch_2+ (Children>2)*ch_3+
(Children>3)*ch_4+ Positive(Children-4)*ch_4
+(Married=0)*Children*ch_lone
earn*SSC_empr
broadcastin
g_tax
7.
CG tax
Earned income allowance
CG_tax
earninc_al
B
B
B
Low income
Taxable income (local)
State and local taxes
Employees' soc security
low_inc
tax_inc_l
local_tax
SSC
B
B
B
B
8.
9.
11.
Cash transfers
cash_trans
J
13.
Employer's soc security
SSC_empr
B
Key to range of equation B calculated separately for both principal earner and spouse P calculated for principal only (value taken as 0 for spouse
calculation) J calculated once only on a joint basis
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France
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in the
tax/benefit system. The methodology also includes the parameter values and
tax equations underlying the data.
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France 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
In-work benefit (Gross)
For two children (Gross)
CRDS Deducted
Total
12. Take-home pay (1-10+11)
13. Employers' compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
32.6%
n.a.
64.6%
n.a.
43.0%
n.a.
58.2%
n.a.
42.2%
n.a.
60.0%
n.a.
51.6%
n.a.
74.6%
n.a.
12.3%
11.3%
23.6%
41.1%
16.5%
11.3%
27.8%
47.0%
22.7%
11.0%
33.6%
54.0%
9.5%
11.3%
-3.0%
20.6%
0
0
0
0
20 465
7 970
0
0
0
0
28 869
14 508
0
0
0
0
44 294
29 578
2 021
4 392
- 32
6 381
27 581
7 970
3 029
6 316
4 521
11 103
7 337
22 459
3 029
5 581
3 029
4 521
7 337
3 029
0
0
3 287
0
0
0
6 582
0
0
0
15 122
0
0
0
2 552
0
7 014
0
19 767
3 287
10 469
0
29 502
6 582
17 292
0
49 460
15 122
7 014
0
19 767
2 552
4 818
2 196
7 191
3 278
11 797
5 496
4 818
2 196
67
none
26 781
100
none
39 971
167
none
66 752
67
2
26 781
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France 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
In-work benefit (Gross)
For two children (Gross)
CRDS Deducted
Total
12. Take-home pay (1-10+11)
13. Employers' compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
20.8%
27.1%
41.9%
43.8%
32.6%
32.6%
50.6%
64.6%
43.0%
43.0%
58.2%
58.2%
29.0%
29.0%
47.9%
62.7%
9.5%
11.3%
16.9%
39.0%
12.0%
11.3%
21.0%
40.9%
14.5%
11.3%
23.8%
44.1%
14.3%
11.3%
25.6%
44.3%
0
1 592
- 8
1 585
33 226
14 508
0
1 592
- 8
1 585
52 762
22 478
0
1 592
- 8
1 585
60 914
29 016
0
0
0
0
49 671
22 478
4 521
8 330
7 549
15 575
9 041
20 613
7 549
17 081
4 521
7 549
9 041
7 549
0
0
3 809
0
0
0
8 026
0
0
0
11 572
0
0
0
9 532
0
10 469
0
29 502
3 809
17 483
0
49 269
8 026
20 938
0
59 005
11 572
17 483
0
49 269
9 532
7 191
3 278
12 009
5 474
14 382
6 556
12 009
5 474
100-0
2
39 971
100-67
2
66 752
100-100
2
79 943
100-67
none
66 752
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The national currency is the Euro (EUR). In 2021, EUR 0.88 equalled USD 1. In that year, the average
worker earned EUR 39 971 (Secretariat estimate).
1. Personal income tax system
1.1. Tax levied by the central government on 2021 income
1.1.1. Tax unit
The tax unit is aggregate family income, but children over 18 are included only if their parents claim them
as dependants. Other persons may be fiscally attached on certain conditions: unlike spouses, who are
always taxed jointly, children over 18 and other members of the household may opt to be taxed separately.
Beginning with the taxation of 2004 income, the law provides for joint taxation of partners in a French civil
union (pacte civil de solidarité, or PACS), as soon as the PACS is signed. Reporting obligations for
“PACSed” partners are similar to those of married couples.
Earned income is reported net of compulsory employer and employee payroll deductions, except for 2.4
percentage points worth of CSG (contribution sociale généralisée) and the 0.5% CRDS (contribution pour
le remboursement de la dette sociale), which are not deductible from the income tax base.
1.1.2. Tax reliefs and tax credits
1.1.2.1. Standard tax reliefs
Work-related expenses, corresponding to actual amounts or a standard allowance of 10% of net
pay (with a minimum of EUR 448 and a ceiling of EUR 12 829 per earner).
Family status:
The “family quotient” (quotient familial) system takes a taxpayer’s marital status and
family responsibilities into account. It involves dividing net taxable income into a certain number of
shares [two shares for a married (or “PACSed”) couple, one share
for a single person, one half-
share for each dependent child, an additional share for the third and each subsequent dependent
child, an additional half-share for single parent, and so on]: the total tax due is equal to the amount
of tax corresponding to one share multiplied by the total number of shares. The tax benefit for a
half-share is limited, however, to EUR 1 592 per half-share in excess of two shares for a couple,
or one share for a single person, except for the first two half-shares granted for the first child of a
single parent, in which case the maximum benefit is EUR 3 756.
1.1.2.2. Main non-standard reliefs available to the average worker
There are compensatory allowances in case of divorce if paid in a lump sum (25% reduction, capped at
EUR 30 500); child care costs for children under six (50% reduction, up to annual expenditure of
EUR 2 300); dependent children attending secondary school or in higher education; donations to charities
or other organisations assisting those in needs; trade union
dues, etc. The exemption of the employer’s
participation to the collective contracts of supplementary health cover is abolished in the budget act for
2014 (i.e. income earned in 2013).
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1.1.3. Tax schedule
Fraction of taxable income
(1 share, in Euros)
1
st
bracket
2
nd
bracket
3
rd
bracket
4
th
bracket
5
th
bracket
Up to 10 225
From 10 225 to 26 070
From 26 070 to 74 545
From 74 545 to 160 336
From 160 336
Rate (in %)
0
11
30
41
45
A special rebate for taxpayers with a low tax liability is applied to the amount of tax resulting from the above
schedule before reductions and tax credits. To be eligible, the tax on the household’s income must be less
than EUR 1 746 for single households and less than 2 888 for the couples. The rebate is equal to 45.25 %
of the difference between this ceiling and the amount of tax before the rebate.
1.1.4. Exceptional contribution on high revenues
An exceptional contribution on high revenues is based on the reference
taxable income (“revenu fiscal de
référence”). The tax rates are 3% from EUR 250 000 to EUR
500 0000 (single person), 4% over
EUR 500 0000 (single person), 3% from EUR 500 000 to EUR 1 000 000 (married couple or civil union)
and 4% over EUR 1 000 000 (married couple or civil unions).
1.2. Taxes levied by decentralised authorities
Local taxes levied on working households are:
Residency tax (taxe d’habitation), which is set by local authorities;
Property taxes on developed and undeveloped land;
There are common rules for each type of tax, to which certain municipalities make certain
adjustments.
These local taxes, the rates of which vary widely, depending on the municipality, are not assessed here.
1.3. Universal social contribution (contribution sociale généralisée, or CSG)
The universal social contribution (CSG) was introduced on 1 February 1991. Since 1 January 2018, the
rate of CSG has been 9.2%. This rate has been applied to a base of 98.25% as of 1st January 2012. The
CSG is deductible against taxable income, but at a lower rate of 6.8%.
1.4. Contribution to the reimbursement of social debt (contribution au
remboursement de la dette sociale, or CRDS)
The contribution to the reimbursement of social debt has been in effect since 1 February 1997. Like the
universal social contribution, its base has passed to 98.25% of gross pay as of 1st January 2012. The rate
is set at 0.5%. Unlike social security contributions, CRDS payments are not deductible from taxable
income.
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2. Compulsory social security contributions to schemes operated within the
government sector
Some contributions are levied on a capped portion of monthly earnings. Since 1997, this ceiling has been
adjusted once a year on 1 January. In January 2020, the ceiling was EUR 3 428 (or EUR 41 136 per year).
It did not change in January 2021
2.1. Employee contributions
2.1.1. Pension
6.9% on earnings up to the ceiling (after 6.9% in 2020).
0.4% on total earnings (after 0.4% in 2020).
2.1.2. Illness, pregnancy, disability, death
0.0% on total earnings (0,0% in 2020)
2.1.3. Unemployment
0.0% on earnings since 1
st
October 2018.
2.1.4. Others
Supplemental pension
1
for non-managers and managers: minimum 3.15% up to the ceiling and
8.64% between one and eight times the ceiling.
The CEG (“Contribution d’Équilibre Général”) replaced
AGFF and GMP in 2019. The rate of this
contribution is, for non-managerial workers and managers, 0.86% of earnings up to the social
security ceiling and 1.08% between one and eight times the ceiling.
The CET (“Contribtion d’Équilibre Technique”):
a contribution of 0.14% on total earnings up to eight
times the ceiling, for employees who earnings exceed one time the ceiling.
2.2. Employer contributions
2.2.1. Pensions
8.55% (8.55% in 2020) of gross pay, up to the ceiling, plus a 1.90% (1.90% in 2020) levy on total pay.
2.2.2. Illness, pregnancy, disability, death
13.0% of total earnings (after 13.0% in 2020). The rate has been reduced to 7.0% up to 2.5 times the
minimum wage since 1
st
January 2019 with the conversion of the CICE into a permanent cut in social
contributions.
An additional contribution of 0.3% (contribution de solidarité autonomie
–
(CSA) is levied on total salary.
2.2.3. Unemployment
4.05% of earnings (4.05% in 2020) (4.5%, 5.5% or 7% for some temporary contracts), up to four times the
ceiling; in addition, 0.15% (0.15% in 2020) up to four times the ceiling to endow the salary guarantee fund
(AGS).
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2.2.4. Work-related accidents
Contribution rates for work-related accidents vary by line of business and are published annually in the
official gazette (Journal officiel de la République française). In 2021, the average rate is 2.24% (after 2.21%
in 2020.
2.2.5. Family allowances
5.25% of total pay. The rate has been reduced to 3.45% up to 1.6 times the minimum wage from 2015 with
the responsibility pact, up to 3.5 times the minimum wage from April 2016.
2.2.6. Others
Supplemental pension: for non-managers and managers, 4.72% up to the ceiling and 12.95%
between one and eight times the ceiling.
The CEG (“Contribution d’Équilibre Général”) contribution is 1.29% up to the ceiling, 1.62%
between one and eight times the ceiling for managers and non-managers. In the table, this is
combined with the rates for supplemental pensions.
The CET (“Contribution d’Equilibre Technique”),
a contribution of 0.21% on total earnings up to
eight times the ceiling for employees who earnings exceed one time the ceiling.
Others (construction, housing, apprenticeship, further training): 2.646% of pay (for enterprises with
more than 20 employees). The transport tax is not included because it varies geographically.
Contributions to finance a fund dedicated to workers exposed to distressing work conditions
(“Fonds Pénibilité”) vary with the levels of exposure of each worker and are therefore not included.
2.2.7. Reduction of employer-paid social insurance contributions
The reduction of employer-paid social insurance contributions, introduced in 1993, has been gradually
extended and strengthened. As of 2021, it includes two types of measures:
(i)
The general reduction of employer-paid social insurance (ex-“Fillon
Act”, also called today
“zero contributions URSSAF”) is a
decreasing reduction in social security contributions, which
eliminates all common law social contributions paid at the minimum wage and whose level
decreases with wage to become zero for a gross annual wage equal to 1.6 times the gross
annual minimum wage. It applies irrespective of the number of hours worked for workers with
contracts of at least three months. Since 1
st
January 2021, the maximum reduction is at
32.46% for companies with more than 50 employees. For companies with less than 50
employees, it is 32.06% since 1
st
January 2021.
A proportional reduction in health insurance and family allowance contributions, which allow
for a reduction of 6 and 1.8 percentage points respectively for gross annual wage below 2.5
and 3.5 times the gross annual minimum wage.
The 6 percentage point’s reduction replaces
since 1
st
January 2019 the competitive tax credit (CICE
–
crédit d’impôt pour la compétitivité
et l’emploi),
whereas the 1.8 percentage point reduction was introduced in 2015 by the
Responsibility Act (Phase 1).
(ii)
The gross annual minimum wage (for 1 820 hours) was changed twice in 2021: it was at EUR 18 655 from
January 1
st
2021, and increased at EUR 19 074 from October 1
st
2021.
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3. Universal cash transfers
3.1. Main minimum social benefits
The RSA
(“Revenu de Solidarité Active”) is the minimum income benefit. However, the eight family types
studied here earn too high an income to benefit from this benefit.
3.2. Main family benefits (in respect of dependent children)
Family allowances: monthly base for family allowances (BMAF) = EUR 414.40 between
1
st
January and 1
st
April 2021, since 1
st
April, the BMAF is EUR 414.81. The CRDS is levied on
family allowances at a rate of 0.5% (no deduction). The amounts in % of BMAF are before
CRDS.
The family allowances, granted to families with two or more children, are subject to revenue
conditions since 1 July 2015, and actualised every year:
o
Up to EUR 69 933 (+EUR 5 827 per child after the second child), the rate is 32% for two children
and 41% per additional child. An extra amount of 16% of the BMAF is reversed if the child is
over 14 years old (the extra amount is not incorporated into the model).
Between EUR 69 933 (+EUR 5 827 per child after the second child) and
EUR 93 212 (+EUR 5 827 per child after the second child), the above rates are divided by 2.
Beyond EUR 93 212 (+EUR 5 827 per child after the second child), the above rates are divided
by 4.
o
o
ASF (Allocation de Soutien Familial): extra child benefit for isolated parent is at most 28.13 % of
the BMAF per month. It is reduced by the amount of child support paid by the other parent to the
family.
ARS (Allocation de Rentrée Scolaire): The amount payable depends on the age of the child to
reflect needs. The allowance is payable to families or persons with children aged 6 to 18 attending
school, and whose income is below a certain level (not incorporated into the model).
Age of the child
610 years
1114 years
1518 years
Percentage of the BMAF in 2021
89.72%
94.67%
97.95%
Family supplement (Complément Familial): 41.65% of the BMAF. Subject to revenue ceilings, this
is paid to families as of the third child aged between 3 and 21. An extra amount (20.83% of BMAF)
is reversed for families whose incomes are below a given threshold (not incorporated into the
model).
Early childhood benefit (not incorporated in the model) known as PAJE (Prestation d’Accueil du
Jeune Enfant): subject to revenue ceilings. It includes:
‒
‒
‒
A birth grant of 229.75% of the BMAF received at the 2nd month following the birth.
A grant of 459.5% of the BMAF is received upon the adoption of a child.
A benefit (“allocation de base”) of 41.65% (or 20.825% depending on the family income)
of the BMAF a month from the birth of the child until three years of age.
3.3. Housing benefits
The housing benefits are not included in the model.
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3.4. In-work benefit
The November 2014 Supplementary Budget Act eliminated the earned income tax credit (Prime pour
l’emploi, PPE) so that it could be merged with the in-work
income supplement (RSA Activité) and become
a single in-work benefit. The in-work benefit was created by the Act of 17 August 2015 on
Labour-Management Dialogue and Employment, and has been in place since 1 January 2016. The in-work
benefit is better targeted to promote a return to full-time work for low-paid workers.
The amount of in-work benefit is equal to a targeted income, less the maximum between resources and a
lump sum.
The targeted income is determined as the sum of three elements:
A lump sum of EUR 553.71 (before CRDS) modulated according to the composition of the
household. For instance, it is increased by 50% for couple, then 30% for each child until two (EUR)
and 40% for each additional child (EUR). The amount may be increased for a temporary period
2
for an isolated parent (128.412% of the basic lump sum for the adult and then 42.804% for each
child).
An individual bonus of 29.101% of the basic lump sum is planned for persons whose net income
exceeds around 100% of the net minimum wage; this bonus grows linearly if the net income is
between around 50% and 100% of the net minimum wage.
3
An individual bonus which grows
linearly, starting at 0
€ if the net monthly income is lesser
than 59 times the hourly net minimum
wage (618.32
€), and reaching 161.14€, or 29.101%
of the basic lump sum, for net monthly
incomes exceeding 120 times the hourly net minimum wage (1 257.60
€).
61% of the net professional income of the household.
Then resources are assessed as the sum of the household income, plus the benefits (family benefits and
others, except RSA and housing benefits).
4
A lump sum depending on the composition of the household
(12% of the basic lump sum (EUR 553.71) for a single person, 16% for a couple, 16.5% for three persons
or plus) is used to take into account the housing benefits.
5
4. Main changes in the tax system and social benefits regime since the taxation
of 2015 income
Tax system (2020 income)
o
New tax schedule following the personal income tax reform (Budget Act 2020):
The Budget Act of 2020 (article 2) introduced a reform of the personal income system. The
reform provides a significant lowering of income tax rate for an amount of around 5 billion euros.
16.9 million taxpayers are benefitting from this reduction from the 1
st
January, for an estimated
average gain of around EUR 300. The changes are the following:
‒
‒
‒
the marginal rate of 14% is reduced at 11%;
the tax rebate is reduced from three quarters to 45.25%;
the special 20% tax reduction rate is removed.
If the final tax is less than EUR 61, no tax is payable.
Increase of 1.7 points of CSG deductible (2018)
Social benefits regime
o
Increased reduction of employer-paid contributions for family allowance: 3.45% instead of
5.25% for salary up to 3.5 times the minimum wage from April 2016 (1.6 times before).
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321
o
o
Removal of sickness and unemployment employee contribution
Creation of a new cash transfer benefit for low income workers (“prime d’activité”) which replace
the PPE and the “RSA activité”.
6
4.1. Changes to labour taxation due to the COVID pandemic in 2020 and 2021
The French government has launched several measures
in order to address companies’ need for
liquidity:
Postponement of social and tax liabilities
for all companies upon request for March, April, May
and June 2020 (first lockdown) and from September to December 2020 (second lockdown). This
measure was extended to August 2021 and for the whole period of administrative closures for
affected businesses. Possibility to spread the payment of social security contributions over a period
of up to 36 months. For large companies (or companies that are members of a large group),
requests for postponement of tax and social security contributions payments are now conditional
to the non-payment of dividends and the non-repurchase of shares between 27 March and
31 December 2020.
Tax relief
on a case-by-case basis : Cancellation of social security charges for companies with
less than 10 employees that had to close down by administrative decision;
Exemption and support for the payment of
employer’s
social security contributions
for
SMEs and VSEs during the administrative closure (activity periods from February to May 2020,
September 2020 to May 2021), in particular in tourism, hotels, cafés and restaurants, events and
cultural sectors. Since June 2021, exemptions from social security contributions for SMEs and
VSEs have been interrupted, except for businesses that remained closed by administrative order.
Support for social security contribution payments were extended but lowered (15 % of total payroll
compared to 20 % previously) until August 2021, except in the confined overseas territories.
The French government has also launched measures for
enhancing labour flexibility and household
income support:
Implementation of an exceptional and massive short-time work scheme (Covid STW).
Between March 2020 and June 2021, employees have received an allowance of 70 % of their
gross salary (approximately 84 % of their net salary), and 100 % for minimum-wage workers. STW
earnings have been exempted from social security contributions and the CSG rate is lower (6.2 %
instead of 9.2 %). The employer received full State compensation during lockdown and up to 85 %
of the employee’s
STW allowance, except for businesses that remained closed by administrative
order and in the hardest hit sectors (hotels, restaurants, cafes, events, sport, culture,
etc.).
This
scheme was in force until April 2021 for all businesses. As of May 2021, the State compensation
has been gradually reduced (see table below).
As of September 2021 for the hardest hit sectors, and since July 2021 for the other sectors,
the exceptional short-time work scheme have been replaced by an Ordinary STW scheme
(APDC,
activité partielle de droit commun).
Employees receive an allowance of 60 % of their gross
salary (approximately 72 % of their net salary), and 90 % for minimum-wage workers. Employers
contribute up to 40 % of the
employees’ STW allowance.
Businesses operating in the hardest-hit
sectors that are still impacted by COVID-19 restrictions such as density limits or that are reporting
a drop in revenue of more than 80 % will continue to benefit from a null contribution until the end
of 2021.
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322
May
Plants closed by administrative
decision or
plants in priority sectors with a
80% minimum loss of
turnover
1
Hardest hit sectors
(S1 et S1bis)
Covid STW
(0 remaining costs to
the employer)
Covid STW
(0 remaining costs to
the employer)
June
Covid STW
(0 remaining costs to
the employer)
Covid STW
(0 remaining costs to
the employer)
July
Covid STW
(0 remaining costs to
the employer)
Covid STW
(15% remaining costs
to the employer)
August
Covid STW
(0 remaining costs to
the employer)
Covid STW
(25% remaining costs
to the employer)
September to
December
Covid STW
(0 remaining
costs to
the employer)
Ordinary STW
(40% remaining
costs
to the employer)
Other sectors
Covid STW
(15% remaining costs
to the employer)
Covid STW
(25% remaining costs
to the employer)
Ordinary STW
(40% remaining costs
to the employer)
Ordinary STW
(40% remaining costs
to the employer)
Ordinary STW
(40% remaining
costs
to the employer)
1. In 2021, with regard to the same month in 2019 or 2020.
Moreover, since July 2020, a Long-Term
job retention scheme (“Activité
partielle de longue
durée”,
APLD) may cover employees of firms that are durably affected by the Covid crisis.
It offers a more generous protection than the Ordinary STW scheme (only 15 % remaining costs
to the employer). Unions and business must reach an agreement at firm, group or sector level on
a reduction of working time. The agreement and the company’s document must include a diagnosis
on the economic situation and activity prospects of the company, group or sector as well as the
maximum reduction of working time (capped by law at 40 % of the usual working time per worker)
and commitments in terms of jobs and training.
Exemption from income tax and social security contributions for overtime worked by
employees,
from 16 March until the end of the state of health emergency, up to a maximum of
EUR 7 500 per year (currently EUR 5 000);
Removal of the obligation to sign a profit-sharing agreement for the payment of an exceptional
bonus exempt from tax and social charges up to a limit of EUR 1 000 in 2020.
In the case of a profit-
sharing agreement, the amount of the exceptional bonus is up to EUR 2 000.
5. Memorandum items
To assess the degree of comparability between countries, the following additional information should be
taken into account:
Coverage is of the private and semi-public sectors of NACE sections C to K up to 2007 and NACE
rev.2 sections B to N from 2008.
The category “employees” encompasses all full-time
dependent employees (excluding apprentices
and interns).
The figures presented are obtained by applying income tax and social contribution scales to
gross salaries as listed in annual social data reports (DADS) in NACE.
There is a break in the average wage time-series starting with the year 2016. That year, the National
Statistics Office (INSEE) changed their methodology for the calculations of the average wage.
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323
2021 Parameter values
APW earnings
Income tax
Work expenses
work_rel_fl
work_rel_ceil
work_rel_rate
Tax schedule
tax_sch
448
12 829
0,100
0,000
0,110
0,300
0,410
0,450
limit_demipart
limit_sp_demipart1
Décote value
decote_sing
decote_mar
decote_pente
Tax reduction
red_taux
red_seuil_1
red_seuil_2
red_seuil_dp
tax_min
CEHR
cehr_rate1
cehr_rate2
cehr_ceil1
cehr_ceil2
CSG+CRDS
CSG_CRDS_abat
CSG_rat_noded
CRDS_rat_noded
CSG_CRDS_rat_noded
CSG_rat_ded
CRDS_special
1 592
3 756
1 746
2 888
0,4525
0,0000
0,0000
0,0000
0,0000
61
0,0300
0,0400
250000
500000
0,0175
0,0240
0,0050
0,0290
0,0680
0,0050
10 225
26 070
74 545
160 336
Ave_earn
39 971
Secretariat
estimate
Employee contributions
pension_rate
pension_rate2
Sickness
Unemployment
Extra pension (non-
cadres) (incl. AGFF)
sickness_rate
unemp_rate
pens_rate_ex
pens_rate_ex2
pens_rate_ex3
0,0690
0,0040
0,0000
0,0000
0,0401
0,0972
0,0014
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324
Employer contributions
pens_empr1
pens_empr2
Sickness
sickness_empr
Sickness_emp2
Authonomous Solidarity
Contribution
Unemployment (incl.
"garantie de salaire")
Accidents
Family Allowance
CSA
0,0855
0,0190
0,0700
0,1300
0,0030
unemp_empr
accidents_empr
fam_empr
fam_empr_2
0,0420
0,0224
0,0525
0,0345
0,0601
0,1457
0,0021
0,0265
Extra pension (incl.
AGFF)
pens_empr_ex
pens_empr_ex2
pens_empr_ex3
Others
CS reduction &
corporate tax credit
Employer SSC reduction
rate
Employer SSC reduction
maximum
Employer SSC reduction
SMIC reference
others_empr
SSC_empr_redrate2
0,6
SSC_empr_red_max
0,3246
SSC_empr_SMIC_ref
SSC_empr_SMIC2
SSC_empr_SMIC3
1,6
3,5
2,5
0,0
2,5
Taux de réduction CICE
cice_red
cice_max
Social transfers
Child benefit (second
child)
third & subsequent
before CRDS
First ceiling for CB
Second ceiling for CB
CB_2
1 592,48
CB_3
2 040,36
CB_c1
CB_c2
69 933,00
93 212,00
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325
Increase of ceiling per
child
Extra child benefit for
isolated parent
Prime d'activité
CB_ceiling_extra_child
CB_isol
pa_forf
pa_maj1
pa_maj2
pa_maj3
pa_maj_isol1
pa_maj_isol2
pa_pct
pa_bonus
pa_bonus1
pa_bonus2
pa_forf_logement1
pa_forf_logement2
pa_forf_logement3
Others
Social security
contributions
Derivation of minimum
income
SSC_ceil
SMIC_horaire
SMIC_heures
SMIC
41 136
10,31
1 820
18 760
5 827,00
1 399,89
553,71
0,50
0,30
0,40
0,28412
0,42804
0,61
0,29101
=(59*(SMIC_horraire*12))/SMIC
=(120*(SMIC_horraire*12))/SMIC
0,12
0,16
0,17
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326
2021 Tax equations
The equations for the French system are mostly calculated on a family basis. Variable names are defined
in the table of parameters above, within the equations table, or are the
standard variables “married” and
“children”. A reference to a variable with the affix “_total” indicates the sum of the relevant variable values
for the principal and spouse. And the affixes “_princ” and “_spouse” indicate the value for the principal and
spouse,
respectively. Equations for a single person are as shown for the principal, with “_spouse” values
taken as 0.
Line in country table and
intermediate steps
1.
Variable name
Earn
Quotient
Range
Equation
Earnings
Quotient for tax calculation
Allowances
CSG deductible
J
1+Married+IF(Children<3, Children/2, Children-
1)+0.5*(Married=0)*(Children>0)
CSG_rat_ded*((1-
CSG_CRDS_abat)*MIN(earn;4*SSC_ceil)+Positive(earn-
4*SSC_ceil))
earn-SSC-CSG_ded
MIN(work_rel_ceil, MAX(work_rel_rate* earn_dec, MIN(work_rel_fl,
earn_dec)))
0
0
Positive(earn_dec_total-work_exp)
MAX(quotient*Tax(tax_inc/quotient, tax_sch), IF(Married,
2*Tax(tax_inc/2, tax_sch)-limit_demipart*(quotient-2), Tax(tax_inc,
tax_sch)-(Children>0)* (limit_sp_demipart1+limit_demipart*(quotient-
2))))++cehr_rate1* MIN((cehr_ceil2-
cehr_ceil1)*(1+Married);MAX(tax_inc-
cehr_ceil1*(1+Married);0))+cehr_rate2 * MAX(tax_inc-
cehr_ceil2*(1+Married);0)
SI(Married;Positive(MINA(tax_sch; (1+decote_pente)*tax_sch-
decote_pente*decote_mar));Positive(MINA(tax_sch;(1+decote_pente
)*tax_sch-decote_pente*decote_sing)))
(adj_tax>=tax_min)*adj_tax
CSG_CRDS_rat_nod*((1-
CSG_CRDS_abat)*MIN(earn;4*SSC_ceil)+Positive(earn-
4*SSC_ceil))
CSG_rat_ded*((1-
CSG_CRDS_abat)*MIN(earn;4*SSC_ceil)+Positive(earn-
4*SSC_ceil))
adj_tax*SI((tax_inc<=red_seuil_1*(1+Married)+red_seuil_dp*Childre
n);red_taux;SI(tax_inc<='red_seuil_2*(1+Married)+red_seuil_dp*Chil
dren;(tax_inc*red_taux'/(red_seuil_1*(1+Married)+red_seuil_dp*Child
ren-
(red_seuil_2*(1+Married)+red_seuil_dp*Children)))+(red_taux*(red_s
euil_2*(1+Married)+red_seuil_dp*Children))/(red_seuil_2*(1+Married
)+red_seuil_dp*Children-
(red_seuil_1*(1+Married)+red_seuil_dp*Children));0))
inc_tax+CSG_CRDS_noded+CSG_ded-tax_cr
0
((sickness_rate+pension_rate2)*earn +
(pension_rate + pens_rate_ex )*MINA(earn;SSC_ceil) +
unemp_rate*MINA(earn;4*SSC_ceil) +
pens_rate_ex2* MAX(MIN(earn;8*SSC_ceil) -
SSC_ceil;0))+SI(earn<SSC_ceil;0;SI(earn>8*SSC_ceil;8*SSC_ceil*p
ens_rate_ex3;pens_rate_ex3*earn))
SI(Children<2;0;(CB_2+(Children-
2.
CSG_ded
B
Salary net
Work related
Basic
Credits in taxable income
CG taxable income
CG tax before credits
Calculation according to
schedule
earn_dec
work_exp
basic_al
taxbl_cr
tax_inc
sch_tax
B
B
B
B
J
J
3.
4.
5.
Adjusted for decote
adj_tax
J
Tax liable
CSG+CRDS (non-deductible)
inc_tax
CSG_CRDS_no
ded
CSG_ded
J
B
CSG deductible
B
6.
Tax credits :
tax_cr
J
7.
8.
9.
CG tax
State and local taxes
Employees' soc security
CG_tax
local_tax
SSC
J
J
B
11.
Cash transfers
cash_transf_gro
J
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ss
2)*CB_3)*SI(tax_inc<=(CB_c1+CB_ceiling_extra_child*(Children-
2));1;SI(tax_inc<=(CB_c2+CB_ceiling_extra_child*(Children-
2));0,5;0,25)))+SI(Isolated=1;CB_isol*Children;0)
J
MAX(SI((Isolated='1);'
12*pa_forf*(1+pa_maj_isol1+pa_maj_isol2*Children);
12*pa_forf*(1+SI(Married=1;pa_maj1;0)+pa_maj2*SI(Children<=2;C
hildren;0)+pa_maj3*SI(Children>2;Children-
2;0)))+pa_pct*(earn_dec-
CSG_CRDS_noded)+pa_bonus*pa_forf/(pa_bonus2-
pa_bonus1)*12*SI(ET(pa_bonus1*SMIC<(earn_dec_princ-
CSG_CRDS_noded_princ);pa_bonus2*SMIC>(earn_dec_princ-
CSG_CRDS_noded_princ));(earn_dec_princ-
CSG_CRDS_noded_princ)/SMIC-
pa_bonus1;0)+pa_bonus*pa_forf/(pa_bonus2-
pa_bonus1)*12*SI(ET(pa_bonus1*SMIC<(earn_dec_spouse-
CSG_CRDS_noded_spouse);pa_bonus2*SMIC>(earn_dec_spouse-
CSG_CRDS_noded_spouse));(earn_dec_spouse-
CSG_CRDS_noded_spouse)/SMIC-
pa_bonus1;0)+pa_bonus*pa_forf*12*SI((earn_dec_princ-
CSG_CRDS_noded_princ)>=pa_bonus2*SMIC;1;0)+pa_bonus*pa_f
orf*12*SI((earn_dec_spouse-
CSG_CRDS_noded_spouse)>=pa_bonus2*SMIC;1;0)-
MAX(earn_dec-CSG_CRDS_noded+(family_benefit_gross-
SI(Isolated='1;CB_isol*Children;0)*(1-
(22,5%'/28,15%)))+((Married+Children='0)*'
pa_forf_logement1*pa_forf*12+
(Married+Children='1)*pa_forf_logement2*pa_forf*1,5*12' +
(Married+Children>='2)*pa_forf_logement3*pa_forf*1,8*12);'
SI(ET((Married='0);(Children>0));'
12*pa_forf*(1+pa_maj_isol1+pa_maj_isol2*Children);pa_forf*12*(1+
SI(Married=1;pa_maj1;0)+pa_maj2*SI(Children<=2;Children;0)+pa_
maj3*SI(Children>2;Children-2;0))));0)
cash_transf_gross*-1*CRDS_special
cash_transf_gross+crds_cash_transf
(CSA + pens_empr2 + accidents_empr+others_empr)*earn +
pens_empr1*MINA(earn;SSC_ceil) +
pens_empr_ex*MINA(earn;SSC_ceil) +
pens_empr_ex2* MAX(MIN(earn;8*SSC_ceil) - SSC_ceil;0) +
unemp_empr*MIN(earn;4*SSC_ceil)
+SI(earn<SSC_empr_SMIC2*SMIC; fam_empr_2*earn;
fam_empr*earn)+SI(earn<SSC_ceil;0;SI(earn>8*SSC_ceil;8*SSC_c
eil*pens_empr_ex3;pens_empr_ex3*earn))+SI(earn<SSC_empr_SM
IC3*SMIC;sickness_empr*earn;sickness_empr2*earn)
IF(OR(earn>SSC_empr_SMIC_ref*SMIC,earn='0),0,-MIN'
(SSC_empr_red_max*earn,(SSC_empr_red_max/SSC_empr_redrat
e2)*(SSC_empr_SMIC_ref*SMIC/earn-1)*earn))
-IF(earn<cice_max*SMIC;earn*cice_red)
SSC_empr_gross+SSC_empr_reduction
in_work_benefit_
gross
13.
Employer's soc security
crds_cash_transf
cash_transf_net
SSC_empr_gros
s
J
J
B
SSC_empr_redu
ction
B
SSC_empr_final
B
Key to range of equation B calculated separately for both principal earner and spouse P calculated for principal only (value taken as 0 for spouse
calculation) J calculated once only on a joint basis.
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328
Notes
1
The social protection scheme is named ARRCO for non-managers and AGIRC for managers. The two
protection schemes have been merged since the 1st January 2019.
2
During at most 12 months over a 18-months period; or, if there is a child under three in the family, until
the child is three.
3
The boundaries are defined as: minimum of 59 hours paid at gross minimum wage per hour per month
and maximum of 120 hours paid at gross minimum wage per hour per month.
4
Capital income, unemployment benefits, pensions or minimum old-age pensions are not taken into
account in this model.
5
The complete formula uses the minimum of this lump sum tax and the amount of housing benefits, if the
family is a tenant. As the model does not include housing benefits, we only use the lump sum in the formula.
This method tends to minimize
the amount of “prime d’activité” served.
6
In the previous model, for 2015 revenues, this reform only affects the income tax (no PPE in 2016) but
not the benefits, since the “prime d’activité” will be served as from the beginning of 2016.
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Germany
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in the
tax/benefit system. The methodology also includes the parameter values and
tax equations underlying the data.
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Germany 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employers' compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
44.69%
n.a.
53.90%
n.a.
49.65%
n.a.
58.03%
n.a.
47.00%
n.a.
47.00%
n.a.
43.07%
n.a.
52.55%
n.a.
12.85%
20.23%
33.08%
44.22%
17.50%
20.23%
37.73%
48.09%
26.01%
16.62%
42.63%
50.74%
-6.32%
19.98%
13.66%
28.03%
0
0
23 566
7 034
0
0
32 728
10 498
0
0
50 351
14 446
0
0
30 403
7 034
7 122
11 647
10 629
19 827
14 591
37 417
7 034
4 810
7 122
10 629
14 591
7 034
0
4 525
0
0
9 198
0
0
22 825
0
5 556
- 2 224
0
0
0
0
5 556
0
0
6 064
1 000
36
7 100
0
28 112
4 525
0
0
9 050
1 000
36
10 086
0
42 470
9 198
0
0
12 117
1 000
36
13 153
0
74 615
22 825
4 248
0
5 976
1 000
36
11 260
0
23 952
3 332
67
none
35 212
100
none
52 556
167
none
87 768
67
2.00
35 212
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Germany 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employers' compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
42.14%
43.75%
51.78%
53.11%
47.04%
47.04%
55.86%
55.86%
46.63%
46.63%
55.51%
55.51%
47.17%
47.17%
55.97%
55.97%
-0.66%
19.98%
19.31%
32.75%
9.14%
19.98%
29.12%
40.92%
12.19%
19.98%
32.16%
43.46%
15.39%
20.23%
35.62%
46.34%
0
0
42 406
10 498
0
0
62 212
17 532
0
0
71 303
20 996
0
0
56 509
17 532
10 498
10 150
17 532
25 556
20 996
33 808
17 751
31 259
10 498
17 532
20 996
17 751
5 556
- 348
0
5 556
8 024
0
0
12 812
0
0
13 508
0
5 556
5 556
0
0
0
0
8 919
1 000
72
9 991
0
42 565
5 208
0
0
14 894
2 000
72
16 966
0
70 802
13 580
0
16 776
17 837
2 000
72
36 685
0
68 426
12 812
0
0
15 113
2 000
72
17 185
0
70 583
13 508
100-0
2
52 556
100-67
2
87 768
100-100
2
105 111
100-67
none
87 768
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332
The national currency is the Euro (EUR). In 2021, EUR 0.84 was equal to USD 1. The average worker
earned EUR 52 556 (Secretariat estimate).
1. Personal Income Tax Systems
1.1. Central/federal government income taxes
1.1.1. Tax unit
Generally, the tax unit is the individual. Spouses may choose between two options: Joint assessment or
individual assessment. In the case of joint assessment the tax unit is the married couple. For the vast
majority of couples joint assessment is beneficial compared to individual assessment. The income of
dependent children is not assessable with that of the parents. Therefore, the calculations in this Report are
based on the assumption of joint taxation for spouses.
1.1.2. Tax allowances and tax credits:
1.1.2.1. Standard reliefs and work related expenses
Basic reliefs: None.
Standard marital status reliefs: In the case of joint assessment the income tax liability for spouses
is computed by the following splitting method:
‒
‒
‒
First step: The taxable incomes of the spouses are calculated, summed up (specific
allowances are doubled) and the resulting sum is divided by two.
Second step: The tax rate is applied to this averaged tax base.
Third step: The tax liability is calculated by doubling the result of step 2.
Results: Given the progressive income taxation and different income levels the resulting tax liability for the
couple is lower than with individual taxation. That is why the household as an economic unit benefits from
this system. The splitting effect is the highest for couples with one zero taxable income and decreases with
converging incomes of spouses. The splitting method results in identical average and marginal income tax
rates for the principal and second earner, irrespective of the income distribution among them.
Relief(s) for children: In 2021, there are increased tax credits of EUR 2 628 for the first and the
second child, of EUR 2 700 for the third child and of EUR 3 000 for the fourth and subsequent
children. There is a tax allowance per parent of EUR 2 730 for the subsistence of a child and an
additional EUR 1 464 for minding and education or training needs (EUR 4 194). The amount of
these allowances is doubled in case of jointly assessed parents and for lone parents if the other
parent does not pay alimony. If the value of the tax credit is less than the relief calculated applying
the tax allowances, the tax allowance is applied instead of the tax credit. In the calculations
presented in this Report we assume that a lone parent always receives the doubled child
allowances.
In 2021, families with children receive a one-time bonus benefit payment of EUR 150 per child.
The bonus will not be offset against basic income support for jobseekers. However, in the case of
households with higher incomes, the bonus will be offset against the tax allowance for children.
Relief for lone parents: As of 1 January 2015, taxpayers who live alone with at least one child that
entitles them to the tax allowances or tax credits for children, receive a standard additional
allowance of EUR 1 908 (formerly EUR 1 308). This additional allowance is increased by EUR 240
for each child in case of more than one child living in the household.
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In 2020, the standard tax allowance for lone parents has been increased to EUR 4 008. Initially,
this has been a temporary measure for the years 2020 and 2021 to mitigate the particular
challenges faced by this family type due to the pandemic. Later on, the increase was made
permanent from 2022 onwards to further support single parents.
Reliefs for social security contributions and life insurance contributions: Social security
contributions and other expenses incurred in provision for the future (e.g. life insurance) are
deductible up to specific ceilings. In 2005, a new calculation scheme came into force:
‒
Step 1: all contributions made to pension funds (i.e. both
employee’s and employer’s
contributions) are added up. Step 2: the resulting amount is limited to the equivalent of
the maximum contribution rate to miners’ pension insurance scheme, rounded up to
the nearest euro (in 2021: EUR 25 787). Step 3: a certain percentage is applied to this
amount (starting from 60% in 2005, this percentage will be increased by 2 percentage
points each year; it will reach 100% in 2025). Step 4: the resulting amount, diminished
by the (tax-free) contributions of the employer, is deductible from income.
The tax treatment of social security expenses (health, unemployment and care
insurance) changed as of 1 January 2010. Employees’ annual contributions to statutory
health insurance excluding sickness benefit (assumed to amount to 96% of statutory
health contributions) and employees’ contributions to mandatory long-term
care
insurance are deductible from the tax base. In case these contributions do not exceed
EUR 1 900/3 800 (single/married couples), contributions to unemployment insurance
and other insurances premiums can be deducted in addition up to this ceiling.
‒
Work related expenses: EUR 1 000 lump-sum deduction for work related expenses per gainfully
employed person. Work related expenses that exceed the lump-sum are fully deductible (no
ceiling). In December 2020, a "home office" deduction for the years 2020 and 2021 came into
effect. It adds up to EUR 5 per day spent exclusively working at home and is limited to a maximum
amount of EUR 600 per year (corresponding to 120 working days). The ”home office”
deduction is
counted against the general lump sum deduction for work-related expenses.
Special expenses: Lump sum allowance (EUR 36/72 (singles/couples)) for special expenses, e.g.
for tax accountancy. The actual expenses will be fully deductible from taxable income if the
taxpayer proves that these expenses exceed the lump sum allowance.
1.1.2.2. Main non-standard tax reliefs applicable to an AW
Contributions to pensions, life insurance, superannuation schemes: Other expenses than the
compulsory contributions to social security are deductible as reliefs for (voluntary) social security
contributions up to specific ceilings (see section 1.1.2.1.).
Medical expenses: Partially deductible if not covered by insurance.
1.1.3. Tax schedule
The German tax schedule is formula based. Taxable income is rounded down (to the EUR).
���� =
The basic allowance in 2021 is EUR 9 744.
X is the taxable income,
T is the income tax liability,
As of 1 January 2021 the following definitions are used in the income tax liability formulas:
����– 9 744
10 000
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���� =
����– 14 753
10 000
The income tax liability (amounts in EUR) is calculated as follows:
1.
2.
3.
4.
5.
���� = 0 ������������ ���� ≤ 9 744
���� = (995.21 ���� + 1 400)���� ������������ 9 745 ≤ ���� ≤ 14 753
���� = (208.85 ���� + 2 397)���� + 950.96 ������������ 14 754 ≤ ���� ≤ 57 918
���� = 0.42 ���� − 9 136.63 ������������ 57 919 ≤ ���� ≤ 274 612
���� = 0.45 ���� − 17 374.99 ������������ 274 613 ≤ ����
These formulas are used to calculate the income tax for single individuals and married couples too.
If families choose the option of being assessed separately these formulas are applied to the individual
taxable income of the principal earner and the spouse. In the case of jointly assessed families these rates
are applied to half of the joint taxable income (see point 1.1.2.1. Splitting method).
1.1.4. Solidarity surcharge
As of 1 January 2021, the solidarity surcharge is levied at 5.5% of the income tax liability subject to an
exemption limit of EUR 16 956/33 912 (singles/couples). The income tax liability is calculated applying the
tax allowance for children. If the income tax liability exceeds the exemption limit, the solidarity surcharge
will be phased in at a higher rate of 11.9% of the difference between the income tax liability and the
exemption limit until it equals 5.5% of the total liability.
1.2. State and local income taxes
None.
2. Compulsory Social Security Contributions to Schemes Operated Within the
Government Sector
The amount of social security contributions depends on the wage level and the insurance contribution
rates. All contributions are subject to a contribution ceiling, i.e. the maximum income up to which statutory
insurance contributions are calculated. The contribution rates for pension, health, care and unemployment
insurances are fixed by the government.
2.1.
Employees’ contributions
In general, earnings up to EUR 4 800 per year were free of employee social security contributions until 31
December 2012. As of 1 January 2013, some essential changes came into effect concerning minimally
paid employment. The earnings limit increased from EUR 400 to EUR 450 per month. Persons whose
mini-job started before 2013 and do not exceed the previous earnings limit of EUR 400 stay contribution-
free in all classes of social insurance. Otherwise, persons who take up a new mini-job are generally subject
to mandatory insurance coverage in the statutory pension scheme with the full pension contribution rate of
18.6% (in 2021). If the earnings are below the amount of EUR 175 (minimum contribution limit), a minimum
contribution of EUR 32.55 has to be paid (18.6% of EUR 175). The employer’s share amounts to 15% of
the whole pay whereas
the employee’s part adds up to 3.6% (or the difference between minimum
contribution and employer share). By applying for an exemption from obligatory insurance coverage the
mini-job holder may reduce his/her share to EUR 0.
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As of 1 April 2003, there was an additional concession for employees with monthly income between EUR
400.01 and EUR 800 per month (the so-called
‘sliding pay scale’, EUR 4 800.12 and EUR 9 600 per year).
Due to the new regulations in 2013 mentioned above the earnings limits shifted to EUR 450.01 and EUR
850.00 per month (EUR 5 400.12 and EUR 10 200 per year). As of 1 July 2019, provisions for the newly-
created so-called
‘transition band’ extend the upper earnings limit from EUR 850 per month to
EUR 1 300
per month (EUR 15 600 per year).
If the employee’s income falls within this range, part of the income
is
exempt from social insurance contributions. However, employers are still required to pay the regular
contributions on the employee’s earnings. The arrangement is purely intended to relieve
the financial
burden on employees. The employees’ contributions to social insurance rise on a straight-line
basis over
the income band reaching the full rate at EUR 1 300 per month.
Within the ‘transition band’, employees’
reduced contribution rates to statutory pension insurance do not reduce their pension entitlements. Details
on social security contributions for workers earning more than EUR 15 600 per year are provided below.
2.1.1. Pensions
Employers and employees pay each half of the contribution rate of 18.6% in 2021, that is 9.3% of the
employee’s gross wage earnings, up to a contribution ceiling of EUR
85 200.
2.1.2. Sickness
As of 1 January 2015, the applicable contribution rate is 14.6% on principle (portion of 7.3% for employers
and employees). Depending on the financial situation of each sickness fund, employees only were obliged
to pay a supplementary contribution to the sickness fund until December 2018. Since January 2019,
employees and employers have to pay one half each of this supplementary contribution which amounts to
1.3% on average in 2021 (portion of 0.65% for employers and employees). Therefore, the contribution rate
averages 7.95% for employees and employers in 2021. The contribution ceiling in 2021 is EUR 58 050.
While all calculations shown in this Report assume membership in the public health insurance, workers
with earnings above the contribution ceiling may opt out of the mandatory public health insurance system
and may choose a private insurance provider instead (those opting for a private health insurance provider
are required to obtain private long-term care insurance as well).
2.1.3. Unemployment
Employees pay half of the insurance contributions; the employer pays the other half. In 2021, the
contribution rate is 2.4% of assessable income. Employee and employer each pay 1.2%. The contribution
ceiling in 2021 is EUR 85 200.
2.1.4. Care
A long-term care insurance (a 1% contribution rate) went into effect on 1 January 1995. The rate was
raised to 1.7% of the gross wage when home nursing care benefits were added six months later. As of
1 July 2008, the rate was increased to 1.95%. In 2013 and 2014, the contribution rate amounted to 2.05%.
In 2015 and 2016, the contribution rate added up to 2.35%. As of 1 January 2017, the contribution rate
was augmented to 2.55%. Since January 2019, the contribution rate has amounted to 3.05%. The
employers pay half of the contributions for long-term care insurance. In other words, employers and
employees both pay a rate of 1.525%. The assessable income is scaled according to the gross wage
earnings but there is a contribution ceiling of EUR 58 050 in 2021.
As from 1 January 2005, child-raising is given special recognition in the law relating to statutory long-term
care insurance. Childless contribution payers are required to pay a supplement of 0.25%, raising the
contribution rate paid by a childless employee from 0.975% to 1.225% as of 1 July 2008. In 2013 and 2014,
the contribution rate of a childless employee added up to 1.275%. In 2015 and 2016, the contribution rate
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amounted to 1.425% for a childless employee. As of 1 January 2017, the contribution rate was raised to
1.525% for a childless employee. Since January 2019, a childless employee has had to pay a contribution
rate of 1.775%.
2.1.5. Work injury
Employer only.
2.1.6. Family allowances
None.
2.1.7. Others
None.
2.2.
Employers’ contributions
See Section 2.1.
2.2.1. Pensions, sickness, unemployment, care:
See Section 2.1.
2.2.2. Work injury
Germany has established a statutory occupational accident insurance. It is provided by industrial,
agricultural and public-sector
employers’ liability insurance funds. This insurance protects employees and
their families against the consequences of accidents at work and occupational illnesses. It is funded by
contributions paid by employers only. The amount of the employer’s contributions depends on the sum
total of employee’s annual pay and the employer’s respective hazard level. As it is
not possible to identify
a representative contribution rate, these amounts are not considered in this Report.
2.2.3. Family allowances
None.
2.2.4. Others
None.
3. Universal Cash Transfers
3.1. Transfers related to marital status
None.
3.2. Transfers for dependent children
None.
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4. Main Changes in Tax/Benefit Systems Since 1997
The following table shows changes in the tax credit and the tax allowance for children since 1997:
Year
First child
Second child
Child credit
Third child
Fourth and
subsequent
children
2 147
2 147
2 147
2 148
2 340
2 580
2 628
2 652
2 676
2 700
2 760
2 820
3 000
3 534
3 534
5 080
5 808
6 024
7 008
7 152
7 248
7 356
7 428
7 620
7 812
8 388
Child allowance
1997
1999
2000
2002
2009
1
2010
2015
2016
2017
2018
2019
2020
2
2021
3
1 350
1 534
1 657
1 848
1 968
2 208
2 256
2 280
2 304
2 328
2 388
2 448
2 628
1 350
1 534
1 657
1 848
1 968
2 208
2 256
2 280
2 304
2 328
2 388
2 448
2 628
1 841
1 841
1 841
1 848
2 040
2 280
2 328
2 352
2 376
2 400
2 460
2 520
2 700
1. plus EUR 100 one-off child credit payment for each child.
2. plus EUR 300 one-time bonus benefit payment per child
3. plus EUR 150 one-time bonus benefit payment per child
Up to 2004, the calculation of the relief for social security contributions and other expenses proceeded in
three steps. First, EUR 3 068/6 136 (singles/couples) was deducted. These amounts were, however,
lowered by 16% of gross wages (serving as a proxy for employers’ social security contributions). This
deduction was provided as a partial compensation for the self-employed who do not receive tax-free
employers’ social security contributions. Second, the remaining expenses were deductible up to
EUR 1 334/2 668 (singles/couples). Third, half of the remaining expenses were deductible up to EUR 667/1
334 (singles/couples).
In 2004, the tax rate was reduced and the formula for calculating the income tax was changed. The relief
for lone parents was reduced to EUR 1 308, the lump sum allowance for work related expenses was
reduced to EUR 920.
As from 1 January 2005, the final stage of the 2000-tax reform came into effect. The bottom and top income
tax rates were further reduced to 15% and 42%. Since 1998, both the bottom and top income tax rate have
been reduced by about 11 percentage points while the personal allowance has been raised from EUR 6
322 to EUR 7 664. The tax cuts reduce the tax burden for all income taxpayers, affording the greatest relief
to employees and families with low and medium incomes as well as to small- and medium-sized
unincorporated businesses.
On 1 January 2005, the law regulating the taxation of pensions and pension expenses entered into force.
The law provides a gradual transition to ex-post taxation of pensions paid by the statutory pensions
insurance. In the long run, the tax treatment of capital-based employee pension schemes based on a
contract between employer and employee will be reformed in the same way as the tax treatment in respect
of the state pension scheme. In addition to the increased deductibility of contributions to the state and
certain private pension schemes, the law contains rules which are intended to increase the attractiveness
of private capital-based pension schemes and to encourage individuals to invest privately for their old-age
pension.
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Up to 30 June of 2005, employees paid half of the sickness insurance contributions; the employer paid the
other half. As from 1 July 2005, members of the statutory health insurance scheme also paid an income-
linked contribution of 0.9% to which employers do not contributed. In return from 1 July 2005, all statutory
health insurance funds have reduced their contribution rates by 0.9 percentage points.
In 2007, a new top income tax rate of 45% was introduced for taxable income above EUR 250 000 (EUR
500 000 for jointly assessed spouses).
In 2009, the bottom income tax rate was reduced to 14%. The basic allowance was increased to EUR 7
834. All thresholds were increased by EUR 400.
Since 1 January 2010, the basic allowance has been augmented to EUR 8 004 and all thresholds have
been increased by EUR 330. Furthermore, new legislation improves the tax treatment of expenditure on
health insurance and long-term care insurance. As of 1 January 2013, the basic allowance rose to
EUR 8 130. As of 1 January 2014, the basic allowance was increased to EUR 8 354. As of 1 January 2015,
the basic allowance amounted to EUR 8 472. The standard relief for lone parents adds up to EUR 1 908.
Lone parents are entitled to an extra allowance of EUR 240 for the second and each subsequent child.
In 2020, the standard tax allowance for lone parents has been increased to EUR 4 008. Initially, this has
been a temporary measure for the years 2020 and 2021 to mitigate the particular challenges faced by this
family type due to the pandemic. Later on, the increase was made permanent from 2022 onwards to further
support single parents.
Since 1 January 2016, the basic allowance has been risen to EUR 8 652. As of 1 January 2017, the basic
allowance was enhanced to EUR 8 820. Since 1 January 2018, the basic allowance has been augmented
to EUR 9 000. As of 1 January 2019, the basic allowance was raised to EUR 9 168. In 2020, the basic
allowance amounts to EUR 9 408. In 2021, the basic allowance has been increased to EUR 9 744 and the
thresholds for tax rates have been increased to account for the impact of inflation (see section 1.1.3.). The
steep increase of the thresholds for the solidarity surcharge (see section 1.1.4.) corresponds to an
abolishment for around 90% of those who paid it in 2020. For a further 6.5% of taxpayers, the surcharge
has been reduced this way.
4.1. Changes to labour taxation due to the COVID pandemic in 2020 and 2021
In 2021, families with children will receive a one-time bonus benefit payment of EUR 150 per child, in
2020 the bonus per child was EUR 300. The bonus will not be offset against basic income support for
jobseekers. However, in the case households with higher incomes, the bonus will be offset against the tax
allowance for children.
5. Memorandum Items
The standard tax allowance for lone parents has been raised to EUR 4 008 for 2020 and 2021 to mitigate
the particular challenges faced by this family type due to the pandemic.
5.1. Average gross annual earnings calculation
Source of calculation: Federal Statistical Office.
Excluding sickness and unemployment, including normal overtime and bonuses.
5.2.
Employer’s contributions to private pension, etc. schemes
No information available, though such schemes do exist.
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2021 Parameter values
Average earnings/yr
Tax allowances
Lone Parents, first child
Lone parents, subsequent child
Work related
SSC allowance
Ave_earn
Child_al
Lone_al
Lone_al_add
Work_rel_al
SSC_dn
SSC_dn_rt
SSC_dn_lim
SSC_dn_lump_rt
SE_al
Ch_tax_rt
Tax_rate2
Tax_rate3
Tax_thrsh1
Tax_thrsh2
Reduction
Reduction2
Squared
208.85
995.21
tax_first_stage
tax_second_stage
tax_third_stage
tax_fourth_stage
surcharge
surcharge_limit
surcharge_alt
Ch_cred
1. ch.
2. ch.
3.ch.
4.ch.
52 556
8 388
4 008
240
1 000
0
0.16
1 334
0.2
36
0
0.42
0.45
9 744
14 753
9 136.63
17 374.99
Single
2 397
1 400
9 744
14 753
57 918
274 612
0.055
16 956
0.119
2 628 + 150
2 628 + 150
2 700 + 150
3 000 + 150
Secretariat estimate
Allow. for special expenses
Church tax rate
Tax formula
Top Rate Tax Reduction
Tax Equation Rates
tax_eqn_rates
Z
Y
Income tax rate stage
Constant
950.96
0
Solidarity Surcharge
Solidarity Exemption Limit
Alternative Surcharge Rate
Child credit
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2021 Parameter values
social
security
period_1
period_2
sum
(Month's)
employer_1
employer_2
employee_1
employee_2
childless_1
childless_2
ceil
SSC Floor
Intermediate
SSC Ceiling
SSC miners’
pension ceiling
SSC miners’
contribution
rate
Sickness
12
0
12
0.0795
0
0.0795
0
0.0795
0
58 050
SSC_floor
SSC_floor1
SSC_pension_miners_ceil
SSC_pension_miners_rate
Pension
12
0
12
0.093
0
0.093
0
0.093
0
85 200
15 600
5 400
104 400
0.247
Unemployment
12
0
12
0.012
0
0.012
0
0.012
0
85 200
Care
12
0
12
0.01525
0
0.01525
0
0.01775
0
58 050
Alternative employer
rate
12
12
0.3
0.036
0.036
2 100
SSC Factor
F
12
12
0.7509
0.7509
0.7509
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2021 Tax equations
The equations for the German system in 2021 are mostly calculated on a family basis.
The standard functions which are used in the equations are described in the technical note about tax
equations. The function acttax carries out a rounded calculation for the tables but the unrounded version
purtax is used in calculating the marginal rates.
For a taxpayer with children, either the child allowance is given in the tax calculation or the cash transfer
is given if this is more beneficial. In practice, therefore, it is necessary to make two calculations - with and
without the child allowance. Nevertheless, the calculation of solidarity surcharge is always based on the
calculation which does assume that the child tax allowance is given.
Variable names are defined in the table of parameters above, within the equations table, or are the
standard variables “married” and “children”. The affixes “_princ” and “_spouse” on Variable names in
functions indicate that the values have to be calculated for the principal and spouse, respectively. The
parameter year in function SSC_Allowance is the year for which you calculate the Allowance.
Line in country table and
intermediate steps
1.
2.
Earnings
Quotient for tax calculation
Allowances:
Children
Lone parent
Soc sec contributions
Variable
name
earn
quotient
children_al
lone_allce
SSC_al
Range
Equation
J
J
J
J
1+Married
Children*Child_al
Children>0)*(Married=0)*Lone_al+(Children>0)*(Married=0)*(Children-
1)*Lone_al_add
Function: SSC_Allowance(earn_princ, earn_spouse , SSC_princ +
SSC_spouse , Quotient, SSC_dn, SSC_dn_rt, SSC_dn_lim,
SSC_dn_lump_rt, If(Children>0; "employee"; "childless"), year, rounded)
Work_rel_al+MIN(earn_spouse,Work_rel_al)
SE_al*quotient
children_al+SSC_al+work_al+ lone_allce + SE_al
0
earn-tax_al
tax_inc/quotient
Function: acttax(taxinc, rate, reduction, threshold1, threshold2, threshold3,
equationrate, tax_first_stage, tax_second_stage, tax_third_stage,
tax_fourth_stage, rate2, reduction2)
Quotient*tax_formula
MIN( tax_adj * surcharge, Positive(tax_adj - surcharge_limit*Quotient) *
surcharge_alt)
tax_adj+sol_surch
0
CG_tax_excl
0
Function: SSC (earn_princ, If(Children>0; "employee"; "childless"), rounded)
+ SSC (earn_spouse, If(Children>0; "employee"; "childless"), rounded)
Children*ch_cred
Function: SSC (earn_princ, “employer”, rounded) + SSC (earn_spouse,
“employer”, rounded)
Work related
Allow. for special expenses
Total
Credits in taxable income
CG taxable income
CG tax before credits
adjusted taxable income
Formula based tax schedule
work_al
SE_al
tax_al
taxbl_cr
tax_inc
adj
tax_formula
J
J
J
J
J
J
J
3.
4.
5.
Adjust for the quotient
Include solidarity surcharge
Tax paid
Tax credits :
CG tax
State and local taxes
Employees' soc security
Cash transfers
Employer's soc security
tax_adj
sol_surch
CG_tax_excl
tax_cr
CG_tax
local_tax
SSC
Cash_tran
SSC_empr
J
J
J
J
J
J
B
J
B
6.
7.
8.
9.
11.
13.
Key to range of equation
B calculated separately for both principal earner and spouse
P calculated for principal only (value taken as 0 for spouse calculation)
J calculated once only on a joint basis
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Greece
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in the
tax/benefit system. The methodology also includes the parameter values and
tax equations underlying the data.
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Greece 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
33.0%
n.a.
45.3%
n.a.
34.7%
n.a.
46.7%
n.a.
39.9%
n.a.
50.9%
n.a.
33.0%
n.a.
45.3%
n.a.
2.4%
14.1%
16.6%
31.9%
8.3%
14.1%
22.4%
36.7%
14.6%
14.1%
28.7%
41.8%
1.5%
14.1%
7.6%
24.6%
0
0
10 529
2 844
0
0
14 608
4 245
0
0
22 422
7 088
1 008
1 008
11 660
2 844
1 782
2 088
2 659
4 223
4 440
9 026
1 782
1 965
1 782
2 659
4 440
1 782
777
307
0
694
1 564
0
477
4 585
0
900
184
0
777
694
477
900
1 782
0
10 835
1 084
2 659
0
16 172
2 258
4 440
0
27 008
5 062
1 782
0
10 835
1 084
1 782
2 659
4 440
1 782
67
none
12 617
100
none
18 831
167
none
31 448
67
2
12 617
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Greece 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
34.7%
18.2%
46.7%
33.3%
34.7%
33.0%
46.7%
45.3%
34.7%
34.7%
46.7%
46.7%
34.7%
33.0%
46.7%
45.3%
8.8%
14.1%
18.1%
33.2%
6.5%
14.1%
18.7%
33.6%
8.8%
14.1%
23.0%
37.1%
7.2%
14.1%
21.3%
35.8%
1 008
1 008
16 968
4 669
672
672
28 129
7 797
0
0
31 920
9 338
0
0
27 211
7 797
2 925
4 754
4 885
7 136
5 850
9 509
4 885
7 382
2 925
4 885
5 850
4 885
784
1 829
0
1 684
2 252
0
1 568
3 659
0
1 438
2 498
0
784
1 684
1 568
1 438
2 925
0
17 789
2 614
4 885
0
29 708
3 936
5 850
0
35 579
5 227
4 885
0
29 708
3 936
2 925
4 885
5 850
4 885
100-0
2
20 714
100-67
2
34 593
100-100
2
41 429
100-67
none
34 593
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The national currency is the Euro (EUR). In 2021, EUR 0.84 was equal to USD 1. In 2021, the estimated
gross earnings of the average worker are EUR 18 831 (Secretariat estimate).
1. Personal income tax system
1.1. Central government income tax
1.1.1. Tax unit
Individuals are subject to national income tax.
Individuals who are Greek tax residents are subject to income tax in Greece on their worldwide income
earned in a certain tax year, whereas non-residents are subject to tax in Greece only on income sourced
in Greece irrespective of his/her nationality, place of domicile. Moreover, an individual whose domicile in
Greece exceeds183 days cumulatively in a twelve month period is considered as a tax resident in Greece
and is subject to tax on his/her
worldwide income irrespective of the individual’s nationality. Due
consideration is given to bilateral conventions, for the elimination of double taxation, their provisions
superseding domestic law.
Individuals who have completed 18 years of age are obliged to file an income tax return regardless of
having taxable income or not. Regarding income derived by minor children, the parent who has the custody
is liable for filing a tax return. The income of minor children is added to the income of the parent who has
the custody and is taxed in the name of the parent who is in principle liable for tax filing. This provision
does not apply to the following types of income, in respect of which the minor child has a personal tax
obligation: a) employment income and b) pensions due to the death of his father or mother.
Spouses file a joint income tax return but each spouse is liable for the tax payable on his or her share of
the joint income. Persons who have entered into a civil union
–
partnership can also file a joint income tax
return. In this case, civil union partners have the same tax treatment as married couples. The tax return
can be filed separately, if at least one of the spouses opts for it, with an irrevocable declaration for each
tax year until 28 February of the year of submission of the return. This option is binding for the concerned
tax year and also applies to the other spouse. Especially for tax year 2020, the deadline for submitting the
irrevocable declaration was set at 6 May 2021.
Losses incurred by a spouse or civil union partner cannot be set off against the income of the other spouse
or partner. Spouses or civil union partners file a return separately if a) they have been divorced or have
terminated the civil partnership at the time of the tax filing or b) one of the spouses or civil union partners
is bankrupt or has been subject to guardianship. The taxpayer’s spouse can be considered as a dependent
member, provided that he/she does not have any taxable income.
As dependent members, related to the taxpayer, are regarded single children under the age of 18, adult
children up to 25 years old studying at the university or serving their military service or registered as
unemployed to the Manpower Employment Organisation (OAED); taxpayers are deem to be in charge for
their ascendants and/or their spouses’ relatives (up to the 3rd degree) who are orphans provided that they
live with them and their annual taxable income does not exceed the amount of EUR 3 000 (alimony and
disability benefits and similar
allowances are not included). Single disabled children (>=67%) or spouses’
disabled siblings (>=67%) are also considered as dependent members, except if their annual income
exceeds the amount of EUR 6 000 (alimony and disability benefits and similar allowances are not included).
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1.1.2. Tax allowances and tax credits
1.1.2.1. Standard tax reliefs
Social security contributions: all compulsory social security contributions and optional contributions
to legally constituted funds are fully deductible from taxable gross income.
Tax is reduced for employees and pensioners, for each tax bracket, as follows:
o
o
o
o
o
o
o
by EUR 777 for annual income up to EUR 12 000, for taxpayers with no dependent children;
by EUR 810 for annual income up to EUR 12 000 for taxpayers with one dependent child;
by EUR 900 for annual income up to EUR 12 000 for taxpayers with two dependent children;
by EUR 1 120 for annual income up to EUR 12 000 for taxpayers with 3 dependent children;
by EUR 1 340 for annual income up to EUR 12 000 for taxpayers with 4 dependent children;
for taxpayers with more than 4 dependent children, the above mentioned tax credit is increased
by EUR 220 per child;
for income exceeding EUR 12 000, the aforementioned tax credit is reduced by EUR 20 for
every EUR 1 000 of taxable income.
In order to maintain the above tax reduction under this, the taxpayer is required to make payments of
acquiring goods and receiving services within the country or in Member States of the European Union or
EEA, which have been paid through electronic payments, the minimum amount of which is 30% of taxable
income, and up to EUR 20 000. If this amount of electronic payments is not reached, a penalty of 22% is
imposed to the remaining amount.
Especially for tax year 2020, taxpayers who were affected from Covid-19 pandemic consequences (i.e.,
taxpayers deriving income from an affected business activity, as specified by code number, employees
whose employment contract was suspended, and property owners that had reduced rental income due to
Covid-19 pandemic) are subject to a reduced penalty.
The amount of tax, as calculated for each tax bracket, is reduced further by EUR 200 for the taxpayer
himself as well as for each dependent member, provided that the taxpayer or his dependents are disabled
(over 67%) or disabled soldiers or military personnel injured in the course of their duties or war victims or
victims of terrorist attacks or in case they receive pension by the State as war victims or as disabled.
Note: Foreign tax residents are not eligible to tax deductions, unless they are tax resident in an EU/EEA
member State and a) derive at least 90% of their total income from sources in Greece or b) prove that their
taxable income is so low that they would be entitled to tax reduction under the tax legislation of the State
of their tax residency.
1.1.2.2. Non-Standard tax credits
The payable amount of tax is reduced by 20% on the donations to certain bodies, as well as to political
parties, party alliances and candidates for the National Parliament and the European Parliament, if
donations exceed the amount of EUR 100 during the tax year. The total amount of donations cannot
exceed 5% of the taxable income.
1.1.2.3. Exemptions
Certain types of income, as specified in the legislation (Income Tax Code) are exempt from the tax.
Examples:
income earned in the performance of their duties by foreign diplomatic representatives or
consulate agents, employees of embassies and consulates that have the nationality of the
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represented State as well as by individuals working in the EU Institutions or other International
Organizations that have been installed under an international treaty applied by Greece.;
alimony received by the beneficiary according to the Court adjudication or notary Document;
all forms of pensions provided to war victims and their families, as well as to soldiers and military
personnel injured in the course of their duties in times of peace;
benefits and similar allowances provided to special categories of disabled persons;
salaries, pensions etc. paid to disabled persons (over 80%);
unemployment benefits granted by the National Employment Organisation (OAED) provided that
the total annual income of the beneficiary does not exceed the amount of EUR 10 000;
financial aid to recognized political refugees, to personsresiding temporarily in Greece for
humanitarian reasons and to persons that have submitted the relevant application to the competent
Greek authorities, paid by bodies carrying out refugee aid schemes financed by the UN and the
EU;
the benefit for hazardous labour provided to employees working in the armed forces, the police,
the fire and port departments as well as the special allowance to medical, nursing and ambulance
staff up to 65%;
the fees paid by the World Association of Disabled Artists (VDM.FK) to the members of foot and
mouth painters, who are tax residents of Greece, exclusively for the work of painting paid by the
Union with exchange;
pensioners’ social solidarity allowance (EFKA);
income from employment obtained by foreign officers and low crew members of merchant ships,
who are foreign tax residents, on merchant ships with Greek flag, which perform exclusively
international trips.
1.1.2.4. Tax calculation
Taxable income is derived from the following sources:
a) income from employment and pensions;
b) income from business activity ;investment income which includes income from dividends, interest,
royalties and income from immovable property (rental income);
c) income from capital gains, which includes income deriving on transfer of real estate or securities.
Net income is computed separately within each category with tax rules that vary across income categories.
Taxpayer is subject to an alternative minimum tax when his/her imputed income is higher than his/her total
declared income. In this case, the difference between imputed and actual income is added to the taxable
income. Imputed income is calculated on the basis of the taxpayer’s and his/her dependents’ living
expenses.
Income from employment is subject to withholding tax. The tax is withheld by the employer and is
calculated by applying the taxpayer’s progressive income tax schedule. The employer calculates the
withholding tax on the basis of the taxpayer’s annual net salary (net of social security contributions). The
resulting tax is the annual tax due, 1/14 of which constitutes the monthly withholding tax for the private
sector’s employees (every employee in the private sector receives 14 monthly salaries per year, i.e., 12
monthly salaries plus one salary as Christmas bonus, �½ salary as Easter bonus and �½ salary as summer
vacation bonus). For the employees of the public sector, the monthly withholding tax is calculated as 1/12
of the annual tax due, because of the fact that bonuses in the public sector have been eliminated. If the
taxpayer's final tax liability (derived from the annual declared income) exceeds the aggregate of the
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amounts already withheld or prepaid, the remaining tax is generally payable in three equal bimonthly
instalments. Any excess tax paid or withheld will be refunded.
1.1.3. Rate schedule
Depending on the income category the following tax schedules apply:
Income from employment and pensions is pooled together with income from business activity and is taxed
at the following rates:
Income bracket (EUR)
10 000
10 000
10 000
10 000
Excess
9%
22%
28%
36%
44%
Tax rate (%)
Tax bracket (EUR)
Income (EUR)
900
2 200
2 800
3 600
10 000
20 000
30 000
40 000
Total amount
Tax (EUR)
900
3 100
5 900
9 500
The above tax scale does not apply for employment income acquired by:
Officers working in merchant ships, whose income is taxed at a 15% flat rate.
Low- crew members working in merchant ships, whose income is taxed at a 10% flat rate.
Pilots, co-pilots and aircraft engineers who are tax residents in Greece for their monthly
compensation, which is taxed at a tax flat rate of 15% and whose air company has a tax residency
or permanent establishment in Greece,
Members of the Independent Board of Refugees Appeal for their monthly compensation, which is
taxed at a tax flat rate of 15%.
The aforementioned categories of employment income are taxed independently, with exhaustion of the tax
liability of their beneficiaries.
For deductions see above section 1.1.2.1.
Income from agricultural business is taxed independently but with the same tax schedule. The previously
described tax credit is granted to farmers as well. In the case where a farmer is earning income from
employment / pension, only one tax credit is given.
Income from dividends is taxed at a 5% flat rate, income from interest is taxed at a 15% flat rate and income
from royalties is taxed at a 20% flat rate.
Income from immovable property (Rental Income) is taxed at the following rates:
Income
0-12.000
12.001 – 35.000
35.001-
Tax Rate
15%
35%
45%
From 1 January 2017, income derived from short term rentals of sharing economy (if it is not considered
as income from business activity) is taxed with the above tax scale.
Income from capital gains is taxed at a 15% flat rate.
In the total taxable income, the Special Solidarity Contribution is additionally imposed. Income up to
EUR 12 000 is not subject to the solidarity contribution. For income exceeding EUR 12 000, the solidarity
contribution applies with the following marginal rates:
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Solidarity Contribution Marginal Tax Rates
Income
0 – 12.000
12.001 - 20.000
20.001 - 30.000
30.001 - 40.000
40.001 - 65.000
65.001 - 220.000
>220.000
Tax Rate
0%
2.2%
5.00%
6.50%
7.50%
9.00%
10.00%
Due to the Covid-19 pandemic, the solidarity contribution for private sector employees has been
suspended for tax years 2021 and 2022. The suspension also applies forincome from business activity,
investment and capital gains for tax years 2020 and 2021.
1.1.4 Income tax return submission and tax payment for tax year 2020
Income tax returns are timely submitted by 27 August 2021 and the tax is paid in eight (8) equal,
monthly installments, of which the first two (2) are paid due until the last working day of August
2021 and each of the following within the last working day of six (6) next months,
For the income tax returns that will be submitted by 28 July 2021 and the tax due is paid in the
lump sum by the last working day of July 2021, a three per cent (3%) discount is provided on the
total amount of tax due. The one-off payment until 31 July 2021 concerns all income categories.
1.2. State and local income taxes
There are no local income taxes in Greece. Municipalities (the local authorities) receive 20% of the national
income tax revenues.
2. Mandatory Social Security Contributions to schemes operated within the
Government Sector
The great majority of individuals who are employed in the public and private sector and render dependent
personal services are subject to a mandatory principal and direct insurance at the Electronic National
Social Security Fund (e-EFKA) for their main pension and health care.
Apart from the main contribution, e-EFKA compulsorily collects contributions for other minor Funds created
for the employee’s benefit (Unemployment Benefits Funds, etc.).
Since 1 March 2020 the subsidiary Unified Supplementary Insurance and Lump-Sum Fund (ETEAEP) was
integrated into the National Social Security Fund (EFKA) which is renamed as
“Electronic
National Social
Security Fund”
(e-EFKA),
(Law 4670/2020), the Supplementary Insurance and Lump-Sum Benefits
sections of former ETEAEP forming now the respective sections of e-EFKA.
The average rates of contributions payable by white-collar employees as a percentage of gross earnings
are as follows (%):
From January 1st 2021 to 31 December 2021
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For work in private sector (full time)
1. National Social Security Fund ( e- EFKA) – Main Pension
2. e-EFKA- Supplementary Pension ( exETEAEP)
3. National Social Security Fund (e- EFKA) - Healthcare Coverage
4. Other Funds
Total
Employer
13.33
3.25
4.55
1.41
22.54
Employee
6.67
3.25
2.55
1.65
14.12
Total
20.00
6.50
7.10
3.06
36.66
For blue-collar workers engaged in heavy work (unhealthy, dangerous etc.), higher contributions are due (17,57% paid by the employee and
24,69% paid by the employer), so that such individuals become entitled to pension five years earlier than other workers (2.20% for e-EFKA-
Main Pension and 1.25% for e- EFKA - Supplementary Pension, paid by the employee, and 1.40% for e-EFKA- Main Pension and 0.75% for
e-EFKA -Supplementary Pension, paid by the employer). In the industrial sector, a contribution at a rate of 1% is added as an occupational risk
contribution which is paid by the employer, since these workers because of their difficult employment conditions are vulnerable to an increased
risk of labour accidents and occupational diseases.
For work in private sector (part time)
Employer
1. National Social Security Fund ( e- EFKA) – Main Pension
2. e-EFKA- Supplementary Pension ( exETEAEP)
3. National Social Security Fund (e- EFKA) - Healthcare Coverage
4. Other Funds
Total
13.33
3.25
4.55
1.89
23.02
Employee
6.67
3.25
2.55
2.07
14.54
Total
20.00
6.50
7.10
3.96
37.56
For work in public sector (full time)
1. National Social Security Fund ( e- EFKA) – Main Pension
2. e-EFKA- Supplementary Pension ( exETEAEP)
3. National Social Security Fund (e- EFKA) - Healthcare Coverage
4. Other Funds
Total
Employer
13.33
3.25
4.55
3.20
24.33
Employee
6.67
3.25
2.55
2.86
15.33
Total
20.00
6.50
7.10
6.06
39.66
For work in public sector (part time)
1. National Social Security Fund ( e- EFKA) – Main Pension
2. e-EFKA- Supplementary Pension ( exETEAEP)
3. National Social Security Fund (e- EFKA) - Healthcare Coverage
4. Other Funds
Total
Employer
13.33
3.25
4.55
3.68
24.81
Employee
6.67
3.25
2.55
3.28
15.75
Total
20.00
6.50
7.10
6.96
40.56
It should be noted that the amount of the maximum insurable earnings for calculating the monthly insurance
contribution of employees and employers is set to EUR 6 500.
The 6.50% (3.25+3.25) rate is valid until 31 May 2022. From 1 June 2022 onwards the rate decreases to
6.00% (3.00+3.00).
The contribution for lawyers and engineers providing dependent services (Law 4756/2020, art. 35) of the
Supplementary Insurance Branch of the former ETEAEP from 1 January 2020 until 31 May 2022 is a fixed
sum of EUR 42, EUR 51 or EUR 61 per month, depending on the respective insurance class level. The
insured persons are subject, from 1 January 2020, to the first insurance class, with the obligation to
contribute EUR 42 per month, while from 1 July 2020 onwards they are entitled to opt for their insurance
class. This contribution is shared between the lawyer or engineer and their employer.
For the former Lump Sum section of ETEAEP, the contribution and the monthly basis on which the
contribution is calculated, for employees first insured before 1992, is determined by the social security
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body which was integrated into ETEAEP. The contribution for employees first insured after 1992, for the
former Lump Sum of ETEAEP is set at 4%. The monthly basis, on which the contribution is calculated, is
the same basis amount as for e-EFKA.
Insurance contribution for the engineers, lawyers and doctors providing dependent services and insured
at the former Lump-sum section of ETEAEP is calculated from 1 January 2020 as a fixed amount of
EUR 26
, EUR 31 or EUR 37
per month
, depending on
the respective insurance class. The insured
persons are subject from 1 January 2020 to the first insurance class, with the obligation to contribute
EUR 26 per month and from 1 July 2020 onwards they are entitled to opt for their insurance class. The
contribution for lawyers is shared between the lawyer and his/her employer.
All these social security contributions are fully deductible for income tax purposes.
3. Universal Cash Transfers
3.1. Transfers related to marital status
According to the National General Collective Labour Agreement, a marriage allowance, which is set at a
rate of 10% of the gross salary, is granted only to workers employed by employers that belong to the
contracting employer organisations.
1
For public servants no marriage benefit is granted.
3.2. Transfers for dependent children
According to the Law 4512/2018, the “Single children support allowance” is calculated according to the
number of dependent children as well as the household equivalent income category.
The equivalence scale assigns a value of 1 to the first household member, of 1/2 to the spouse and of 1/4
to each dependent child. Especially, for single parent families, a value of �½ is assigned to the first
dependent child and a value of ¼ to each additional child.
Households that are entitled to the allowance are divided into three income categories according to their
income:
a) Household equivalent income of < EUR 6 000: monthly allowance of EUR 70 for the first child,
EUR 70 for the second child and EUR 140 for every additional child.
b) Household equivalent income of EUR 6 001
–
10 000: monthly allowance of EUR 42 for the first
child, EUR 42 for the second child and EUR 84 for every additional child.
c) Household equivalent income of EUR 10 001
–
15 000: monthly allowance of EUR 28 for the first
child, EUR 28 for the second child and EUR 56 for every additional child.
4. Main Changes in the Tax/benefit System since 2016
No significant changes in the tax and benefit system have taken place since 2016.
4.1. Changes to labour taxation due to the COVID pandemic in 2020 and 2021
A monthly special tax
–
free allowance has been granted to employees of enterprises affected by the
coronavirus crisis, whose labour contracts have been suspended based on specific NACE codes.
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5. Memorandum items
5.1. Identification of an AW and method of calculations used
Methodological note for the estimation of the average annual earnings per employee, for the period
2000
–
2018
Terminology and coverage
The average annual earnings below refer to full time employees for Sectors C to N of ISIC Rev.3.1, before
2008, and for Sectors B to N including Division 95 and excluding Divisions 37, 39 and 75 of ISIC Rev. 4,
for 2008 onwards.
Data sources
In the estimation procedure of the average annual earnings per employee, for the period 2000-2018 the
following data are taken into account:
Annual earnings and number of employees, as derived from the Structure of Earnings Survey
(SES), of the years 2002, 2006, 2010, and 2014.
Hours worked and annual average number of employees, as derived from the Labour Force Survey
(LFS), of the years 2000
–
2018.
Average annual earnings indices, as derived from the Indices on Quarterly Labour Cost Survey, of
the years 2000
–
2018.
Annual Gross earnings per full time employee 2000-2020 Greece
Year
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
NACE Rev 2 classification
15.459
15.715
17.359
19.240
21.446
22.012
23.800
23.936
23.823
24.569
24.156
23.929
23.309
21.101
21.322
20.494
20.033
19.913
19.924
20.243
18.834
Source: ELSTAT
The Average gross Annual Earnings per full time employee for the period 2000 to 2020 includes:
The special payments for shift and night work, as well as work during weekends and holidays;
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The total annual bonuses as well as those that are regularly paid on a monthly basis, the 13th
salary (Christmas salary, where applicable) and 14th salary (Easter and vacation payments, where
applicable)
The annual bonuses based on productivity;
The education and working time allowance;
The marriage and children allowance
and excludes:
The annual payments in kind: foods, drinks, footwear, clothes, accommodation, business cars
provided, mobile phones, etc.;
The annual premiums related to profit-sharing schemes.
The data for 2019 and onwards will be revised when the final results of the SES 2022 will be available.
Data in bold refer to data from SES 2002, 2006, 2010 and 2014 and 2018.
It should be noted that the data with reference years 2000 - 2005 are different from those of the succeeding
years with regard to the source that was used for the calculation of the LCIWages For the years 2000 -
2005 the index was calculated on the basis of data from National Accounts deriving from administrative
sources, while for the years 2006
–
2020 the calculation of LCIWages was based on the quarterly Labour
Cost Survey.
Finally, we would like to inform you that the data refer to the mean yearly gross income for full-time paid
employees, regardless of:
Marital status
Number of children
Employer’s contributions
Taxes paid
5.2.
Main employers’ contributions to private pension, health, and related
schemes
Contributions to private pension and sickness schemes made by employers are not added to employees’
gross earnings for tax purposes (but they are subject to special taxation entailing extinction of tax liability).
Since these contributions are not obligatory for employers, no data is provided by the National Statistical
Service of Greece. Very few employers have adopted such additional insurance schemes.
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2021 Parameter values
Average earnings/yr
Tax credit
Rates of family subsidies
paid by employers
children (up to 3)
Income tax schedule
Ave_earn
Child_cred
Wife_sub
Child_sub
Tax_sch
18 831
0
01
0
0.09
0.22
0.28
0.36
0.44
777
810
900
1 120
1 340
1
220
1 560
12 000
0.02
0
0
0
0
0
0
0
0.1412
0.22254
91 000
1
0
6 000
10 000
15 000
0.50
0.25
Secretariat estimate
10 000
20 000
30 000
40 000
Tax deduction
Solidarity contribution (suspended – COVID-19 related measure)
Tax_cred
Tax_cred_1dc
Tax_cred_2dc
Tax_cred_3dc
Tax_cred_4dc
num_ch_over4
tax_cred_over4
tax_cred_5dc
Tax_cred_thrsh
Tax_red
Solidarity_sch
12 000
20 000
30 000
40 000
65 000
220 000
Social security contributions
Single children support allowance
SSC_rate
SSC_rate_empr
SSC_ceil
SSC_ceil_use
Child_all
840
504
336
0
Spouse_weight
Child_weight
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2021 Tax equations
The equations for the Greek system in 2021 are mostly on an individual basis. The level of gross earnings
for the principal earner is increased by the spouse and child subsidy paid by the employer.
The functions which are used in the equations (Taper, MIN, Tax etc) are described in the technical note
about tax equations Variable names are defined in the table of parameters above, within the equations
table, or are the standard variables “married” and “children” A reference to a variable with the affix “_total”
indicates the
sum of the relevant variable values for the principal and spouse And the affixes “_princ” and
“_spouse” indicate the value for the principal and spouse, respectively Equations for a single person are
as shown for the principal, with “_spouse” values taken
as 0.
Line in country table and
intermediate steps
1
2
3
4
5
Earnings
Allowances:
Credits in taxable income
CG taxable income
CG tax before credits
Solidarity contribution
Tax credits :
Variable
name
earn_princ
earn_spouse
tax_al
taxbl_cr
tax_inc
CG_tax_excl
sol_contr
tax_cr
P
S
B
B
B
B
B
Range
Equation
Ave_earn*(1+Married*Wife_sub+ MIN(Children,3)*Child_sub)
Ave_earn*(1+Married*Wife_sub+ MIN(Children,3)*Child_sub)
SSC
0
Positive(earn-tax_al)
Tax(tax_inc,tax_sch)-Low_rate
*Positive(MIN(Effect_low_band-Low_thrsh,tax_inc-Low_thrsh))
=Solidarity(earn-SSC,Solidarity_sch)
Positive(IF(Children>0,
tax_cred_1dc*(Children=1)+tax_cred_2dc*(Children='2)+tax_cred_3
dc*(Children>2),
tax_cred)-(INT(Positive(earn-tax_cred_thrsh)'/1000)*tax_cred_red))
Positive(CG_tax_excl-tax_cr)+sol_contr
0
IF(SSC_ceil_use=1,SSC_rate*MIN(earn,SSC_ceil),SSC_rate*earn)
(earn – CG_tax –
SSC)/(1+IF(Married>0,(Married*Spouse_weight)+(Children*Child_w
eight),min(children,1)
*Spouse_weight+positive(children-1)*Child_weight))
VLOOKUP(fam_netinc,Child_all,2)*Children
IF(SSC_ceil_use=1,SSC_rate_empr*MIN(earn,SSC_ceil),SSC_rate
_empr*earn)
6
7
8
9
11
CG tax
State and local taxes
Employees' soc security
Cash transfers
CG_tax
local_tax
SSC
fam_netinc
B
B
B
B
13
Employer's soc security
cash_trans
SSC_empr
B
B
Key to range of equation B calculated separately for both principal earner and spouse P calculated for principal only (value taken as 0 for spouse
calculation) J calculated once only on a joint basis.
Notes
1
Namely the Hellenic Federation of Enterprises, the Hellenic Confederation of Professionals, Craftsmen
& Merchants, the National Confederation of Hellenic Commerce and the Association of Greek Tourism
Enterprises.
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Hungary
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in the
tax/benefit system. The methodology also includes the parameter values and
tax equations underlying the data.
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Hungary 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Central government income tax liability (exclusive of tax credits)
Total
6.
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's wage dependent contributions and taxes
Employer's compulsory social security contributions
Payroll taxes
Total
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
33.5%
n.a.
43.2%
n.a.
33.5%
n.a.
43.2%
n.a.
33.5%
n.a.
43.2%
n.a.
33.5%
n.a.
43.2%
n.a.
15.0%
18.5%
33.5%
43.2%
15.0%
18.5%
33.5%
43.2%
15.0%
18.5%
33.5%
43.2%
1.7%
18.5%
10.4%
23.4%
560 833
54 274
615 108
837 065
81 006
918 071
1 397 898
135 280
1 533 179
560 833
54 274
615 108
0
0
2 406 157
0
0
3 591 278
0
0
5 997 435
355 200
355 200
3 241 345
669 382
1 212 124
999 077
1 809 140
1 668 459
3 021 264
669 382
732 136
669 382
999 077
1 668 459
669 382
0
542 742
0
0
810 063
0
0
1 352 805
0
0
62 754
0
0
0
0
0
542 742
542 742
810 063
810 063
1 352 805
1 352 805
62 754
62 754
0
0
3 618 281
0
0
5 400 419
0
0
9 018 699
3 199 920
0
418 361
0
0
0
3 199 920
67
none
3 618 281
100
none
5 400 419
167
none
9 018 699
67
2
3 618 281
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Hungary 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Central government income tax liability (exclusive of tax credits)
Total
6.
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's wage dependent contributions and taxes
Employer's compulsory social security contributions
Payroll taxes
Total
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
33.5%
33.5%
43.2%
43.2%
33.5%
33.5%
43.2%
43.2%
33.5%
33.5%
43.2%
43.2%
33.5%
33.5%
43.2%
43.2%
6.1%
18.5%
18.7%
30.5%
9.7%
18.5%
24.6%
35.6%
10.6%
18.5%
26.1%
36.8%
15.0%
18.5%
33.5%
43.2%
837 065
81 006
918 071
1 397 898
135 280
1 533 179
1 674 130
162 013
1 836 142
1 397 898
135 280
1 533 179
319 200
319 200
4 390 466
319 200
319 200
6 796 623
319 200
319 200
7 981 745
0
0
5 997 435
999 077
1 329 152
1 668 459
2 541 276
1 998 155
3 138 293
1 668 459
3 021 264
999 077
1 668 459
1 998 155
1 668 459
0
330 075
0
0
872 817
0
0
1 140 138
0
0
1 352 805
0
0
0
0
0
330 075
330 075
872 817
872 817
1 140 138
1 140 138
1 352 805
1 352 805
3 199 920
0
2 200 499
3 199 920
0
5 818 779
3 199 920
0
7 600 917
0
0
9 018 699
3 199 920
3 199 920
3 199 920
0
100-0
2
5 400 419
100-67
2
100-100
2
100-67
none
9 018 699
9 018 699 10 800 837
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The national currency is the Forint (HUF). In 2021, HUF 301.34 were equal to USD 1. In 2021, the average
worker earned HUF 5 400 419 (Secretariat estimate).
1. Personal Income Tax Systems
1.1. Central/federal government income taxes
1.1.1. Tax unit
The tax unit is, in all cases, the separate individual. In exceptional cases, the employer can become subject
to personal income tax, for instance in the case of benefits in kind.
1.1.2. Tax allowances and tax credits
1.1.2.1. Standard reliefs
Basic reliefs: None.
Standard marital status reliefs: None.
Employee Tax credit: Since 1st January 2012 there is no employee tax credit.
Family tax allowance: For families having children, the basis of income tax can be reduced by the
family tax allowance, which amounts to HUF 66 670 per month (for families having one child),
HUF 133 330 per month/each dependent (for families having two children) or HUF 220 000 per
month/each dependent (for families having at least three children). This tax allowance can be
applied by a pregnant woman (or her husband) as from the 91st day after conception until birth of
the child. The tax allowance may be claimed by one spouse or be split between the spouses. As
of 1st January 2014, the family tax allowance was extended: families whose combined PIT base is
not sufficient to claim the maximum amount of the family tax allowance can deduct the remaining
sum from the 7% health insurance contribution and the 10% pension contribution. This measure
does not affect the eligibility for social security benefits (pensions, healthcare, transfers, etc.).
From 1
st
January 2020, mothers who raise or have raised at least four children are exempt from
paying personal income tax on their income received from an employer or gained by self-
employment.
From 1
st
July 2020 the regulation of social security contributions have been integrated in a general
law. The change has a positive outcome for families with children: the remaining sum of the family
tax allowance will be deductible from the entire 18.5% of the new social security contribution of the
employees (formerly the 1.5% labour market contribution was not taken into account in the
regulation of family tax allowance).
1.1.2.2. Main non-standard tax reliefs
Trade Union membership dues: Membership dues and contributions paid to trade unions and other
corporate bodies of employees are deductible without any restriction.
Tax credits are made available for physical disability or agricultural activities. Tax deduction is
available for those having income from abroad.
From 1st January 2015 for newly married couples (where it is the first marriage for at least one of
the parties) the basis of income tax can be reduced by HUF 33 335 per month for one person of
the couple for 24 months.
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1.1.3. Tax schedule
The rate of personal income tax amounts to 15%.
1.2. State and local income taxes
In Hungary there is no local personal income tax system supplementing the central one.
2. Compulsory Social Security Contributions to Schemes Operated within the
Government Sector
2.1.
Employees’ contributions
2.1.1. Pensions
The rate of pension contribution amounts to 10% of gross earnings.
From 1
st
January 2019 retired workers (old age pension) does not have to pay 10% pension contribution
on their wage income.
From 1
st
July 2020 employees’ social security contributions –
currently consisting of separate pension,
sickness and labour market contribution items
–
have been integrated into the single social security
contribution. The new regulation includes the extension of the social contribution exemption of retired
individuals to all the other gainful activities (previously employment contracts only).
2.1.2. Sickness
The rate of health security contribution amounts to 7% of gross earnings.
From 1
st
January 2019 retired workers (old age pension) does not have to pay 4% sickness contribution
on their wage income. (Previously they had to pay only 4% out of the 7%).
The new regulation from 1
st
July 2020 (2.1.1.) applies for sickness contributions as well.
2.1.3. Unemployment
The worker
must pay, as employees’ contribution, 1.5% of gross earnings.
From 1
st
January 2019 retired workers (old age pension) are not charged 1.5% labour market contribution
on their wage income.
The new regulation from 1
st
July 2020 (2.1.1.) applies for labour market contribution as well.
2.1.4. Others
None. The average worker does not have any obligation to pay other contributions than the above
mentioned. However, the contribution rates may be different for certain types of income or for certain
groups of income recipients (e.g. employees with pensioner status). None of these exceptions are
applicable to the workers taken into consideration in this report.
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2.2.
Employers’ contributions
2.2.1. Pensions
None.
2.2.2. Sickness
None.
2.2.3. Unemployment
None.
2.2.4. Others
From 2012, the employers’ social
security contributions were merged into the new payroll tax, called social
contribution tax. This change is of legal nature, the combined rate remains 27% while the revenue is divided
among the pension, health care and labour-market funds. In 2017, the social contribution tax decreased
to 22%, and in January 2018, the rate was lowered to 19.5%. In July 2019, the rate was lowered to 17.5%
and will decrease by 2 percentage points to 15.5% from 1
st
July 2020.
The employer contributions also include a payroll tax: the training levy amounts to 1.5% of gross earnings.
From 1st January 2013, the Job Protection Act (JPA) introduced new targeted reliefs in the employers’
contributions (social contribution tax and training levy) to incentivise the employment of the most
disadvantageous groups on the labour market. This measure reduces the standard rate of the employers'
contributions up to a cap of HUF 100 000 per month. From 2017, the JPA introduced a permanent reduction
of the employers' tax rate by 50% of the current tax rate for:
employees under 25 years of age,
employees over 55 years of age,
employees working in elementary occupations,
employees working in agricultural occupations.
It also introduced temporary reductions (0% tax rate in the first two years of employment, and 50% of the
current tax rate in the third year) for:
long term unemployed re-entering the labour market,
people returning to work after child-care leave,
career-starters.
From 1st January 2015, the budgetary institutions are not eligible for the JPA tax allowances anymore.
From 1
st
January 2019, the JPA is being phased out and new better targeting reliefs were introduced. The
new reliefs reduce the standard rate of the employers' contributions up to the cap of the minimum wage.
The minimum wage was HUF 161 000 per month in 2020, raised to HUF 167 400 per month from 1
st
February 2021.
The new reliefs reduce the employers' tax rate by 50% of the current tax rate for:
employees working in elementary and in agricultural occupations,
In addition, there is a temporary reduction (0% tax rate in the first two years of employment, and 50% of
the current tax rate in the third year) for:
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362
employees returning to labour market (those who had been out of work for at least 6 months out of
the preceding 9 months became entitled for a new type of tax allowance )
In addition, there is a temporary reduction (0% tax tare in the first three years of employment, and 50% of
the current tax rate in the fourth and fifth year) for:
mothers with 3 or more children
From 1
st
January 2019, the wage income of retired workers (old age pension) is exempt from social
contribution tax.
The new regulation from 1
st
July 2020 (2.1.1.) applies for the social contribution tax of retired workers as
well.
The targeted reliefs in the
employers’ contributions are not considered in the Taxing Wages model.
Social security contributions will have to be paid on other benefits than gross earnings (e.g., grants in kind)
and payments (e.g., certain kind of contracts).
3. Universal cash transfers
3.1. Transfers related to marital status
None.
3.2. Transfers for dependent children
Effective from 1 January 2008:
Type of family
For a couple with one child
For a single earner with one child
For a couple with two children, per child
For a single earner with two children, per child
For a couple with 3 or more children, per child
For a single earner with 3 or more children, per child
For a couple with permanently sick and disabled child
For a single earner with permanently sick and disabled child
HUF per month
12 200
13 700
13 300
14 800
16 000
17 000
23 300
25 900
4. Main Changes in the Tax/benefit System Since 2010
The tax base correction was phased out in two steps.
The employee tax credit was abolished.
The employees’ health care contribution was increased.
The employers’ social security contributions were merged into the social contribution tax (legal
change only, rates and base remained unchanged).
Health contributions on benefits in kind were increased.
As a temporary measure, a wage compensation scheme
was in effect in the form of an employers’
SSC credit.
Targeted employment incentives to boost the employment levels of groups at the margin of the
labour force.
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The child tax allowance was extended in 2014 by allowing the deduction of the allowance from
employees’ SSC.
The rate of the PIT decreased by 1 percentage point in 2016.
The rate of family tax benefit for families with two children is gradually increased from 2016 so that
it will be doubled by 2019.
From 2017 the social contribution tax decreased to 22% and from 2018 subsequently to 19.5%.
From 1
st
of July, 2019 social contribution tax decreased to 17.5%.
From 1
st
January 2019 retired workers (old age pension workers)
doesn’t have to pay 10% pension
contribution, 4% sickness contribution,
employers’ social security contributions (social contribution
tax and training levy) after their wage income.
From 1
st
July 2020 employers’ social contribution tax
decreased by further 2 percentage points to
15.5%.
From 1
st
July 2020 employees’ social security
contributions have been integrated into a general
regulation. The new regulation includes the extension of the social contribution exemption of retired
individuals to all the other gainful activities (previously employment contracts only).
4.1. Changes to labour taxation due to the COVID pandemic in 2020 and 2021
Sectors that were severely hit by the pandemic (e.g. tourism, restaurants, entertainment venues,
sports, cultural services, transportation, agriculture, aviation industry) were temporarily exempted
from paying social security contributions, payroll taxes and kiva (small business tax). The employee
contribution is lowered to the legal minimum of HUF 7 710 per month until 30 June.
Employer’s social security contribution tax rate decreased
by 2 percentage points from 17.5% to
15.5% from 1
st
July 2020, regardless of the real wage growth precondition included in the wage
and tax agreement between the Government of Hungary and private sector representatives.
Although the measure results a permanent change in labour taxation, the timing is closely linked
to the extraordinary situation caused by the economic crisis.
Sectors that were severely hit by the second wave of the pandemic (tourism, catering, leisure and
cultural services) were temporarily exempted from paying social security contributions, payroll
taxes and kiva (small business tax) from November 2020 to May 2021. This measure was further
extended to the retail sector and other services during the stricter lockdown regulations in March
and April 2021.
5. Memorandum Items
5.1. Employer contributions to private social security arrangements
In Hungary the law dealing with the voluntary mutual insurance funds (like pension funds) was enacted on
6 December 1993. From 2019 employers’ contributions to these funds are
taxed as wages, but employees
can apply a 20% tax credit with a limit of HUF 150 000 per year on. The tax authority pays the tax credit
directly to a voluntary fund.
From 2019 voluntary insurance contributions paid by the employer are taxable as wages and the
employees can apply a 20% tax credit with a limit of HUF 150 000 per year. Insurance contracts signed
before 2019 have one-year transitional provision, in case of these contracts contributions paid by the
employer are tax exempt till 30% of the minimal wage, above that it’s taxable according to an effective
personal income tax rate of 17.7% and an effective health contribution of 21.83%.
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As from 2008, employer pension institutions can be established. Based on the rules for 2017, the monthly
contribution paid to an employer pension institution by the employer of a private worker is not limited and
it is taxable according to an effective personal income tax rate of 17.7% and an effective health contribution
of 25.96%. From 2018, the effective health contribution is 23.01%. From 2019, voluntary contributions to
these funds are taxed as wages.
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2021 Parameter values
Average earnings/yr
Child allowance (per child)
Ave_earn
child_al
5 400 419
1
2
3
4
0.15
0.185
0.155
0.015
# of children
0
1
Secretariat’s estimate
800 040
1 599 960
2 640 000
2 640 000
Income tax schedule
Social security contributions
Payroll taxes *
tax_sch
SSC_emp
SSC_empr
payroll_rate
CB_rates
Transfers for children
(monthly)
1
12 200
13 700
2
13 300
14 800
3+
16 000
17 000
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2021 Tax equations
The equations for the Hungarian system in 2021 are mostly on an individual basis. But the child allowance
can be split between the spouses and cash transfers are calculated only once. This is shown by the Range
indicator in the table below.
The functions which are used in the equations (Taper, MIN, Tax etc) are described in the technical note
about tax equations. Variable names are defined in the table of parameters above, within the equations
table, or are the standard variables "married" and "children". A reference to a variable with the affix "_total"
indicates the sum of the relevant variable values for the principal and spouse. And the affixes "_princ" and
"_spouse" indicate the value for the principal and spouse, respectively. Equations for a single person are
as shown for the principal, with "_spouse" values taken as 0.
Line in country table
and intermediate
steps
1.
2.
Earnings
Allowances:
Children
Total
Credits in taxable
income
CG taxable income
CG taxable income
CG tax before credits
CG tax
State and local taxes
Child tax allowance
(Employees' SSC)
Child tax allowance
(Employees' SSC)
Employees' soc
security
Cash transfers
Employer's soc
security
Employer's payroll
taxes
Variable name
Range
Equation
earn
child_al
tax_al
taxbl_cr
tax_inc
tax_inc
CG_tax_excl
CG_tax
local_tax
SSC_child_cr
P
B
B
P
S
B
B
B
P
S
SSC
cash_trans
SSC_empr
Payroll
B
J
B
B
IF(Children>0, Children*VLOOKUP(Children,
child_al, 2), 0)
child_al
0
MAX(0,earn -tax_al)
Positive(earn_spouse-Positive(tax_al-
earn_spouse-SSC_deduction_princ/tax_sch))
tax_inc*tax_sch
CG_tax_excl-tax_cr
0
=MIN(earn_princ*SSC_emp,Positive(tax_al-
earn_princ)*tax_sch)
=MIN(earn_spouse*SSC_emp,Positive(-
earn_princ)*tax_sch)
earn*SSC_emp-SSC_child_cr
Children*(VLOOKUP((1-Married), CB_rates,
MIN(Children, 3)+1)*12)
earn*SSC_empr
earn*payroll_rate
3.
4.
5.
7.
8.
9.
11.
13.
Key to range of equation B calculated separately for both principal earner and spouse P calculated for principal only (value taken as 0 for spouse
calculation) J calculated once only.
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Iceland
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in the
tax/benefit system. The methodology also includes the parameter values and
tax equations underlying the data.
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Iceland 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
36.4%
n.a.
40.1%
n.a.
36.4%
n.a.
40.1%
n.a.
44.4%
n.a.
47.6%
n.a.
47.5%
n.a.
50.5%
n.a.
23.7%
0.2%
23.9%
28.2%
27.9%
0.1%
28.0%
32.2%
33.5%
0.1%
33.6%
37.4%
23.7%
0.2%
11.4%
16.5%
0
0
5 153 689
412 925
0
0
616 305
0
0
1 029 230
843 974
843 974
5 997 663
412 925
12 334
1 615 566
12 334
2 830 249
12 334
5 664 907
12 334
1 615 566
12 334
12 334
12 334
12 334
609 509
664 201
939 031
609 509
1 416 376
1 401 539
609 509
3 312 003
2 340 570
609 509
664 201
939 031
609 509
609 509
609 509
609 509
270 770
0
6 498 485
1 254 910
404 135
0
674 905
0
270 770
0
6 498 485
1 254 910
270 770
404 135
674 905
270 770
67
none
100
none
167
none
67
2
6 769 255
6 769 255 10 103 366 16 872 621
9 699 231 16 197 716
2 007 085
3 902 712
7 273 117 11 207 714
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Iceland 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
46.0%
41.3%
49.1%
44.7%
43.6%
43.6%
46.9%
46.9%
36.4%
36.4%
40.1%
40.1%
36.4%
36.4%
40.1%
40.1%
21.9%
0.1%
15.1%
20.0%
26.2%
0.1%
25.6%
29.9%
27.9%
0.1%
28.0%
32.2%
26.2%
0.1%
26.3%
30.6%
690 877
690 877
616 305
118 851
118 851
1 029 230
0
0
1 232 611
0
0
1 029 230
12 334
2 220 740
24 668
4 445 815
24 668
5 660 498
24 668
4 445 815
12 334
24 668
24 668
24 668
1 219 018
806 867
1 401 539
1 219 018
2 080 577
2 340 570
1 219 018
2 832 753
2 803 078
1 219 018
2 080 577
2 340 570
1 219 018
1 219 018
1 219 018
1 219 018
404 135
0
674 905
0
808 269
0
674 905
0
404 135
674 905
808 269
674 905
100-0
2
100-67
2
100-100
2
100-67
none
10 103 366 16 872 621 20 206 731 16 872 621
9 699 231 16 197 716 19 398 462 16 197 716
2 007 085
3 261 995
4 014 171
3 261 995
8 573 502 12 545 657 14 546 233 12 426 806
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The national currency is the Króna (plural: Krónur) (ISK). In 2021, ISK 126.9 were equal to USD 1. That
year, the average worker is expected to earn ISK 10 103 366 (Secretariat estimate).
1
1. Personal Income Tax System
1.1. Central government income taxes
1.1.1. Tax unit
Income is taxed on an individual basis, except for capital income of married couples which is taxed jointly.
1.1.2. Tax allowances and credits
1.1.2.1. Standard reliefs
Basic tax credit: A fixed tax credit, amounting to ISK 609 509 in 2021, is granted to all individuals
16 years and older, regardless of their marital status. The tax credit is deducted from levied central
and local government taxes. Unutilised tax credits or portions thereof are wastable, i.e. non-
refundable and non-transferable between tax years.
Standard marital status relief: Married couples and civil partners may utilise up to 100% of each
spouses’ unutilised portion of his/her basic tax credit. Joint taxation also allows for bracket sharing
between partners. If one partner has income in the highest
tax bracket while the other’s income
falls below the top bracket, one-half
of the latter’s unused second bracket amount can be
transferred to the high-income partner, up to a limit equal to half the second bracket. This transfer
is then taxed at a rate lower than the top tax rate.
Relief(s) for children: None.
Relief(s) for compulsory pension contributions: The compulsory payment to pension funds amounts
to 4% of wages and is deductible. In addition, an optional payment of up to 4% of wages may also
be deducted. As the additional 4% contribution is optional, it is viewed as a non-standard relief in
this Report.
1.1.2.2. Main non-standard tax reliefs applicable to an AW
Interest payment relief: A fully refundable tax credit is granted to purchasers of personal dwellings
(homes) to recuperate a part of mortgage-related interest expenses. The maximum tax related
interest credit in 2021 is ISK 420 000 for a single person, ISK 525 000 for a single parent and ISK
630 000 for a married couple. The following constraints apply to interest rebates: (1) they cannot
exceed 7.0% of the remaining debt balance incurred in buying a home for one’s own use. (2) The
maximum amount of interest payments that qualify for an interest rebate calculation is ISK 840 000
for an individual, ISK 1 050 000 for a single parent and ISK 1 260 000 for a couple. (3) 8.5% of
taxable income is subtracted from the interest expense. (4) The rebates begin to be curtailed at a
net worth threshold of ISK 5 000 000 for a single individual and a single parent and ISK 8 000 000
for a couple and are eliminated altogether at a 60% higher amount, or ISK 8 000 000 and
12 800 000, respectively. (These amounts are based on income in the year 2021 but are paid out
in 2022).
1.1.3. Tax schedule
The income tax base is composed of personal income (e.g. wages, salaries, fringe benefits, pensions,
etc.), which is taxed on an individual basis, and capital income which is taxed jointly for married couples.
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The tax on personal income is triple-rated. The central government income tax rate in 2021 is 17.0% for
income up to ISK 349 018 per month. The tax rate is 23.5% for income ISK 349 018 to ISK 979 847. For
income exceeding ISK 979 847 the tax rate is 31.8%. Tax relief is provided by the basic credit described
in Section 1.1.2.1. As a result of the basic credit, personal income is free of income tax for personal income
up to ISK 168 230 per month (ISK 2 018 775 per year), when accounting for the deductible, compulsory
pension payments.
The tax on capital income is 22%. It is levied on all capital income of individuals, such as interest, dividends,
rents etc. Interest income up to ISK 300 000 per year and 50% of income from long-term rent of a maximum
of two residential properties is tax free.
Fee to the broadcast media: 16 to 70 year-old individuals with taxable income over ISK 1 938 025 for the
year are subject to a fixed tax of ISK 18 800 in 2021, which will be collected in 2022.
1.2. Local government income tax
The local government income tax base is the same as the central government’s
personal income tax base.
The local governments’ income tax is single rated, but the rate varies between 12.44% and 14.52%
between municipalities. The weighted average rate in 2020 is 14.45%.
2. Compulsory Social Security Contributions to Schemes Operated Within the
Government Sector
2.1.
Employees’ contributions
Fee to the Retiree Investment Fund: 16 to 70 year-old individuals are subject to a fixed tax of ISK 12 334
in 2021, provided the individual's taxable income is at least ISK 1 938 025 for the year. This tax will be
collected in 2022.
2.2.
Employers’ contributions
Employers pay a social security tax on total wages of 6.0%. In addition, 0.65% is levied on the wages of
fishermen as a premium for their government accident insurance. Other taxes, levied on the social security
tax base, but based on other legislation, are the 0.05% Wage Guarantee Fund Fee and a payroll tax, the
Promote Iceland Market Fee, also 0,05%. Furthermore, a new financial activities tax was introduced in
2012, which requires financial and insurance companies to pay an additional 5.5% payroll tax.
3. Universal Cash Transfers
3.1. Marital status related transfers
None.
3.2. Transfers for dependent children
Child benefits are granted for each child, subject to income thresholds. In 2021 they are as follows (in ISK
per year):
For each child under the age of seven: 148 000
Children under the age of eighteen at the end of 2021:
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‒
‒
First child: 248 000
Each additional child: 295 000
First child: 413 000
Each additional child: 423 000
For couples: 9 098 000
For a single parent: 4 549 000
For each child: 4%
For one child: 4%
For two children: 6%
For three children or more: 8%
An additional 1.5% is deducted for income above a threshold of 6 160 000 for single parents
and 12 320 000 for couples (not applicable for the curtailment of supplemental benefit for
children under the age of seven).
Benefits for single parents:
‒
‒
Income threshold for benefit curtailment:
‒
‒
Curtailment of benefits (children under the age of seven only):
‒
Curtailment of benefits (all children under the age of eighteen):
‒
‒
‒
‒
A special child benefit supplement was added in 2020 in response to the Covid crisis and extended in the
year 2021, although changed from previous year. Benefits are granted for each child but only to households
where other child benefits are not fully curtailed by income thresholds. This special child benefit supplement
will not be extended past 2021 (see also section 4.7).
For each child:
‒
If households receive other child benefits: 30 000
Note that child benefits in this Report are based on income in the year 2021 but are paid out in 2022 (see
also section 4.4).
4. Main Changes in the Tax/Benefit System Since 1998
4.1. The deductibility of the payment to pension funds
All employees are required to participate in pension funds. The employee contribution is generally 4% of
wages and the employer contribution was 6%, and increased to 8% as of beginning 2007. On July 1st
2016 the employer contribution increased to 8.5% and one year later it increased again to 10%. The
employer contribution increased once again on July 1st, 2018 to 11.5%. Both contributions are deductible
from income before tax. In some cases, the contributions of employees and employers are higher. An
optional, additional payment from employees of up to 4% of wages is also deductible and goes into an
individual retirement account. However, from 2012 to mid-2014, this additional payment was temporarily
set at 2%.
This voluntary pension savings option was first introduced in 1999 in order to encourage personal saving.
At the time the contribution rate was 2% for employees and 0.2% for employers. In May 2000 these rates
were doubled to 4 and 0.4%, respectively, as noted above. In addition, some employers, such as the
central government, have increased their employer counter-contribution by agreement with employees.
The central government contributed 1% against a voluntary employee contribution of 4% in 2001 and 2%
as of the beginning of 2002. All such contributions are tax-deductible, both with the employer and the
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employee at the time the contribution is made. The actual pension is taxed as personal income when it is
drawn. As of the beginning of 2004, the employer option of deducting the above 0.4% against the social
security tax was abolished. Since such employer counter-contributions had become part of wage
agreements in most cases, it was no longer felt that such a tax incentive was needed.
4.2. Central and local income tax rates in 1997-2020
In 1997–2007, the Government pursued a policy of reducing the marginal tax rate, as can be seen in the
table below. This development was reversed in 2009 when income tax was raised by 1.35 percentage
points in response to the Treasury’s rising debt burden brought on by the economic crisis. At the beginning
of 2010, the tax system was changed from single rated to triple rated. The tax rate was set at 24.1% for
the first monthly ISK 200 000 but it was raised by 2.9% for the next ISK 450 000 and again by 6% for
income in excess of ISK 650 000. In 2017, the tax system was changed to double rated and in 2020 another
tax bracket was added, changing it back to triple rated. The rates in 2021 are 17.0% for income up to ISK
349 018 per month, 23.5% for income exceeding that up to ISK 979 847 and 31.8% for income higher than
ISK 979 847; see section 1.13 for further details. From 1998 onwards, the central government and average
local government personal income tax rates have been as follows:
Central government general tax rate (%)
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
27.41
26.41
26.41
26.08
25.75
25.75
25.75
24.75
23.75
22.75
22.75
24.10
24.10
22.90
22.90
22.90
22.86
22.86
22.68
22.5
22.5
22.5
20.6
17.0
Municipal tax rate (%)
11.61
11.93
11.96
12.68
12.79
12.80
12.83
12.98
12.97
12.97
12.97
13.10
13.12
14.41
14.44
14.42
14.44
14.44
14.45
14.44
14.44
14.44
14.44
14.45
Total tax rate (%)
39.02
38.34
38.37
38.76
38.54
38.55
38.58
37.73
36.72
35.72
35.72
37.20
37.32
37.31
37.34
37.32
37.30
37.30
37.13
36.94
36.94
36.94
35,04
31.45
Central government
surtax (%)
7.00
7.00
7.00
7.00
7.00
5.00
4.00
2.00
0
0
0
0
2.90/6.00
2.90/6.00
2.90/6.00
2.90/6.00
2.44/6.50
2.44/6.50
1.22/7.90
9.3
9.3
9.3
2.15/9,05
6.5/8.3
4.3. A special tax on higher income
In 1998, the special tax on higher income was raised by 2 percentage points, from 5 to 7%. For 2003-
income, it was reduced back to 5%. It was reduced to 4% for 2004 income and to 2% for 2005-income. In
the fiscal year 2006, the tax was abolished. In the latter half of 2009 the special tax on higher income was
introduced again at 8%. In 2010 the tax system changed to triple-rated and in 2017 it was changed to
double rated. In 2020 a triple-rated tax system was reintroduced; see sections 4.2 and 1.1.3.
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4.4. A revision of child benefit system
Child benefits are granted for each child, subject to income thresholds. The amendments to tax legislation
that came into effect in 2004 included a schedule for raising child benefits. As from 2007, the child benefits
will be paid for children up to 18 years old instead of 16 years old. For 2012–2021, benefits are as follows
(in ISK per year):
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
For all
children
under the
age of seven
Children
under the
age of
eighteen:
First child
Each
additional
child
Benefits for
single
parents:
First child
Each
additional
child
Income
threshold
for benefit
curtailment:
For couples
100 000
100 000
115 825
119 300
122 879
133 300
140 000
140 000
140 000
148 000
167 564
199 455
167 564
199 455
194 081
231 019
199 839
237 949
205 834
245 087
223 300
265 900
234 500
279 200
234 500
279 200
234 500
279 200
248 000
295 000
279 087
286 288
279 087
286 288
323 253
331 593
332 950
341 541
342 939
351 787
372 100
381 700
390 700
400 800
390 700
400 800
390 700
400 800
413 000
423 000
4 800
000
4 800
000
4 800
000
4 800
000
5 400
000
5 800
000
For a single
parent
Curtailment
of benefits
under the
age of
seven:
For each
child
Curtailment
of benefits
under the
age of
eighteen:
For one
child
For two
children
For three
children or
more
2 400
000
2 400
000
2 400
000
2 400
000
2 700
000
2 900
000
7 200 000
/
11 000
000
3 600 000
/
5 500 000
7 800 000
/
11 000
000
3 900 000
/
5 500 000
8 424 000 /
11 000 000
9 098 000 /
12 320 000
4 212 000 /
5 500 000
4 549 000 /
6 160 000
3%
3%
4%
4%
4%
4%
4%
4%
4%
4%
3%
5%
7%
3%
5%
7%
4%
6%
8%
4%
6%
8%
4%
6%
8%
4%
6%
8%
4% / 5.5%
6% / 7.5%
8% / 9.5%
4% / 5.5%
6% / 7.5%
8% / 9.5%
4% / 5.5%
6% / 7.5%
8% / 9.5%
4% / 5.5%
6& / 7.5%
8% / 9.5%
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375
4.5. A revision of interest rebates
In 2004, the interest rebate was cut by 10%, effective for that year only. The ceiling on interest payments
that qualify for the interest rebate was reduced from 7% to 5.5% in 2005 and the interest rate cut was
reduced from 10% to 5%. As of the beginning of 2006, the ceiling was further reduced to 5%. In 2005 and
again in 2007 the net worth ceiling was lifted considerably in reaction to the increase in net worth due to
the house price boom in 2005–2007. In 2008, as mortgage-related interest expenses surged, the ceiling
on interest payments was raised back to 7% and the maximum rebate amount increased by 37%. These
measures stayed in effect in 2009. In 2010 the maximum rebate amount increased by 47–62% and the net
worth ceiling was reduced significantly. The rate of taxable income which is subtracted from the interest
expense was increased from 6% to 8% and further to 8.5% in 2014. In addition to the ordinary interest
payment relief, a temporary interest cost rebate was in effect in 2010–2011; see section 1.1.2.2.
4.6. Transferability of basic tax credit between spouses
The basic tax credit was made transferable between spouses in stages; see section 1.1.2.1. above. In
fiscal year 2001, 90% of the credit became transferable, rising to 95% in 2002 and 100% in 2003.
4.7. Changes to labour taxation due to the COVID pandemic in 2020 and 2021
Changes in
2020
A special child benefit supplement was added in 2020 in response to the Covid crisis. Benefits are granted
for each child, but the amount is subject to whether other child benefits were fully curtailed by income
thresholds. This special child benefit supplement will only be paid out in 2020.
For each child:
o
If households receive other child benefits: ISK 42 000
o
If other child benefits are fully curtailed: ISK 30 000
Note that as regular child benefits in this Report, this one-off special child benefit supplement is based on
income in the year 2019 but paid out in 2020.
A payment deferral scheme was introduced for monthly pay-as-you-go payments of withheld central and
local PIT and social security contributions on previous month wages. Employers may defer 50% of the
payable amount in March 2020. Employers hard-hit by COVID-19 may also defer 100% of the monthly
payable amount up to three times in the nine-month period April-December 2020. Deferred amounts are
due for payment in January 2021.
Changes in 2021
The special child benefit supplement was extended to 2021, although amended. In 2021 benefits are only
granted to households already receiving other child benefits and are granted for each child. This special
child benefit supplement will only be paid out in 2021.
For each child:
o
If households receive other child benefits: ISK 30 000
Note that as regular child benefits in this Report, this one-off special child benefit supplement is based on
income in the year 2020 but paid out in 2021.
A payment deferral scheme was also introduced in 2021 for monthly pay-as-you-go payments of withheld
central and local PIT and social security contributions on previous month wages. Employers who
postponed payments in 2020 and suffered significant loss of income in 2020 compared to earlier operating
years, can request further postponement of the payments previously postponed until June, July and August
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376
2021. Employers meeting the same criteria may also defer 100% of the monthly payable amount up to two
times in 2021. Deferred amounts are due for payment in January 2022.
5. Memorandum Items
5.1. Identification of AW (only eight categories) and valuation of earnings
The data on average earnings refers to average workers in eight categories according to the NACE rev. 2
classification which corresponds to the ISIC rev.4 system. The categories are C
–
Manufacturing, D
–
Electricity, gas, steam and air conditioning supply (from 2008), E
–
Water supply; sewerage, waste
management and remediation activities (from 2008) F
–
Construction, G
–
Wholesale and retail trade,
repair of motor vehicles, motorcycles, H
–
Transport, storage, and J
–
Information and communication K -
Financial and insurance activities. Public sector employees are not included. Together, these categories
comprise approximately
80% of Iceland’s private sector labour force.
The original data are obtained from a monthly survey among Icelandic firms with 10 or more employees.
5.2. Employer contributions to private pension funds, health and related schemes
By law, all employees and employers must contribute to pension funds. These funds are private, and form
the second pillar pension protection. The private pension funds are not part of the basic, first pillar,
government-run social security system, to which a social security tax is paid as described under section
2.2 above. Compulsory and voluntary payments to such funds are described in section 4.1 above.
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2021 Parameter values
Average earnings/yr
Pension rate for tax allowance
Tax credit
Central income tax
Ave_earn
pension_rate
Basic_crd
Married_propn
tax_sch
10 103 366
0.04
609 509
1
0.17
0.235
0.3180
18 800
Secretariat estimate
4 188 216
11 758 164
Broadcast fee
Special tax
threshold
Local tax
Church tax
Social Security Contr.
Employer SSC
General child allowance:
child allowance
Maximum number of children under 7
Supplement child allowance:
Married couple case
first child
other children
income threshold
Single parent case
first child
other children
income threshold
reduction rate (one child)
reduction rate (two children)
reduction rate (tree or more children)
additional reduction rate (for higher income)
Special child benefit supplement:
Households receiving other child benefits
Households not receiving other child benefits
broadcast_fee
special_rate
special_thrsh
local_rate
church_tax
SSC_fixed
SSC_thrsh
SSC_empr
CA
max_child_under7
0.1445
0
12334
1 870 828
0.061
140 000
1
SA_first_m
SA_others_m
SA_tresh_m
SA_thresh_m_2
SA_first_s
SA_others_s
SA_tresh_s
SA_thresh_s_2
SA_redn_1
SA_redn_2
SA_redn_3
SA_redn_4
SCBS_high
SCBS_low
248 00
295 000
9 9 098 000
12 320 000
413 000
423 000
4 549 000
6 160 000
0.04
0.06
0.08
0.015
30 000
0
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378
2021 Tax equations
The equations for the Iceland system are mostly on an individual basis. But the tax credit for married
couples is relevant only to the calculation for the principal earner and child benefit is calculated only once.
This is shown by the Range indicator in the table below. The functions which are used in the equations
(Taper, MIN, Tax etc) are described in the technical note about tax equations. Variable names are defined
in the table of parameters above, within the equations table, or are the standard variables
“married” and
“children”. A reference to a variable with the affix “_total” indicates the sum of the relevant variable values
for the principal and spouse. And the affixes “_princ” and “_spouse” indicate the value for the principal and
spouse, respectively.
Equations for a single person are as shown for the principal, with “_spouse” values
taken as 0.
Line in country table and intermediate
steps
Variable name
Range
Equation
1.
2.
3.
4.
5.
6.
Earnings
Allowances:
Credits in taxable income
CG taxable income
CG tax before credits
Tax credits :
earn
tax_al
taxbl_cr
tax_inc
CG_tax_excl
tax_cr
B
B
B
B
P
S
B
J
B
P
S
Broadcast fee
7.
8.
CG tax
State and local taxes
special_tax
CG_tax
local_tax
9.
11.
Employees' soc security
Cash transfers:
Total family income
Child allowance
SSC
inc_tot
cash_trans
B
J
J
earn*pension_rate
0
earn-tax_al
tax(tax_inc, tax_sch)
MIN(CG_tax_excl_princ,Basic_crd+MAX(Married*Basic_crd-
CG_tax_excl_spouse-(tax_inc_spouse*local_rate),0))
MIN(Married*Basic_crd, CG_tax_excl_spouse)
broadcast_fee*(earn>SSC_thrsh)
0
CG_tax_excl-tax_cr+special_tax+Broadcast fee
MAX(tax_inc_princ*local_rate-MAX(Basic_crd+
Max(Married*Basic_crd-CG_tax_excl_spouse-
(tax_inc_spouse*local_rate),0)-CG_tax_excl_princ,0),0)
MAX(tax_inc_spouse*local_rate-MAX(Married*Basic_crd-
CG_tax_excl_spouse,0),0)
SSC_fixed*(earn>SSC_thrsh)
earn_total
IF(Children = 0, 0, IF(AND(Married = 1, Children = 1),SA_first_m -
MAX(0, (EARN*(1-pension_rate)) - SA_thresh_m) * SA_redn_1 -
(MAX(0, (EARN*(1-pension_rate)) - SA_thresh_m_2) * SA_redn_4) +
((CA * max_child_under7) - MAX(0, (EARN*(1-pension_rate)) -
SA_thresh_m) * SA_redn_1), IF(AND(Married = 1, Children = 2),
(SA_first_m + SA_others_m) - (MAX(0, (EARN*(1-pension_rate)) -
SA_thresh_m) * SA_redn_2) - (MAX(0, (EARN*(1-pension_rate)) -
SA_thresh_m_2) * SA_redn_4) + MAX(0, ((CA *max_child_under7) -
MAX(0, (EARN * (1 - pension_rate)) - SA_thresh_m) *SA_redn_1)),
IF(AND(Married = 0, Children =1), SA_first_s - MAX(0, (EARN*(1-
pension_rate)) - SA_thresh_s) * SA_redn_1 - (MAX(0, (EARN*(1-
pension_rate)) - SA_thresh_s_2) * SA_redn_4) + ((CA *
max_child_under7) - MAX(0, (EARN*(1-pension_rate)) - SA_thresh_s)
* SA_redn_1), IF(AND(Married = 0, Children = 2),
(SA_first_s + SA_others_s) - (MAX(0, (EARN*(1-pension_rate)) -
SA_thresh_s) * SA_redn_2) - (MAX(0, (EARN*(1-pension_rate)) -
SA_thresh_s_2) * SA_redn_4) + MAX(0, ((CA * max_child_under7) -
MAX(0, (EARN * (1 - pension_rate)) - SA_thresh_s) * SA_redn_1)),
0 )))))
IF(Children>0;IF(AY10>0;SCBS_high*Children;SCBS_low*Children);0)
earn*SSC_empr_rate
12.
13.
Special child benefit supplement
Employer's soc security
SCBS
SSC_empr
J
B
Key to range of equation B calculated separately for both principal earner and spouse P calculated for principal only (value taken as 0 for spouse
calculation) J calculated once only on a joint basis.
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Notes
1
The definition of average worker in Iceland includes workers in five categories. See section 5.1.
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380
Ireland
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in the
tax/benefit system. The methodology also includes the parameter values and
tax equations underlying the data.
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381
Ireland 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
2.
3.
4.
5.
6.
Gross wage earnings
Standard tax allowances
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Single, head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
28.5%
n.a.
35.6%
n.a.
48.5%
n.a.
53.6%
n.a.
52.0%
n.a.
56.8%
n.a.
71.4%
n.a.
74.2%
n.a.
12.7%
4.0%
16.7%
25.0%
22.7%
4.0%
26.7%
34.0%
32.0%
4.0%
36.0%
42.4%
7.9%
4.0%
-4.2%
6.2%
0
0
0
28 255
3 749
0
0
0
37 135
5 595
0
0
0
54 099
9 344
2 088
3 360
5 448
35 352
3 749
1 357
5 672
2 025
13 501
3 382
30 463
1 357
4 022
1 357
2 025
3 382
1 357
1 650
3 300
4 315
0
1 650
3 300
11 476
0
1 650
3 300
27 081
0
1 650
4 950
2 665
0
1 650
0
1 650
0
1 650
0
1 650
1 650
67
none
33 926
0
0
33 926
6 785
100
none
50 636
0
0
50 636
13 194
167
none
84 562
0
0
84 562
26 765
67
2
33 926
0
0
33 926
6 785
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382
Ireland 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
3.
4.
5.
6.
Gross wage earnings
Standard tax allowances
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Single, head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
48.5%
30.8%
53.6%
37.7%
48.5%
48.5%
53.6%
53.6%
48.5%
48.5%
53.6%
53.6%
48.5%
48.5%
53.6%
53.6%
12.7%
4.0%
10.1%
19.0%
18.3%
4.0%
18.4%
26.5%
22.7%
4.0%
23.3%
31.0%
18.3%
4.0%
22.3%
30.1%
0
3 360
3 360
45 545
5 595
0
3 360
3 360
69 024
9 344
0
3 360
3 360
77 630
11 191
0
0
0
65 664
9 344
2 025
8 451
3 382
18 898
4 051
27 002
3 382
18 898
2 025
3 382
4 051
3 382
3 250
6 550
6 426
0
3 300
6 600
15 515
0
3 300
6 600
22 951
0
3 300
6 600
15 515
0
3 300
0
3 300
0
3 300
0
3 300
0
100-0
2
50 636
0
0
50 636
11 394
100-67
2
84 562
0
0
84 562
19 705
100-100
2
101 272
0
0
101 272
26 389
100-67
none
84 562
0
0
84 562
19 705
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The national currency is the Euro (EUR). In 2021, EUR 0.84 was equal to USD 1. In that year, the average
worker earned EUR 50 636. (Secretariat estimate).
1. Personal income tax systems
1.1. Central/ federal government income taxes
1.1.1. Tax unit
Tax is levied on the combined income of both spouses. Either spouse may, however, opt for separate
assessment, in which case the tax payable by both spouses must be the same as would be payable under
joint taxation. A further option allows either spouse to opt for assessment as single persons in which case
they are treated as separate units. The calculations presented in this Report are based on family taxation.
1.1.2. Tax credits
1.1.2.1. Standard reliefs:
Basic reliefs: The single person's credit is EUR 1 650 per year.
Standard marital status reliefs: The married person's credit is EUR 3 300 per year (i.e. twice the
basic credit of EUR 1 650).
Employee credit: With the exception of certain company directors and their spouses and the
spouses of partners in partnership cases, all employees, including (subject to certain conditions)
children who are full-time employees in the business of their parents, are entitled to an employee
credit of EUR 1 650.
Earned Income credit: Individuals in receipt of earned income are entitled to an earned income
credit of EUR 1 500 for 2020et seq. Note: The combined employee credit and earned income
credit is limited to EUR 1 650.
One-Parent Family credit: The single parent family credit is EUR 1 650.
1.1.2.2. Main non-standard tax reliefs applicable to an AW
Interest on qualifying loans: No relief will be available from 1 January 2021 onward
This relief can no longer be claimed by new applicants but those who had claimed prior to 2012
are still eligible for relief up to 2020 inclusive. The relief varies between 25% and 15% of the
following limits for 2020
First Time Mortgage Holders
Married Couple
Widowed Person
Single Person
EUR 5,000
EUR 5 000
EUR 2 500
Other Mortgage Holders
EUR 1 500
EUR 1 500
EUR 750
Medical Insurance: Relief at the taxpayer’s standard rate of tax is available for taxpayers who make
a payment to an authorised insurer under a contract which provides for the payment of medical
expenses resulting from sickness of the person, his wife, child or other dependants. The maximum
relief is EUR 1 000 in respect of an adult and EUR 500 in respect of a child. This relief is now
granted at source and is paid to the insurance provider.
Work related Expenses: These are relieved to the extent that they are wholly, exclusively and
necessarily incurred in the performance of the duties of an employment.
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Home Carers Allowance: This is a tax credit of EUR 1 600 for families where one spouse works at
home to care for children, the aged or incapacitated persons, where the carer spouse’s income
does not exceed EUR 7 199. A reduced measure of relief is granted for income between
EUR 7 200 and EUR 10 400: if the income exceeds EUR 7 200 the tax credit is reduced by one
half of the income of the Home Carer that exceeds this limit. This credit and the increased standard
rate tax band for two income couples (see tax schedule below) are mutually exclusive but the
person may opt for whichever is the more beneficial. If the Home Carer earns income of up to
EUR 7 200 in his/her own right for the tax year, the full tax credit may be claimed. For the purposes
of this tax credit, income means any taxable income such as income from a part-time job, dividends,
etc. but does not include the Carer’s Allowance payable by the Department of Social Protection.
1.1.3. Tax schedule
Band of taxable Income (EUR)
Single/
Widow(er)
Up to 35 300
Balance
Rate (%)
One-Parent
Families
39 300
Balance
20
40
Married Couple
(One Income)
Up to 44 300
Balance
Married Couple
(Two Incomes)
Up to the lesser of 70 600 - 44 300 plus the
amount of the lowest income
Balance
1.1.4. Low income exemption and marginal relief tax
Where total income of an individual aged 65 and over is less than or equal to the income exemption limit
that income is exempt from tax.
Exemption limits:
Single / Widowed: EUR 18 000
Married: EUR 36 000
The exemption limits may be increased in respect of children, as follows:
One or two children (each): EUR 575
Subsequent children: EUR 830
The marginal relief rate of tax applies where liability to tax at the marginal relief rate is less than that which
would be chargeable under the normal tax schedule and where total income is less than twice the relevant
exemption limit, otherwise tax is charged under the normal tax schedule.
Marginal relief tax is charged, where applicable, at a rate of 40% on the difference between total income
and the relevant exemption limit.
1.1.5. Universal Social Charge (USC)
The USC is charged on an individualised basis on gross income at 0.5% on income up to and including
EUR 12 012, at 2% for income in excess of EUR 12 012 but not greater than EUR 20 687, at 4.5% for
income in excess of EUR 20 687 but not greater than EUR 70 044, and at 8% above that level. The lower
exemption threshold is EUR 13 000.The USC does not apply to social welfare payments, including
contributory and non-contributory social welfare State pensions.
USC rates for individuals whose total income does not exceed EUR 60 000 and who are (a) aged 70 years
and over or (b) who hold full medical cards: The 2% rate applies to all income over EUR 12 012.
There is a surcharge of 3% on individuals who have income from self-employment that exceeds
EUR 100 000 in a year.
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1.2. State and local income taxes
No State or local income taxes exist in Ireland.
2. Compulsory Social Security Contributions to Schemes Operated within the
Government Sector.
2.1. Employees' contributions
Contributions are payable at a rate of 4 percent of an employee's gross earnings less allowable
superannuation contributions. No distinction is made by marital status or sex. Those earning less than
EUR 352 per week are exempt. The following is a breakdown of the 2021 rate of contribution together with
ceilings where applicable:
Description
Pension and social insurance
Rate
4.00
Threshold (EUR)
352 per week
Ceiling (EUR)
A PRSI credit was introduced in 2016 which reduces the amount of PRSI payable for people earning
between EUR 352.01 and EUR 424 per week. The credit is tapered and the amount of the credit depends
on your earnings. The maximum credit is EUR 12. If you earn between EUR 352.01 and EUR 424 per
week, the maximum credit of EUR 12 is reduced by one-sixth of the amount of your weekly earnings over
EUR 352.01.
2.2. Employers' contributions
Like employees' contributions, employers' contributions are payable as a percentage of gross employee
earnings less allowable superannuation contributions. The following is a breakdown of the 2021 rate of
contribution:
Description
Occupational injuries
Redundancy contribution
Pension and social insurance(*)
Rate %
0.50
0.40
10.05
*An incremental annual increase of 0.1% in the National Training Fund levy that is collected through the Pay Related Social Insurance (PRSI)
system, is increasing the levy rate from 0.7% to 1% in the three year period from 2018 to 2020.
In 2021, the total employers’ contribution is 11.05% and is reduced to 8.8% in respect of employees earning
less than EUR 398 per week.
3. Universal Cash Transfers
3.1. Transfers related to marital status
None.
3.2. Transfers for dependent children
These are payable to all children under the age of 16 (or under 18 years, if the child is undergoing full time
education by day or is incapacitated and likely to remain so for a prolonged period). These payments do
not depend on any insurance or on the means of the claimant. Entitlements to higher rate for the third and
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subsequent child are being phased out over two years. The amounts payable in 2021 are as follows:
If you have twins, you get one-and-a-half times the normal monthly rate of Child Benefit for each child.
For triplets and other multiple births, Child Benefit is paid at double the normal monthly rate for each
child, provided at least 3 of the children meet the conditions (such as being under 16).
Period
January 2021 to December 2021
Monthly rate per child
First to second child: EUR 140.00
Subsequent children: EUR 140.00
3.3. Transfers for low income families
A non-taxable family income supplement is payable to low income families where either the principal earner
and/or the spouse are in full-time employment. Full-time employment is defined as working nineteen hours
per week or more. The hours worked by the principal and the spouse can be aggregated for the purposes
of this definition. When calculating income for the purposes of the relief superannuation payments, social
welfare payments, tax payments, health and employment and training levies are all subtracted to arrive at
disposable income.
The level of payment is dependent on the amount of family income and the number of children. The
supplement payable is 60% of the difference between the family income and the income limit applicable to
the family. A minimum of EUR 20 per week is payable to eligible families. No supplement is payable to
families with income in excess of the relevant income limit.
The income limit for a family with two children in 2021 is EUR 642 per week.
One Parent Family Payment: This payment is available for men and women who for a variety of reasons
are bringing up a child or children without the support of a partner. The payment which is means tested is
payable in full where the person’s earnings does not exceed EUR
165 per week). Where earnings are
between EUR 165 per week and EUR 425.00 per week a reduced payment is received. From April 2021
working lone parents will no longer lose their One-Parent Family Payment (OFP) when their employment
income exceeds the current EUR 425 weekly limit.
The amount of the full payment for 2021 is EUR 203
per week (plus EUR 38 per week for each child).
4. Other Main Changes in Tax/Benefit System Since 2016
4.1. Earned Income credit
Individuals in receipt of earned income are entitled to an earned income credit of EUR 1 600 for 2020 and
2021 et seq. Note: The combined employee credit and earned income credit is limited to EUR 1 650.
4.2. Changes to labour taxation due to the COVID pandemic in 2020 and 2021
There are a few measures operating in Ireland at present in response to the COVID-19 pandemic these
are the Temporary Wage Subsidy Scheme (TWSS) operated by Revenue. The Pandemic Unemployment
Payment (PUP) by Social Welfare along with Enhanced Illness Benefit and short term changes to Rent
Supplement as outlined below.
The following measures do not impact on the Taxing of Wages results.
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Employment Wage Subsidy Scheme
EWSS is an economy-wide enterprise support that focuses primarily on business eligibility. The scheme
provides a flat-rate subsidy to qualifying employers based on the numbers of eligible employees on the
employer’s payroll and gross pay to
employees.
The EWSS replaced the Temporary Wage Subsidy Scheme (TWSS) from 1 September 2020. It is
expected to continue until the end of 2021.
Key features
Employers must possess valid tax clearance to enter the EWSS and continue to maintain tax
clearance for the duration of the scheme.
A reduced rate of employer’s PRSI of 0.5% is charged on wages paid which are eligible for the
subsidy payment.
Seasonal and new hires are eligible for the EWSS. Claims could have been backdated to 1 July
2020 (subject to limited exceptions).
Subsidy is based on an employee’s gross weekly wage, including notional pay, before deductions,
and excluding non-taxable benefits.
The subsidy amount paid to you will depend on the gross income of each employee. The EWSS will
give a flat-rate subsidy to you, based on the number of qualifying employees on your payroll.
No subsidy is paid for employees paid less than EUR 151.50 or more than EUR 1 462 gross per week.
Pay dates 20 October 2020 to 30 June 2021 (inclusive)
For every employee paid between:
EUR 400 and EUR 1 462 gross per week, the subsidy is EUR 350
EUR 300 and EUR 399.99 gross per week, the subsidy is EUR 300
EUR 203 and EUR 299.99 gross per week, the subsidy is EUR 250
EUR 151.50 and EUR 202.99 gross per week, the subsidy is EUR 203.
Pay dates before 20 October 2020
For every employee paid between:
EUR 203 and EUR 1 462 gross per week, the subsidy is EUR 203
EUR 151.50 and EUR 202.99 gross per week, the subsidy is EUR 151.50.
Temporary Wage Subsidy Scheme
This scheme run by Revenue, enabled employees, whose employers were affected by the pandemic, to
receive significant supports directly from their employer through the payroll system. To qualify for the
scheme, employers must have
be experiencing significant negative economic disruption due to Covid-19
be able to demonstrate, to the satisfaction of Revenue, a minimum of a 25% decline in turnover *
be unable to pay normal wages and normal outgoings fully and
retain their employees on the payroll.
*TWSS turnover drop relates to the period Q2 2020 the employer is free to calculate drop with respect to
Q1 2020 or Q2 2019).
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The wage subsidy payments to employees are liable to income tax and USC; however, the subsidy is not
taxable in real-time through our PAYE system during the period of the Subsidy scheme. Instead the
employee will be liable for tax and USC on the subsidy amount paid to them by their employer by way of
review at the end of the year.
The scheme was introduced in 26 March 2020 and was extended until the 31 August 2020.
On 4 May 2020 Revenue informed all eligible employers of the maximum personal subsidy amount in
respect of each individual employee on its payroll based on the employee’s Average Revenue Net Weekly
Pay. See below table
Income thresholds
Previous average take home pay
below EUR 412
per week
Previous average take home pay
between EUR 412 and EUR 500
per
week
Previous average take home pay
between EUR 500 and EUR 586
per
week
Previous average take home pay
between EUR 586 and EUR 960
per
week
Level of subsidy payment
85% of the weekly average take home pay
Flat rate subsidy of EUR 350 per week
70% of the weekly average take home pay, up to a maximum of EUR 410
Subsidy is subject to ‘tapering’. That means the level of subsidy is calculated by reference to the
amount of any additional (‘top up’) payments made by the employer and its effect on the weekly
average take home pay.
Subsidy levels are as follows:
Flat rate subsidy of EUR 350 per week, where the employer pays a top up payment up to 60% of
the employee’s previous weekly take home pay
Flat rate subsidy of EUR 205 per week, where the employer pays a top up payment between 60%
and 80% of the employee’s previous weekly take home pay
No subsidy is payable, where the employer pays a top up payment above 80% of the employee’s
previous weekly take home pay
Tapering is calculated by subtracting the gross 'top up' paid by the employer from the employee’s
previous average take home pay.
Employee’s whose average take home pay has fallen below EUR 960 can now avail of the
scheme, subject to the tapering rules (see above).
No subsidy applies for employee’s whose current pay is more than EUR 960. This is the case
regardless of the level of any reduction in pay.
Previous average take home pay
above EUR 960
per week
Pandemic Unemployment Payment
The COVID-19 Pandemic Unemployment Payment is available to employees and the self-employed who
have lost their job on (or after) March 13 due to the COVID-19 (Coronavirus) pandemic. The COVID-19
Pandemic Unemployment Payment will be extended beyond 30th June 2021 until February 2022 for
existing claimants.
PUP will close to new entrants from 1st July 2021 onwards
You can apply for the COVID-19 Pandemic Unemployment Payment if you:
are aged between 18 and 66 years old and
currently living in the Republic of Ireland and
have lost your job due to the COVID-19 pandemic or
have been temporarily laid off due to the COVID-19 pandemic and
worked in the Republic of Ireland or were a cross border frontier worker and
are not in receipt of any employment income
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The payment also applies if you are:
self-employed and your trading income has ceased due to COVID-19
a non EU/EEA worker who has lost employment due to the COVID-19 pandemic
a student (or a non-EU/EEA student) who has lost employment due to the COVID-19 pandemic
(Payments to Students will cease once they return to full time education
–
the last payment will be
made on 7th September)
part-time worker
The current rates of payment above the rate of €203 will remain in place until 7th September at which
point they will
begin to be gradually reduced on a phased basis in increments of €50.
The first reduction is planned to take effect in payments on 14th September, with subsequent
reductions taking effect in mid-November and early February.
People currently receiving the
€203 rate and those who reach the €203 rate in each phase, will then
transition to standard jobseeker terms. This will be done over a period of time and with advance notice.
From 16 October 2020 until 30 June 2021 the COVID-19 Pandemic Unemployment Payment will be paid
at 4 rates.
The rate you receive will depend on the amount you used to get paid:
if you earned less than EUR 200 per week - the rate of the COVID-19 Pandemic Unemployment
Payment will be EUR 203 per week
if you earned between EUR 200 and EUR 299.99 per week - the rate of the COVID-19 Pandemic
Unemployment Payment will be EUR 250 per week
if you earned between EUR 300 and EUR 399.99 per week - the rate of the COVID-19 Pandemic
Unemployment Payment will be EUR 300 per week
if you earned EUR 400 or more - you will receive EUR 350
If you were working and were also in receipt of any social welfare payment such as a Carer's Payment,
Working Family Payment (WFP) or One-Parent Family Payment, you can, provided you have lost your job
due to COVID-19, also claim the COVID-19 emergency payment, in addition to retaining your existing
welfare payment. The COVID-19 Payment Unemployment Payment will replace your employment income
and will be regarded by the department as equivalent to employment income.
This payment is subject to income tax but is not liable to either the universal social charge or PRSI (pay-
related social insurance).
In contrast to the year 2020, PUP is taxable in real-time during 2021. (This means you are taxed when you
are paid.) PUP payments earned in 2021 are treated like other Department of Social Protection (DSP)
taxable payments.
The DSP informs Revenue on a weekly basis of the amount of taxable PUP paid to each recipient. Then:
any tax due is collected by reducing the person’s tax
credits and rate band. To do this, Revenue
‘annualises’ the weekly amount of PUP. This is calculated by multiplying the weekly amount by 52. The
annual tax credits and rate band are reduced by this amount.
Enhanced Illness Benefit
This payment is for workers and the self-employed who cannot work in the short term because they have
been medically certified to self-isolate or are ill due to COVID-19. COVID-19 Enhanced Illness Benefit will
continue after the end of June 2021.
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390
The personal rate of Illness Benefit will increase from EUR 203 per week to EUR 350 per week for a
maximum of 2 weeks where you are medically-required to self-isolate or a maximum of 10 weeks following
a confirmed diagnosis of COVID-19.
COVID-19 and Rent Supplement
Legislation was introduced to prevent both the termination of residential tenancies and any rent increases
for the duration of the COVID-19 pandemic.
While tenants are expected to pay rent during the COVID-19 pandemic, Rent Supplement is available to
you if you are struggling to pay.
There are new Rent Supplement rules for applicants who apply on or after 13 March 2020. These rules
will be in place until 30 June 2021:
You can qualify for Rent Supplement if you or your partner are working more than 30 hours per
week and you have had a reduction in your income from work due to the COVID-19 public health
emergency.
You must have been in your current tenancy for more than 4 weeks and could have continued to
paid your rent from your own resources, but for the COVID-19 public health emergency.
If you are diagnosed with COVID-19 or are suspected of having COVID-19 and are medically
required to self-isolate, your Rent Supplement can be processed and paid immediately.
You will be assessed for Rent Supplement using a higher Supplementary Welfare Allowance rate.
The basic Supplementary Welfare Allowance rate is normally EUR 201
–
you will get a higher rate if you
have dependents. However, if you are a new Rent Supplement applicant and applied on or after 13 March
2020, you will be assessed for Rent Supplement using the following Supplementary Welfare Allowance
rates:
EUR 350 for a single person
EUR 700 for a couple
EUR 40 for each child.
5. Memorandum Items
5.1. Employer contributions to private social security arrangements
Information not available, although such schemes do exist.
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2021 Parameter values
Average earnings/yr
Tax allowances
Tax Credits
Ave_earn
Basic_al_at_standardrate
Married_al_at_standardrate
Empl_al_at_standardrate
Singleparent_at_standardrate
Carers_allow
Carers_thrsh1
Carers_thrsh2
Carers_taper_rt
Single_ex
Married_ex
Child_ex
Child_ex_3
Single_MR
Married_MR
Child_MR
Child_MR_3
marg_rel_rate
Single_sch
Single_sch_child
Married_sch_oneinc
Married_sch_twoinc
50 636
1650
1650
1650
1650
1600
7200
10400
0.5
0
0
0
0
0
0
0
0
0.4
0.2
0.4
0.2
0.4
0.2
0.4
0.2
0.4
0.005
0.02
0.045
0.08
0.005
0. 02
13 000
26 300
18 304
0.04
624
0.166666667
Limit Abolished
0
0.1105
0.088
20696
Limit Abolished
1680
1680
33384
1040
0.6
9568
13 858
Secretariat estimate
Exemption amount
Marginal relief limit
Marginal relief
Income tax
35 300
39 300
44 300
70 600
12 012
20687
70 044
12 012
Universal Social Charge
USC
USC_sch_med_card
USC threshold
Band_increase_lim
SSC_thresh
pension_rate
SSC_cred_max
SSC_cred_red
pension_ceil
Non_cum_Allc
Empr_rate
Empr_lower_rate
Empr_thrsh
Empr_ceil
Ch_ben
Ch_ben_3
FIS_pay_limit
FIS_min
FIS_rate
single_med_card
married_med_card
Maximum increase in first band
Social security contributions
Employees
Employers
Child benefit
Family income supplement
Medical card
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Child_add_med_card
One-Parent Family
opf_basic
opf_inclim_1
opf_inclim_2
opf_inclim_3
opf_dis
opf_thrsh
opf_red
opf_childincr
1976
10556
8580
22 100
10795.2
0.5
395.2
130
1976
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2020 Tax equations
The equations for the Irish system in 2020 are mostly on a family basis using mainly a tax credit system
for the first time. But social security contributions are calculated separately for each spouse. This is shown
by the Range indicator in the table below.
The functions which are used in the equations (Taper, MIN, Tax etc) are described in the technical note
about tax equations. Variable names are defined in the table of parameters above, within the equations
table, or are the standard variables “married” and “children”. A reference to a variable with the affix “_total”
indicates the sum of the relevant variable
values for the principal and spouse. And the affixes “_princ” and
“_spouse” indicate the value for the principal and spouse, respectively. Equations for a single person are
as shown for the principal, with “_spouse” values taken as 0.
Line in country table and
intermediate steps
1.
2.
3.
4.
Earnings
Allowances:
Credits in taxable income
Taxable income
New carers allowance
(provided as a tax credit)
Preliminary Tax Liable
(including carers allowance)
Variable
name
earn
taxbl_cr
tax_inc
career_allo
w
tax_prel
J
J
Range
Equation
J
5.
Tax before credits (but
including carers allowance)
Universal social charge
Tax credits :
_tax_excl
USG
basic_cr
single_par
_cr
other_cr
tax_cr
exemp_am
t
MRL
CG_tax
J
J
J
6.
(provided at standard rate ( tax credit equivalent))
0
Earn+OPF_total
IF((Married*Children)>0, IF(earn_spouse<=Carers_thrsh1,
Carers_allow, IF(earn_spouse>Carers_thrsh2, 0, Positive
(Carers_allow-Carers_taper_rt*(earn_spouse-Carers_thrsh1)))), 0)
IF(Married='0,' IF(Children='0,' Tax(tax_inc, Single_sch), Tax(tax_inc,
Single_sch_child)), IF(AB7='0,' Tax(tax_inc, Married_sch_oneinc)-AG7,
Tax(earn_principal+Positive(earn_spouse-Band_increase_lim),
Married_sch_oneinc)+Tax(MIN(earn_spouse, Band_increase_lim),
Married_sch_oneinc)))
IF((Married*earn_spouse)>0, MINA(tax_prel, (Tax(tax_inc,
Married_sch_oneinc)-career_allow)), tax_prel)
IF(earn>USC_threshold,IF(med_crd_fac=1,Tax(earn,USC_sch),Tax(ea
rn,USC_sch_med_card)),0)
Basic_al_at_standardrate+(Married*Married_al_at_standardrate)
IF(Married='0,' IF(Children>0, Singleparent_at_standardrate, 0), 0)
Empl_al_at_standardrate+ (IF(earn_spouse>0,
Empl_al_at_standardrate, 0))
basic_cr+single_par_cr+other_cr
Single_ex+Married*Married_ex+Child_ex*MIN(2, Children)+
(Children>2)*(Children-2)*Child_ex_3
Single_MR+Married*Married_MR+Child_MR*MIN(2, Children)+
(Children>2)*(Children-2)*Child_MR_3
If(earn_total<='MRL,' MIN(marg_rel_rate*positive(earn_total-
exem_amt), positive(_tax_excl-tax_cr)), positive(_tax_excl-
tax_cr))+USG
0
IF(earn=0,0,MINA(Non_cum_Allc,earn))
(single_med_card+Married*(married_med_card-single_med_card)
+child_add_med_card*Children<earn_princ+earn_spouse)
=IF(earn>SSC_thresh,(pension_rate*earn)-Positive(SSC_cred_max-
((earn-SSC_thresh)*SSC_cred_red)))
Children*Ch_ben+(Children>2)*(Children-2)*(Ch_ben_3-Ch_ben)
(Children>0)*IF((earn-_tax-SSC+OPF_total)<='FIS_pay_limit' , MAXA(
(FIS_pay_limit-(earn-_tax-SSC+OPF_total))*FIS_rate, FIS_min), 0)
Exemption amount
Marginal relief limit
7.
Net tax
J
J
J
8.
State and local taxes
Employees' soc security
weekly allowance
Medical card factor
employees' soc security
local_tax
weekly_all
ce
Med_crd_f
ac
SSC
J
B
J
B
11.
Cash transfers
Child_ben
efit
FIS
J
J
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394
OPF_basic
P
=IF((earn-opf_inclim_1)*opf_dis<opf_thrsh,opf_basic,IF((earn-
opf_inclim_1)*opf_dis>opf_inclim_3,0,Positive(opf_basic- (opf_red+
(opf_red*TRUNC((((earn-opf_inclim_1)*opf_dis)-
opf_thrsh)/opf_red)))))*((Married=0)*(Children>0)))*(earn<opf_inclim_2)
=IF(OPF_basic>0,OPF_basic+(opf_childincr*Children))
Child_benefit+FIS+OPF_total
IF(earn<='Empr_thrsh,' Empr_lower_rate, Empr_rate)* MIN(earn, Empr_ceil)
13.
Total cash transfers
Employer's soc security
OPF_total
cash_trans
SSC_empr
B
Key to range of equation:
B calculated separately for both principal earner and spouse
P calculated for principal only (value taken as 0 for spouse calculation)
J calculated once only on a joint basis
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395
Israel
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in the
tax/benefit system. The methodology also includes the parameter values and
tax equations underlying the data.
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396
ISRAEL 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
EITC
Unused wastable tax credits
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
32.0%
n.a.
36.8%
n.a.
43.0%
n.a.
47.0%
n.a.
47.0%
n.a.
50.7%
n.a.
12.0%
n.a.
18.2%
n.a.
6.9%
6.5%
13.5%
17.6%
11.4%
8.3%
19.7%
24.2%
20.0%
9.8%
29.8%
34.1%
0.0%
6.5%
1.3%
6.0%
0
0
102 063
5 887
0
0
141 328
10 301
0
0
206 462
19 265
6 170
6 170
116 414
5 887
7 695
15 876
14 666
34 701
28 819
87 507
7 695
7 695
7 695
14 666
28 819
7 695
5 886
0
0
0
0
5 886
8 181
0
5 886
0
0
0
0
5 886
20 035
0
5 886
0
0
0
0
5 886
58 688
0
7 194
2 616
5 232
0
975
15 042
0
0
0
0
117 940
14 067
0
0
176 029
25 921
0
0
293 969
64 574
0
0
117 940
14 067
0
0
0
0
0
0
0
0
67
none
117 940
100
none
176 029
167
none
293 969
67
2
117 940
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397
ISRAEL 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
EITC
Unused wastable tax credits
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
43.0%
7.9%
47.0%
12.3%
43.0%
32.0%
47.0%
36.8%
43.0%
43.0%
47.0%
47.0%
43.0%
32.0%
47.0%
36.8%
11.4%
8.3%
17.4%
21.9%
7.4%
7.6%
13.6%
18.1%
9.5%
8.3%
16.7%
21.3%
9.2%
7.6%
16.8%
21.1%
4 128
4 128
145 456
10 301
4 128
4 128
254 059
16 188
4 128
4 128
293 324
20 603
0
0
244 699
16 188
14 666
34 701
22 361
44 038
29 332
62 863
22 361
49 270
14 666
22 361
29 332
22 361
5 886
0
0
0
0
5 886
20 035
0
13 080
0
5 232
0
0
18 312
21 677
0
13 080
0
5 232
0
0
18 312
33 531
0
13 080
0
0
0
0
13 080
26 909
0
0
0
176 029
25 921
0
0
293 969
39 989
0
0
352 058
51 843
0
0
293 969
39 989
0
0
0
0
0
0
0
0
100-0
2
176 029
100-67
2
293 969
100-100
2
352 058
100-67
none
293 969
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398
The Israeli currency is the Israeli Shekel (ILS). In 2021, ILS 3.2266 was equal to USD 1. In that year, the
average worker in Israel earned ILS 176 029
(Secretariat’s estimate).
1. Personal income tax system
1.1. Central government income tax
1.1.1. Tax unit
In general, spouses are taxed separately on their earned income, subject to the condition that its sources
are independent. The household is taxed jointly if their earned income is deemed to be interdependent.
Until 2014, the conditions for interdependence involved situations where one spouse worked in a business
that the other spouse either owned or had certain levels of capital or management/voting rights. Since
2014, spouses could still be taxed separately, even in cases where their earned income is deemed to be
interdependent, if the labour of both spouses is needed to run the business and their income is
commensurate to their effort.
1.1.2. Tax allowances and credits
1.1.2.1 Standard tax credits
The standard tax credits are given in the form of credit points subtracted from the tax liability. Each point
is worth ILS
2 616 in 2021
.
Basic credit:
Every resident taxpayer is entitled to 2.25 credit points (ILS
5 886 in 2021
).
Additional credit for women:
Women are entitled to a further half credit point (ILS
1 308 in 2021
).
Child credit:
Working mothers (and fathers in one parent families) with children aged under 18 are
entitled to one additional credit point per child (ILS 2 616 in 2021). In 2012 this credit was increased
to 2 credit points per child aged under 5. Since 2012, married working fathers with children aged
under 2 are also entitled to 2 credit points per child. In 2017, the credit for both parents was
increased to 2.5 credit points per child aged under 5. Since, according to the Taxing Wages
methodology, the children in the model are between 6 and 11 inclusive, this change was not
included in the model.
Single parent credit:
Single parents (male or female) are entitled to one additional credit point.
1.1.2.2 Non
–
standard tax credits applicable to income from employment
Tax credits are awarded for contributions to approved pension schemes, up to a ceiling that varies
according to the employee’s circumstances.
Employees living in certain development areas or in conflict zones receive credits as a percentage
of their income up to ceiling. In 2016, a comprehensive reform was implemented, where the
average credit was decreased but the number of beneficiaries more than doubled. In 2021 the
credits range from 7 % in the lowest category to 20% in the highest category with ceilings between
ILS 131 640 and 251 280. About 20% of the population lives in these areas.
New immigrants are entitled to three additional credit points in their first eighteen months in Israel,
two additional credit points in the following year, and one credit point in the year after.
Discharged soldiers receive 2 credit points for three years after the completion of at least
23 months of service or 1 credit point for a shorter service.
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399
Graduates of academic studies receive 1 credit point for one year after the completion of a B.A.
degree (or after the completion of 1 700 study hours that led to a professional certificate) and 0.5
credit point for one year after the completion of a M.A. degree.
1.1.3. Tax schedule
The tax schedule for earned income in 2021 is as follows:
Taxable income
(ILS per year)
0 - 75480
75480 - 108360
108360 - 173880
173880 - 241680
241680 - 502920
502920 - 647640
Above 6476400
Tax rate
(%)
10
14
20
31
35
47
50
1.2. Regional and local income tax
There are no regional or local income taxes.
2. Compulsory social security insurance system
Social security contributions consist of a combination of social security contributions and health insurance.
The tax rates paid by employees and employers are applied in two brackets:
A reduced rate for income up to a level of 60% of the average wage per employee post (ILS 6 331
per month in 2021).
A full rate for income exceeding 60% of the average wage per employee post and up to ILS 44 020
per month (in 2021).
2.1.
Employees’ contributions
The taxable base for social security insurance contributions paid by employees is the total amount of the
gross wage or salary including fringe benefits. The assessment period is the calendar month. The effective
employees’ contribution rates in
2021 are as follows:
Insurance branch
Total for National Insurance branches
Health
Total contributions
Full rate contribution
(%)
7.00
5.00
12.00
Reduced rate contribution
(%)
0.40
3.10
3.50
2.2.
Employers’ contributions
Employers on behalf of their employees also pay social security insurance contributions. These relate to
National Insurance only - employers do not pay any contributions for health insurance.
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400
The employers’ contribution rates in
2021 are as follows:
Insurance branch
Total for National Insurance branches
Health
Total contributions
Full rate contribution
(%)
7.60
--
7.60
Reduced rate contribution
(%)
3.55
--
3.55
3. Payroll taxes
The following payroll taxes exist in Israel but neither of them is included in the modelling as they have
limited coverage:
Wage tax on the non-profit institutions: the VAT law imposes a 7.5% on the wage-bill on the non-
profit sector including Government,
Wage tax on the financial institutions: the VAT law also imposes a 17.0% tax on the wage-bill of
the financial institutions
.
4. Universal cash transfers
4.1. Transfers related to marital status
None.
4.2. Transfers for dependent children
A monthly child allowance is paid to the parent (usually the mother) of unmarried children aged up to 18.
The amount of the entitlement for each child depends on the date of birth of the child. Between August
2003 and June 2009, all children born after 1 June 2003 received the same benefit as the first child. But,
according to the Coalition agreement signed in March 2009, the benefits for the second, third and fourth
child (including those born after June 2003) were increased gradually over a period of four years (i.e. from
2009 to 2012). In August 2013 the allowance for all children born after June 2003 were decreased to
ILS 140 per month per child.
In December 2015 (retroactively from May 2015) the allowance for all children were increased.
Moreover, the government deposits ILS 50 per child per month, starting with May 2015 (for the period May
2015-December 2016, the actual deposit was only delivered, in 36 equal instalments, between January
2017-December 2019). The savings are liquid only when the child turns 18. Considering this delay of cash
payments, they do not benefit the household, but rather the child and therefore are not included in the
Taxing Wages modelling for 2021.
Children born before 1 June 2003
First child
Second child
Third child
Fourth child
Fifth child and above
152
192
192
340
359
Children born on or after 1 June 2003
152
192
192
192
152
In addition, a Study Grant is paid to lone parents with children aged 6 to 18. The grant is paid in one
instalment, usually in September at the beginning of the school year. In 2021, the grant per child was
ILS 1 021.
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401
5. Main changes in the tax and benefit systems since 2002
There has been a policy of gradually reducing the level of personal income taxes since 2003. This
policy was expected to continue till 2016 but came to an end in 2012 with the top tax bracket
increasing from 45% to 48% although the rate of one middle income tax bracket was further
decreased from 23% to 21%. In 2013 a surtax of 2% was imposed on total income above
ILS 811 560, effectively increasing the top marginal rate to 50%. In 2017 the surtax was increased
to 3% on total income above ILS 640 000, while the top marginal rate remained unchanged at 50%.
In 2013, the value of some tax brackets were not fully indexed to the CPI and even suffered a
nominal decrease. In 2014, the value of all tax brackets and of the "credit point" were not indexed
to the CPI. In 2017, some tax rates and the width of some tax brackets were changed, effectively
decreasing the tax burden for low and mid income while increasing the burden for higher incomes.
The full contribution rate for employee social security contributions increased gradually from 9.7%
in 2002 to 12% in 2006. The reduced contribution rate decreased from 5.76% in 2002 to 3.5% in
2006. The upper threshold for contributions was removed in July 2002 but re-instated one year
later. In August 2009, as a temporary measure until December 2011, it was increased to 10 times
the average wage per employee post until December 2010 and to 9 times the average wage per
employed post until December 2011.
Prior to July 2005, there was only one contribution rate for employer social security contributions,
set at 5.93% between July 2002 and June 2005. The upper threshold for contributions was
removed in July 2002 but was re-instated one year later. The current system of two tax brackets
was introduced in July 2005 with a reduced contribution rate of 5.33% and a full rate of 5.68%.
There has been a lowering of rates in each year between 2006 and 2009. In August 2009, as a
temporary measure until March 2011, the reduced rate was increased from 3.45% to 3.85%. In
April 2011 the regular rate was increased to 5.9%. It was increased again to 6.5% in January 2013,
6.75% in January 2014, 7.25% in January 2015, 7.5% in January 2016 and 7.6% in January 2019.
The Employers tax on wage bill of the non-profit sector excluding Government was abolished in
2008.
In the period between August 2003 and June 2009, all children that were born on or after 1 June
2003 received the same level of benefit payment as the first child. The 2009 Coalition agreement
introduced a gradual increase in the benefit payments for the second, third and fourth children in
all families (including those where children were born after June 2003) over a period of four years
from July 2009 to Apr 2012. In August 2013, the allowance for all children born after June 2003
was decreased to ILS 140 per month per child. In December 2015 (retroactively from May 2015)
the allowance for all children were increased.
In 2017, the tax credit for both parents was increased to 2.5 credit points per child aged under five.
5.1. Changes to labour taxation due to the covid-19 pandemic
People entitled to the EITC and who worked during the pandemic in April-December 2020 got a special
bonus (see details in paragraph 6.3).
6. Memorandum items
6.1. Average gross annual wage earnings calculation
The average wage figures represent the amount earned for a full time post by employees working 35 hours
per week or more. Until 2011, the AW data came from a combination of two sources - the income and
expenditure survey and the labour force survey. Since 2012, the data come exclusively from the income
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402
and expenditure survey as the labour force survey has no more data on income. The Central Bureau of
Statistics has now computed a new AW series based exclusively on the income and expenditure survey
back from 2000.
As to the economic classification, until 2012, Israel used a modified version of ISIC 3 where the B-I
industries (see Table below) are a very close equivalent of C-K industries in ISIC 3.1. Israel's Central
Bureau of Statistics adopted ISIC 4 in 2012 and the Average Wage used in the modelling is based on ISIC
4 since 2013.
A
B
C
D
E
F
G
H
I
J
K
L
M
Agriculture.
Manufacturing.
Electricity and water supply.
Construction (building and civil engineering projects).
Wholesale and retail trade and repairs.
Accommodation services and restaurants
Transport, storage and communication.
Banking, insurance and other financial institutions.
Business activities.
Public administration.
Education.
Health, welfare and social work services.
Community, social, personal and other services.
6.2. Employer contributions to private pension
Until 2007, employers were not legally obliged to pay into a pension plan for their employees. Pension
rights were guaranteed in collective agreements that covered less than half of the labour force. About one
million employees in Israel had no pension arrangement (mainly those earning a relatively low wage,
temporary workers and those working for subcontractors).
In 2008, a compulsory employment pension was introduced for employees with a period of employment of
at least 6 months. The minimum rate of contributions in January 2021 was 18.5 per
cent of the employee’s
salary (up to the level of the average wage of ILS 10 551 per month), about one third to be paid by the
employee and two thirds by the employer.
6.3. Earned income tax credit
A non-wastable earned income tax credit was introduced in 2008 in selected geographical areas of Israel
covering 15 % of the population. Entitlement to this credit is established based on earnings in the previous
year. The tax credit was extended to all areas of Israel in 2012 (based on the earnings in 2011 and therefore
we already included it in the 2011 version of the model). For mothers of children up to the age of two and
for single parents the full coverage started in 2011 (based on earnings in 2010).
By law, workers aged 23 and over who are the parents of one or two children under the age of 18 (or
workers aged 55 and over even without children), and earn at least ILS 2 110 per month (about 40% of
the minimum wage) but not more than ILS 6 370 per month are entitled to a monthly supplement of up to
340 ILS. The corresponding figure for a family with three or more children is ILS 490.
Since 2016, single parents are eligible for the EITC for a wider income range
–
from ILS 1 300 per month
to ILS 9 640 per month (for a single parents of 1-2 children) or ILS 11 770 per month (for a single parent
of three or more children).
Since 2013 (based on earnings in 2012), these sums were increased by 50% for working mothers (and
fathers in one-parent family).
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403
A temporary measure (for earnings in 2018 only), expanded the 50% bonus to all working fathers and
furthermore added a bonus of 30% for families where both parents work. This measure is no longer in
effect and is not included in the Taxing Wages modelling for 2021.
To help workers specially hurt by the COVID-19 pandemic, a temporary measure (for earnings in 2020
only), added a 62% bonus to the EITC for April-December 2020 (but not less than ILS 990). Therefore, an
equivalent annual 46.5% bonus was included in the 2020 Taxing Wages model but not in the 2021 Taxing
Wages model.
Families in which both parents work, and their joint income does not exceed ILS 12 240, are entitled to
these benefits for each wage-earner. The grant is paid four times a year directly into the account of the
eligible persons.
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2021 Parameter values
Average earnings/yr
Income tax
Ave_earn
Tax_sch
176 029
0.10
0.14
0.20
0.31
0.35
0.47
0.50
0.035
0.12
0
0.0355
0.0760
0.0000
1 824
2 304
1 021
5 886
2 616
2 616
1 308
0
0.161
0
0
-0.23
0
0.235
3.635
0
-0.235
0
0.108
0
0
-0.116
0
0.155
2.805
0
-0.116
1080
1440
240
25 320
15 600
17 640
58 800
146 880
Secretariat estimate
75 480
108 660
173 880
241 680
502 920
647 640
75 972
528 240
75 972
528 240
Employees SSC
SSC_sch
Employers SSC
SSC_rate2
Child benefit
CB_firstchild
CB_secondchild
Studygrant_rate
WTC_Basic
WTC_lone
WTC_Child
WTC_woman
NIT_sch1
Wastable tax credits
Basic element
Lone parent
Parents/per child
Women
Negative Income tax
Married with 1 or
2 children
Married with 3 or
more children
NIT_sch2
Single with 1 or
2 children
NIT_sch3
Single with 3 or
NIT_sch4
25 320
43 954
44 040
58 800
76 440
25 320
44 028
44 040
58 800
83 760
15 600
43 378
44 040
82 800
115 680
15 600
44 028
44 040
92 400
141 240
NIT_basic1
NIT_basic2
NIT_min
NIT_MinIncome1
NIT_MinIncome2
Nit_AddIncome1
Nit_AddIncome2
Nit_MaxIncome
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NIT_Bonus1
NIT_Bonus2
NIT_Bonus3
NIT_PartnerIncome
NIT_MinCovid
Days in tax year
numdays
1.5
1
1
0
0
366
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2021 Tax equations
Line in country table and
intermediate steps
1.
2.
3.
4.
5.
6.
Earnings
Allowances:
Credits in taxable income
CG taxable income
CG tax before credits
Tax credits (nonwastable):
Principal
Variable name
earn
Tax_al
taxbl_cr
tax_inc
CG_tax_excl
tax_cr_princ
Range
Equation
B
B
B
B
B
0
0
Earn
Tax(tax_inc, tax_sch)
(earn>0)*(wtc_basic+(IF(married=0)*(children>0),wtc_woman+wtc_lo
ne+(wtc_child*children))
(earn>0)*(wtc_basic+wtc_woman+(wtc_child*children))
NIT=MAX(0,IF(Children=0,0,IF(Married=1,IF(Children<=2,NIT_basic1
*(Princ_earnings>NIT_MinIncome1)+Tax(Princ_earnings,NIT_sch1),
NIT_basic2*(
Princ_earnings>NIT_MinIncome1)+Tax(Princ_earnings,NIT_sch2)),(I
F(Children<=2,NIT_basic1*( Princ_earnings
>NIT_MinIncome2)+Tax(Princ_earnings,NIT_sch3),NIT_basic2*(
Princ_earnings
>NIT_MinIncome2)+Tax(Princ_earnings,NIT_sch4))))))
NIT=+MAX(0,NIT+IF(Children=0,0,IF(Children<=2,-0.23,-0.235))
*MAX(0,+( Princ_earnings +Spouse_earnings)-NIT_MaxIncome-
MIN(MAX(0, Princ_earnings -NIT_Addincome2),NIT_AddIncome1)-
MIN(MAX(0,Spouse_earnings-NIT_Addincome2),NIT_AddIncome1)))
NIT=IF(NIT<NIT_min,0,NIT)*if(Married=1,1,NIT_Bonus1)*IF(Spouse_
earnings>NIT_PartnerIncome,NIT_Bonus2,1)
+MAX(NIT_MinCovid*(NIT>=NIT_min) ,(NIT_Bonus3-1)
*IF(NIT<NIT_min,0,NIT)*IF(Married=1,1,NIT_Bonus1)
*IF(Spouse_earnings >NIT_PartnerIncome,NIT_Bonus2,1)
NIT=MAX(0,IF(Children=0,0,IF(Married=1,IF(Children<=2,NIT_basic1
*(Spouse_earnings>NIT_MinIncome1)+Tax(Spouse_earnings,NIT_sc
h1),NIT_basic2*(Spouse_earnings>NIT_MinIncome1)+Tax(Spouse_e
arnings,NIT_sch2)),(IF(Children<=2,NIT_basic1*(Spouse_earnings>N
IT_MinIncome2)+Tax(Spouse_earnings,NIT_sch3),NIT_basic2*(Spou
se_earnings>NIT_MinIncome2)+Tax(Spouse_earnings,NIT_sch4))))))
NIT=+MAX(0,NIT+IF(Children=0,0,IF(Children<=2,-0.23,-0.235))
*MAX(0,+( Princ_earnings +Spouse_earnings)-NIT_MaxIncome-
MIN(MAX(0, Princ_earnings -NIT_Addincome2),NIT_AddIncome1)-
MIN(MAX(0,Spouse_earnings-NIT_Addincome2),NIT_AddIncome1)))
NIT=IF(NIT<NIT_min,0,NIT)*NIT_Bonus1*IF(Princ_earnings>NIT_Pa
rtnerIncome,NIT_Bonus2,1)
+MAX(NIT_MinCovid*(NIT>=NIT_min) ,(NIT_Bonus3-1)
*IF(NIT<NIT_min,0,NIT)*IF(Married=1,1,NIT_Bonus1)
*IF(Spouse_earnings >NIT_PartnerIncome,NIT_Bonus2,1)
Positive(CG_tax_excl-tax_cr)-NIT
0
Tax(earn, SSC_sch)
IF(children=1,CB_firstchild,IF(Children=2,CB_firstchild+CB_secondch
ild)+(IF(married=0)*(children>0),Studygrant_rate*children)
Tax(earn, SSC_rate2)
Spouse
Tax credits (nonwastable)
tax_cr_spouse
NIT_princ
B
B
NIT_spouse
B
7.
8.
9.
11.
13.
CG tax
State and local taxes
Employees' soc security
Cash transfers
Employer's soc security
CG_tax
local_tax
SSC
cash_trans
SSC_empr
B
B
B
J
B
Key to range of equation B calculated separately for both principal earner and spouse P calculated for principal only (value taken as 0 for spouse
calculation) J calculated once only on a joint basis
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Italy
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in the
tax/benefit system. The methodology also includes the parameter values and
tax equations underlying the data.
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Italy 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
40.4%
n.a.
54.7%
n.a.
52.6%
n.a.
64.0%
n.a.
51.2%
n.a.
62.9%
n.a.
42.0%
n.a.
55.9%
n.a.
13.2%
9.5%
22.7%
41.2%
20.1%
9.5%
29.6%
46.5%
30.7%
9.7%
40.4%
54.7%
6.4%
9.5%
3.2%
26.4%
0
0
17 633
7 201
0
0
23 948
10 747
0
0
33 886
17 948
2 900
2 900
22 076
7 201
2 164
5 169
3 230
10 084
5 488
22 947
2 164
3 625
2 164
3 230
5 488
2 164
1 310
0
0
1 200
2 510
2 462
543
1 980
0
0
0
1 980
6 044
810
132
0
0
0
132
15 699
1 761
1 310
0
1 544
1 200
4 054
919
543
2 164
0
20 638
4 972
3 230
0
30 802
8 025
5 488
0
51 345
15 831
2 164
0
20 638
4 972
2 164
3 230
5 488
2 164
67
none
22 801
100
none
34 032
167
none
56 833
67
2
22 801
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Italy 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3 )
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
54.2%
28.0%
65.2%
45.3%
53.4%
41.2%
64.6%
55.3%
53.4%
53.4%
64.6%
64.6%
52.6%
40.4%
64.0%
54.7%
14.0%
9.5%
18.3%
37.9%
14.8%
9.5%
22.2%
40.9%
18.1%
9.5%
26.3%
44.0%
17.3%
9.5%
26.8%
44.4%
1 782
1 782
27 808
10 747
1 194
1 194
44 231
17 948
928
928
50 191
21 495
0
0
41 580
17 948
3 230
8 006
5 393
13 797
6 459
18 800
5 393
15 253
3 230
5 393
6 459
5 393
1 980
710
1 368
0
4 058
3 967
810
3 290
0
1 456
1 200
5 946
7 051
1 353
3 961
0
1 368
0
5 329
10 721
1 620
3 290
0
0
1 200
4 490
8 507
1 353
3 230
0
30 802
8 025
5 393
0
51 440
12 997
6 459
0
61 605
16 050
5 393
0
51 440
12 997
3 230
5 393
6 459
5 393
100-0
2
34 032
100-67
2
56 833
100-100
2
68 064
100-67
none
56 833
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The national currency is the Euro (EUR). In 2021, EUR 0.84 was equal to USD 1. In that year the average
worker earned EUR 34 032 (Secretariat estimate).
1. Personal Income Tax
1.1. Central government income tax
1.1.1. Tax unit
Spouses are taxed separately.
1.1.2. Tax allowances and tax credits
1.1.2.1 Tax allowances
Social security contributions due by law.
1.1.2.2 Tax credits
Italy increased the basic employee tax credit from EUR 1 840 to EUR 1 880 and as from 2014 introduced
an additional refundable tax credit of EUR 960 for employees with income between EUR 8 146 and
EUR 24 600, with a phase-out for income between EUR 24 600 and EUR 26 600. As from 01/07/2020 the
EUR 960 fiscal bonus is not in force and has been replaced by a EUR 1 200 payable tax credit for net
income under EUR 28 000.
The payable tax credits amount for 2021 has to be estimated as follows:
Taxable income (EUR)
Up to 8 145
From 8 146 to 28 000
More than 28 000
Fiscal bonus (EUR)
0
1200
0
Standard tax credits (not refundable)
The PAYE tax credit is defined as a function of net income:
Taxable income (EUR)
Up to 8 000
From 8 001 to 28 000
From 28 001 to 55 000
More than 55 000
PAYE tax credit (EUR)
1 880
Maximum tax credit + 902*(28 000 – taxable income)/20 000
Maximum tax credit*(55 000 – taxable income)/27 000
0
The maximum value for the tax credit depends on the level of taxable income:
Level of taxable income (EUR)
From 8 001 to 15 000
From 15 001 to 23 000
From 23 001 to 24 000
From 24 001 to 25 000
From 24 001 to 26 000
From 26 001 to 27 700
From 27 701 to 28 000
From 28 001 to 55 000
Maximum tax credit (EUR)
978
978
978
978
978
978
978
978
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As from 01/01/2021 the additional non refundable tax credit, previously temporary, has become permanent
for employees with PIT income level over 28,000 euros, starting from an amount of 1200 euros and
decreasing gradually to 960 euros at 35,000 euros of PIT income level. Above 35,000 the tax credit amount
decreases gradually, down to 0 at 40,000 euros of PIT income level.
Taxable income (EUR)
Up to 28 000
From 28 001 to 35 000
From 35 001 to 40 000
More than 40 000
PAYE tax credit (EUR)
0
960+240*(35 000 – taxable income)/7 000
960*(40 000 – taxable income)/5 000
0
Tax credits for family dependents (not refundable)
The tax credits for family dependants, which have replaced the former tax allowances, are as follows:
Family tax credit (EUR)
1
Spouse
Children
Under three years of age
Over three years of age
Other dependent relatives
Amount (EUR)
800 decreasing to 0 for net income over 80 000
1 220 decreasing to 0 for net income over 95 000
950 decreasing to 0 for net income over 95 000
750 decreasing to 0 for net income over 80 000
1. Tax credits are granted for family dependents earning less than EUR 2 840.51
The spouse tax credit is calculated as a function of net income:
Level of taxable income (EUR)
Up to 15 000
From 15 001 to 29 000
From 29 001 to 29 200
From 29 201 to 34 700
From 34 701 to 35 000
From 35 001 to 35 100
From 35 101 to 35 200
From 35 201 to 40 000
From 40 001 to 80 000
More than 80 000
Amount of tax credit (EUR)
800–110*taxable income/15 000
690
700
710
720
710
700
690
690*(80 000–taxable income)/40 000
0
The child tax credit is calculated as a function of net income:
for families with only one child: 950*(95 000-taxable income)/95 000;
for families with more than one child the amount of 95 000 is increased by 15 000 for each child
other than the first, for every children (including the first one).
Families with more than 3 children receive an additional tax credit of EUR 200 per child.
Families with more than 3 children receive a refundable tax credit of EUR 1 200 (per family).
A lone parent receives an actual tax credit for the first child equal to the maximum of the spouse tax credit
and the child tax credit.
Tax credits for children have to be equally shared between the parents; different shares are no longer
allowed.
If the spouse’s tax liable net of the
PAYE tax credit is less than his/her share (50%) in the child tax credit,
the entire child tax credit is provided to the principal earner.
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1.1.2.3 Main non-standard tax allowances and tax credits
Other compulsory contributions;
Periodical benefits allowed to the spouse fixed by judicial authority;
Charitable donations to certain religious institutions (up to EUR 1 032.91);
Medical and assistance expenses incurred by handicapped persons;
Expenses to restore one's own residence at 50% for 2020 of full expenses up to EUR 96 000,
apportioned into 10 annual allowances of the same amount;
Expenses for energy requalification of buildings at 65% for 2020 of full expenses apportioned into
10 annual allowances of the same amount;
Expenses for the replacement of covers, windows and shutters and for the installation of solar
panels (only for hot water production) at 50% of full expenses.
For the following expenses, a tax credit of 19% of each incurred expense is allowed:
Mortgage loan interest (up to EUR 4 000);
Most medical expenses that exceed EUR 129.11;
Payments to insurance funds up to EUR 1 291.14;
Expenses to attend secondary school and university courses; in case such courses are private,
the expenses allowed cannot exceed those foreseen for State courses;
Expenses for nursery school (up to EUR 632 for each child);
Rents paid by out of town students (up to EUR 2 633);
Funeral charges up to EUR 1 549.37;
Expenses for disabled persons;
Payments to foundations (up to EUR 2 065.83);
Expenses related to sport activities for children between 5 and 18 years of age (up to EUR 210 per
child).
Personal assistance for non-self-sufficient people (up to EUR 2 100);
Most veterinary expenses that exceed EUR 129.11 (up to EUR 387.34).
For the following expenses, a tax credit of 26% of each incurred expense is allowed:
Donations to political parties (ranging from EUR 30.00 to EUR 30 000.00);
Donations to non-profit organizations of social utility - ONLUS - (up to EUR 30 000.00).
1.1.3. Tax schedule
The following tax schedule is applied to taxable income:
Bracket (EUR)
up to 15 000
over 15 000 up to 28 000
over 28 000 up to 55 000
over 55 000 up to 75 000
over 75 000
Rate (%)
23
27
38
41
43
Decree-Law
n. 138 of 13th August 2011 introduced the “Contributo di Solidarietà” for the 2011-2013,
(extended up to 2016), tax periods, that is a 3% “solidarity contribution” on the portion of income higher
than EUR 300 000 (the amount paid is deductible from
PIT base)”. As from 2017 the “Contributo di
solidarietà” measure is not in force.
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1.2. State and local taxes
These surcharges are due only by taxpayers who pay individual income tax IRPEF (imposta sul reddito
delle persone fisiche).
Regional surcharge tax
This surcharge tax has been introduced in 1997. The tax is levied by each region on resident taxpayers’
total taxable income at a discretionary rate, which must fall within an established range. As from the year
2000 this range is 0.9%
–
1.4%.
In December 2011, with the DL 201/2011, the minimum state rate has been increased from 0.9% to 1.23%.
The figure given in the 2016 parameter values table under the heading “Regional and local tax” includes
the regional surcharge tax paid in the most representative city which is Rome (Lazio); the rate is 3.33% for
taxable income bracket over EUR 15 000 and 1.73% for income under EUR 15 000. As from 2017 a
progressive tax schedule is applied to taxable income:
Bracket (EUR)
up to 15 000
over 15 000 up to 28 000
over 28 000 up to 55 000
over 55 000 up to 75 000
over 75 000
Rate (%)
1,73
2,73
2,93
3,23
3,33
Nevertheless, if the taxable income is under the threshold of EUR 35 000 the rate applicable to the total
amount of taxable income is 1.73%.
Local surcharge tax
This surcharge tax has been introduced in 1999. The tax may be levied by each local government at an
initial rate that cannot exceed 0.2%. If the tax is levied, the local government can increase the initial rate,
on a yearly basis, up to a maximum of 0.5%. Each yearly increase cannot exceed 0.2%. As from 2012,
municipalities can increase the rate up to 0.8. A 0.9 special rate can be introduced by Roma Capitale Local
Government.
The figure given in the 2015 parameter values table under the heading
“Regional and local tax” includes
the local surcharge tax paid in the most representative city which is Rome; the rate is 0.9% as from 2015.
Starting from 2011, exemption is provided to taxpayers whose total income consists of retirement income
not exceeding EUR 7 500, income from land not exceeding EUR 185.92, and income from primary
residence. As from 2015 the rate is not applied to taxpayers with income under EUR 12 000. The ordinary
rate is applied if any one of these limits is passed.
The surcharge rates can be adjusted above the fixed roof because of the health care losses.
2. Compulsory Social Security
2.1. Employee contributions
Rate and ceiling
‒
‒
‒
The average rate is 9.49% on earnings up to EUR 47 379;
The average rate is 10.49% on earnings over EUR 47 379 and up to EUR 103 055;
For earnings exceeding EUR 103 055, the employee pays a fixed amount given by
(0.0949 x 47 379) + 0.1049 x (103 055–47 379).
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Distinction by marital status or sex
‒
None.
2.2. Employer contributions
Contributions equal 31.58% on earnings up to EUR 103 055. For earnings exceeding
EUR 103 055, the employer pays a fixed amount given by 0.3158 x 103 055.
A General Government employer work-related accident insurance exists in Italy. It is compulsory
for employers with employees and contract workers in activities involving the use of machinery and
in risky activities as defined by the law. The standard premium to be paid is calculated by applying
to remuneration the rates linked to the activity in which the employee works. The rates that vary
between 0 to about 13% are provided by a special classification that takes into account the different
categories of risk between the various activities. It is not possible to provide a representative or
average rate since the contribution rates vary depending on the industrial activities and also other
factors of risk. Those contributions are not included in the Report.
3. Universal Cash Transfers
3.1. Amount for spouse and for dependent children
Cash transfers are granted for family income that is:
composed of at least 70% wage and / or pension income;
below a given threshold set by law each year.
Family income is the sum of the incomes of all individuals comprising the family.
Cash transfers are determined each year by INPS (Istituto Nazionale di Previdenza Sociale), the public
body that collects and manages the social security contributions for dependent workers for the period
beginning in July of that year (t) to June in the following year (t+1) and relate to family income earned in
the previous year (t-1).
As such, the transfers granted in any given year t are determined by the family income in the previous two
years. The following table provides a description of the calculations.
Transfer granted in year t
January–June
July–December
Relevant amounts as given in INPS tables
The amount of cash transfers is that given in the INPS table published in July t-1. The transfers are granted
with reference to family income earned in year t-2.
The amount of cash transfers is that given in the INPS table published in July t. The transfers are granted with
reference to family income earned in year t-1.
For the purposes of
Taxing Wages,
the cash transfers that are calculated represent those amounts that
would be received by the family based on their incomes for that year even though these amounts would
only begin to be paid in July of the following year.
The amounts provided for the period July
–
December 2021, (on the basis of 2020 family income), have
been temporary increased in the extent of 37,50 euros for each child in case of a family with less than 3
children and 55 euros for families with 3 or more children.
4. Main Changes
The temporary additional PAYE tax credit introduced from 01/07/2020 until 31/12/2020 has become
permanent as from 2021.
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4.1. Changes to labour taxation due to the COVID pandemic in 2020 and 2021
The changes above do not concern the COVID-19 pandemic. As concerns COVID-19 measures, a
suspension of SSCs and withholding PIT payments due by December 2020 has been introduced. The
allowance is applied to employers with a revenues level under 50 million euros in 2019, if revenues in
November 2020 decreased of at least 33% compared to November 2019. The suspension holds
independently from size for tax-payers operating in the most hit sectors as well as activities started after
November 2019. Payments are due by March 2021.The same measure is applied to March and April
payments, (due by January 2021).
5. Memorandum Item
5.1. Identification of an AW
The data refer to the annual earnings of average workers.
5.2. Contributions by employers to private pension, health, etc. schemes
In addition to the mandatory social security contributions employers may pay contributions to private
pension schemes (currently about forty pension funds). Employer’s contributions are included in the
taxable income of the employee.
Employees may also choose to contribute to the pension funds with all or part of the retirement allowance
that is otherwise withheld by the employers. In this case the employee can deduct from his taxable income
an amount equal to twice the amount of the contribution paid to fund.
Employer’s contributions to private health insurance schemes are not included in the taxable income of
the employee up to the limit of EUR 3 615.20.
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416
2021 Parameter values
Average earnings/yr
Tax schedule
Ave_earn
tax_sch
34 032
0.23
0.27
0.38
0.41
0.43
Secretary estimate
15 000.00
28 000.00
55 000.00
75 000.00
999 999 999.99
Tax credits
Fiscal bonus 100 euro
new_thre_min
new_thre_max
new_f_bonus
8146
28000
1200
0
8 000
15 000
23 000
24 000
25 000
26 000
27 700
28 000
55 000
1 880.00
978.00
978.00
978.00
978.00
978.00
978.00
978.00
978.00
0.00
Employment
emp_add
Additional Tax Credit Employment
Spouse
emp_add_2
emp_add_3
Spouse_cred
960
1200
0
15 000
29 000
29 200
34 700
35 000
35 100
35 200
40 000
80 000
800.00
690.00
700.00
710.00
720.00
710.00
700.00
690.00
690.00
0
Limit
Child credit
Additional child credit
Regional and local tax
Sp_crd_lim
Child_credit
add_child
reg_rt_sch
2 840.51
950
200
0.0173
0.0273
0.0293
0.0323
0.0333
15 000.00
28 000.00
55 000.00
75 000.00
999999999.99
reg_rt
Local_rt
Social security contributions
SSC_sch
0.0173
0.009
0.0949
0.1049
0.00
47 379
103 055
999 999 999.99
103 055
Employer contributions
Empr_sch
0.3158
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0.00
Cash transfers:
family allowance schedule (t)
married couple
single parent
trans_sch
Trans_sch_sp
Table is too long to be included
Table is too long to be included
999 999 999.99
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2021 Tax equations
The equations for the Italian system in 2020 are mostly repeated for each individual of a married couple.
But the spouse credit is relevant only to the calculation for the principal earner and any child credit which
the spouse is unable to use is transferred to the principal. This is shown by the Range indicator in the table
below.
The functions which are used in the equations (Taper, MIN, Tax etc) are described in the technical note
about tax equations. Variable names are defined in the table of parameters above, within the equations
table, or are the standard variables “married” and “children”. A reference to a variable with the affix “_total”
indicates the sum of the relevant variable
values for the principal and spouse. And the affixes “_princ” and
“_spouse” indicate the value for the principal and spouse, respectively. Equations for a single person are
as shown for the principal, with “_spouse” values taken as 0.
Line in country table and
intermediate steps
1.
2.
3.
4.
5.
6.
Earnings
Allowances:
Credits in taxable income
CG taxable income
CG tax before credits
Tax credits :
Employment credit
Variable name
Earn
tax_al
taxbl_cr
tax_inc
CG_tax_excl
emp_cr_max
emp_cr_max_sp
ouse
emp_cr
Range
Equation
B
B
B
B
P
S
P
SSC
0
earn-tax_al1
Tax(tax_inc, tax_sch)
VLOOKUP(tax_inc, emp_add, 2))
IF(tax_inc_spouse=0,0,(VLOOKUP(tax_inc_spouse,emp_add,2)))
MIN(CG_tax_excl, IF(tax_inc<=thre_1,emp_cr_max,
IF(tax_inc<=thre_2,emp_cr_max+902*(thre_2-tax_inc)/20000,
IF(tax_inc>thre_3,emp_cr_max,emp_cr_max*(thre_3-
tax_inc)/27000)))+IF(tax_inc<=thre_2;0;IF(tax_inc<=thre_6;emp_add_2+(
emp_add_3-emp_add_2)*(thre_6-tax_inc)/(thre_6-
thre_2);IF(tax_inc<=thre_7;emp_add_2*(thre_7-tax_inc)/(thre_7-
thre_6);0))))
MIN(CG_tax_excl_spouse,
IF(tax_in_spousec<=thre_1,emp_cr_max_spouse,
IF(tax_inc_spouse<=thre_2,emp_cr_max_spouse+902*(thre_2-
tax_inc_spouse)/20000,
IF(tax_inc_spouse>thre_3,emp_cr_max_spouse,emp_cr_max_spouse*(t
hre_3-
tax_inc_spouse)/27000)))+SE(tax_inc_spouse<=thre_2;0;SE(tax_inc_sp
ouse<=thre_6;emp_add_2+(emp_add_3-emp_add_2)*(thre_6-
tax_inc_spouse)/(thre_6-
thre_2);SE(tax_inc_spouse<=thre_7;emp_add_2*(thre_7-
tax_inc_spouse)/(thre_7-thre_6);0)))))
IF(tax_inc<new_thre_min;0;IF(tax_inc<=new_thre_max;new_f_bonus;0))
IF(Married='1,' IF(tax_inc_spouse>Sp_crd_lim,0, IF(tax_inc>80000,0,
IF(tax_inc<15000,800-110*tax_inc/15000, IF(tax_inc>40000,690*(80000-
tax_inc)/40000,VLOOKUP(tax_inc,Spouse_cred,2))))),0)
IF(Children=0,0,IF(Married=1,(950*(110000-tax_inc)/110000)*(1-
child_crpct_spouse), MAX(950*(95000-tax_inc)/95000,
IF(tax_inc>80000,0,IF(tax_inc<15000,800-110*tax_inc/15000,
IF(tax_inc>40000,690*(80000-tax_inc)/40000,
VLOOKUP(tax_inc,Spouse_cred,2)))))+950*(110000-tax_inc)/110000))
IF(Children=0,0,(spouse_cr=0)*Married*(950*(95000-
tax_inc_spouse)/95000+(Children-1)*950*(110000-
tax_inc_spouse)/110000))
IF(child_crfull_spouse>0,IF((CG_tax_excl_spouse-
emp_cr_spouse)/child_crfull_spouse<0.5,0,0.5),0)
child_crfull_spouse*child_crpct_spouse
S
Fiscal bonus
Spouse credit
fiscal_b
spouse_cr
B
P
Child credit
child_cr_princ
P
child_crfull_spou
se
child_crpct_spou
se
child_cr_spouse
S
S
S
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419
Total
CG tax
State and local taxes
Employees' soc security
Cash transfers
tax_cr
CG_tax
reg_rt
SSC
B
B
B
B
J
MIN(emp_cr+spouse_cr+child_cr, CG_tax_excl)
Positive(CG_tax_excl-tax_cr)
=IF(CG tax=0;0;IF(tax_inc<12000;0;tax_inc*local_rt))+IF(CG
tax=0;0;IF(tax_inc<35000;tax_inc*reg_rt;tax(tax_inc;reg_rt_sch)))
Tax(earn, SSC_sch)
IF(Children='0,0,12*VLOOKUP(earn_total,'
IF(Married,trans_sch,trans_sch_sp),1+Children)) +
Children*6*(IF(Children<3;37,50;55)
Tax(earn, Empr_sch)
7.
8.
9.
11.
13.
Employer's soc security
SSC_empr
B
Key to range of equation B calculated separately for both principal earner and spouse P calculated for principal only (value taken as 0 for spouse
calculation) J calculated once only on a joint basis.
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Japan
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in the
tax/benefit system. The methodology also includes the parameter values and
tax equations underlying the data.
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Japan 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances:
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
22.8%
n.a.
33.1%
n.a.
27.7%
n.a.
37.3%
n.a.
34.1%
n.a.
38.0%
n.a.
45.2%
n.a.
52.5%
n.a.
6.2%
14.5%
20.6%
31.2%
7.8%
14.5%
22.3%
32.6%
12.7%
13.6%
26.3%
35.6%
6.2%
14.5%
4.4%
17.1%
0
0
2 737 852
529 676
0
0
3 999 294
790 561
0
0
6 335 221
1 247 467
559 419
559 419
3 297 271
529 676
498 295
710 557
743 724
1 147 585
1 169 250
2 260 068
498 295
710 557
498 295
743 724
1 169 250
498 295
0
69 203
143 059
0
150 983
252 878
0
583 714
507 104
0
69 203
143 059
2 092 818
0
1 355 591
69 203
2 693 100
0
2 453 779
150 983
3 599 250
0
4 996 038
583 714
2 092 818
0
1 355 591
69 203
480 000
0
0
498 295
1 114 523
480 000
0
0
743 724
1 469 376
480 000
0
0
1 169 250
1 950 000
480 000
0
0
498 295
1 114 523
67
none
3 448 409
100
none
5 146 879
167
none
8 595 289
67
2
3 448 409
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Japan 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
27.7%
23.6%
37.3%
33.8%
27.7%
25.9%
37.3%
35.7%
27.7%
29.7%
37.3%
39.1%
27.7%
25.9%
37.3%
35.7%
6.5%
14.5%
16.2%
27.4%
7.2%
14.5%
18.8%
29.6%
7.8%
14.5%
20.0%
30.6%
7.2%
14.5%
21.6%
32.1%
240 000
240 000
4 311 092
790 561
240 000
240 000
6 977 146
1 320 236
240 000
240 000
8 238 588
1 581 121
0
0
6 737 146
1 320 236
743 724
1 075 787
1 242 019
1 858 143
1 487 448
2 295 171
1 242 019
1 858 143
743 724
1 242 019
1 487 448
1 242 019
0
112 185
219 878
0
220 186
395 937
0
301 967
505 756
0
220 186
395 937
3 073 100
0
2 073 779
112 185
4 785 918
0
3 809 371
220 186
5 386 200
0
4 907 559
301 967
4 785 918
0
3 809 371
220 186
480 000
380 000
0
743 724
1 469 376
960 000
0
0
1 242 019
2 583 899
960 000
0
0
1 487 448
2 938 752
960 000
0
0
1 242 019
2 583 899
100-0
2
5 146 879
100-67
2
100-100
2
100-67
none
8 595 289
8 595 289 10 293 759
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The national currency is the Yen (JPY). In 2021, JPY 109.7 were equal to USD 1. In that year, the average
worker is assumed to earn JPY 5 146 879 (Secretariat estimate). In Japan, the central government income
tax year is a calendar year and the local government income tax year is from April to March. The
calculations in this report are based on the tax rules and rates, which are applicable the April 1st.
1. Personal Income Tax Systems
1.1. Central government income tax
1.1.1. Tax unit
Each individual is taxed separately.
1.1.2. Allowances and tax credits
1.1.2.1. Standard reliefs
First step deduction:
Employment income deduction:
employment income:
‒
first, the following amounts may be deducted from gross
If gross employment income does not exceed JPY 1 800 000, the deduction is 40 per cent of
gross employment income less JPY 100 000. The minimum amount deductible is JPY 550 000,
even if the amount of income is very small.
If gross employment income exceeds JPY 1 800 000, but not JPY 3 600 000, the deduction is
JPY 80 000 plus 30 per cent of gross employment income.
If gross employment income exceeds JPY 3 600 000, but not JPY 6 600 000, the deduction is
JPY 440 000 plus 20 per cent of gross employment income.
If gross employment income exceeds JPY 6 600 000, but not JPY 8 500 000, the deduction is
JPY 1 100 000 plus 10 per cent of gross employment income.
As of 2020, if gross employment income exceeds JPY 8 500 000, the deduction is fixed at
JPY 1 950 000. However, in consideration of child-care and long-term care, measures will be
taken to avoid increase in tax burden for taxpayers on care,
1
households with a dependent
relative(s) under 23 years of age and households with a member(s) dependent on care.
‒
‒
‒
‒
Second step deduction:
Second step deductions are calculated using as a “reference income” the earnings from employment
less
the employment income deductions described above. The second step deductions are:
Basic allowance (Personal deduction): allowance up to JPY 480 000 is given to a resident taxpayer
whose reference income does not exceed JPY 25 000 000. The amount of tax allowance gradually
decreases once the income exceeds JPY 24 000 000. Specifically, the allowance is JPY 320 000
for a taxpayer with income from JPY 24 000 001 to JPY 24 500 000, JP 160 000 for those from
JPY 24 500 001 to JPY 25 000 000, and zero for those above JPY 25 000 000.
Allowance for spouse(*): a tax allowance up to JPY 380 000 is given to a resident taxpayer whose
reference income does not exceed JPY10 000 000 and who lives with a spouse whose reference
income does not exceed JPY 480 000.
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Allowance for elderly spouse(*): a tax allowance up to JPY 480 000 is given to a resident taxpayer:
‒
‒
‒
Whose reference income does not exceed JPY 10 000 000 and
who lives with a spouse aged 70 or older, whose income does not exceed JPY 480 000,
instead of the allowance for spouse mentioned above.
Special allowance for spouse(*): a tax allowance up to the amount shown in the following table is
given to a resident taxpayer whose reference income does not exceed JPY 10 000 000 and who
lives with a spouse whose reference income exceeds JPY 480 000 but does not exceed
JPY 1 330 000:
Spouse’s income JPY
0–480 000
480 001–950 000
950 001–1 000 000
1 000 001–1 050 000
1 050 001–1 100 000
1 100 001–1 150 000
1 150 001–1 200 000
1 200 001–1 250 000
1 250 001–1 300 000
1 300 001–1 330 000
1 330 001 or more
Amount
0
380 000
360 000
310 000
260 000
210 000
160 000
110 000
60 000
30 000
0
(*) The amounts of the Allowance for spouse, of the allowance for elderly spouse, and of the Special
allowance for spouse, decrease gradually when the reference income (as defined above) of the taxpayer
is from JPY 9 000 001 to JPY 10 000 000, then they become zero. Specifically, the amounts of the
allowances is as follows:
‒
‒
‒
‒
Reference income not more than JPY 9 000 000: full amount;
Reference income from JPY 9 000 001 to JPY 9 500 000: full amount*2/3;
Reference income from JPY 9 500 001 to JPY 10 000 000: full amount*1/3
Reference income above JPY 10 000 000: no allowance.
Allowance amounts are rounded up to the closest multiple of JPY 10 000. For instance, an amount of
JPY 73 333 is rounded to JPY 80 000.
Allowance for dependents: if a resident taxpayer has dependent children or other dependent
relatives who are aged 16 o r older, whose reference income does not exceed JPY 480 000, a tax
allowance of JPY 380 000 per each is given for each dependent. Two taxpayers cannot receive
the allowance for the same dependent.
Special allowance for dependents: if a resident taxpayer has dependents whose reference income
does not exceed JPY 480 000 and who are aged 19 to 22, an allowance of JPY 630 000 is given
for each dependent, instead of the allowances for dependents mentioned above. Two taxpayers
cannot receive the allowance for the same dependent.
Allowance for elderly dependent: if a resident taxpayer has dependents who are aged 70 or older
whose reference income does not exceed JPY 480 000, there is a tax allowance of JPY 480 000
per each dependent, instead of the allowances for dependents mentioned above. If the dependents
are direct ascendants of the taxpayer or their spouse and permanently live with the taxpayer or
their spouse, a tax allowance of JPY 580 000 per each dependent is given to the taxpayer.
Deduction for social insurance contributions: the amount of social insurance contributions for a
resident taxpayer or their dependents are deducted from their income without any limit.
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1.1.2.2. Main non-standard tax reliefs applicable to an AW
Deduction for life insurance premiums: If a resident taxpayer pays insurance premiums on life
insurance contracts and the beneficiary is the taxpayer, his/her spouse or other relatives, the
portion of these insurance premiums which does not exceed the limit described below, is deductible
from ordinary income, retirement income or timber income.
In addition, if a resident taxpayer pays insurance premiums for “qualified private pension plan
(insurance type)”, and the recipient of the pension payment is the taxpayer or his/her spouse or
relatives living with the taxpayer, the portion of such premiums which does not exceed the limit
described below, is deductible from ordinary income, retirement income, or timber income.
Annual Premium Paid (JPY)
Over
20 000
40 000
80 000
Not over
20 000
40 000
80 000
--
Deduction
Total amount of premiums paid (1)
(1) x 1/2 + JPY 10 000
(1) x 1/4 + JPY 20 000
JPY 40 000
Furthermore, if a resident taxpayer pays insurance premiums on nursing and medical insurance
contacts and part of the nursing/medical care which the taxpayer receives is financed by the
insurance, the portion of such premiums which does not exceed the limit described below, is
deductible from ordinary income, retirement income, or timber income.
Deduction for medical expenses: If a resident taxpayer pays bills for medical or dental care for
himself/herself or for his/her dependent spouse or other dependent relatives living with him/her and
the amount of such expenses (excluding those covered by insurance) exceeds JPY 100 000 or 5%
of the total of his/her ordinary income, retirement income, timber income and so on, the excess
amount is deductible from his/her ordinary income, retirement income or timber income. The
maximum deduction is JPY 2 million.
Deduction for earthquake insurance premiums: Earthquake insurance premiums up to JPY 50 000
can be deducted from income. Although the income deduction for casualty insurance premiums
are basically abolished, the deduction for long-term casualty insurance premiums remains
available if contracted before 31 December, 2006. The maximum deduction for long-term casualty
insurance premiums is JPY 15 000. If an individual applies for a deduction for both earthquake
insurance premiums and long-term casualty premiums, the maximum deductible amount is JPY 50
000 in total.
Taxpayers can also apply other tax reliefs established by Act on Special Measures Concerning
Taxation (such as self-medication taxation system and credit for housing loans).
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1.1.3.
Tax schedule
Taxable Income (JPY) (*)
Equal to or over
1 950 000
3 300 000
6 950 000
9 000 000
18 000 000
40 000 000
Less than
1 950 000
3 300 000
6 950 000
9 000 000
18 000 000
40 000 000
Tax Rate (%)
(A)
5
10
20
23
33
40
45
Deductible Amounts for
Each Bracket (JPY
(B)
--
97 500
427 500
636 000
1 536 000
2796 000
4 796 000
(*) The fraction of taxable income that is less than JPY 1 000 is rounded down
Tax liability is obtained by multiplying the taxable income by tax rate (A) and deducting the amount (B).
For example, income tax due on taxable income of JPY 7 million is:
7 000 000 x 0.23 (A)
－
636 000 (B) = JPY 974 000.
Finally, the tax amount is increased by 2.1%. This provision will apply in each year from 2013 until 2037.
1.2.
Local taxes (personal inhabitant’s taxes)
1.2.1. General description of the system
Local taxes in Japan
(personal inhabitant’s taxes) consist of prefectural inhabitant's tax levied by
prefectures and municipal inhabitant’s tax levied by cities, towns and villages. The prefectural inhabitant’s
tax is collected together with the municipal inhabitant’s tax by cities,
towns and villages.
1.2.2. Tax base
Basically, personal inhabitant’s taxes (prefectural and municipal inhabitant’s taxes) consist of two parts;
one is income based tax and the other is a fixed per capita amount. The taxable income of personal
inhabitant’s
taxes is computed on the basis of the previous year's income. The main difference from state
tax (income tax) is the amount of income reliefs (tax deductions). For example, the amount of personal
deduction is JPY 430 000, tax deduction for dependents is JPY 330 000, and tax allowance for spouse is
up to JPY 330 000, the amount of specified allowance for dependents is JPY 450 000, etc.
1.2.3. Tax rate
The standard fixed (annual) per-capita
amount of Prefectural inhabitant’s tax is JPY
1 500;
The standard fixed (annual) per-capita
amount of Municipal inhabitant’s tax is JPY
3 500;
The standard rate of the income based
tax is 10% (Prefectural inhabitant’s tax: 4%, Municipal
inhabitant’s tax: 6%,
for ordinance-designated
cities, Prefectural inhabitant’s tax: 2%,
for Municipal
inhabitant’s tax:
8%).
The personal inhabitant’s taxes rate and the income tax rate were changed in the FY
2006 tax reform.
Adjusted credit (a form of tax credit) was introduced in order to alleviate the tax burden increase arising
from the changes in the tax rates and from the difference between the personal allowances (basic tax
allowance, tax allowance for spouse, tax allowance for dependents, special tax allowance for dependents,
etc.) for national income tax purposes and for inhabitant tax purposes.
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427
Adjusted credit is applied if the total amount of income is JPY 25 000 000 or less. Amounts of the credit
are as follows:
Taxable income for local income
tax purposes
JPY 2 000 000 or less
The tax credit
5% of the lesser of:
- total amount of differences in personal reliefs between those for income tax purposes and for
personal inhabitant’s taxes purposes; or
- taxable income amount for personal inhabitant’s taxes purposes
((total amount of differences in personal reliefs between those for income tax purposes and for
personal inhabitant’s taxes purposes) – (taxable income amount for personal inhabitant’s taxes
purposes – JPY 2 000 000)) * 5%.
Note: The minimum credit is JPY 2 500
More than JPY 2 000 000
Notes: Local authorities do not levy the per-capita rate and the income based tax on a taxpayer whose previous year’s income does not exceed
a certain amount. For example, in special wards of Tokyo, this threshold is calculated as follows:
- per-capita rate: (1 + number of spouse and dependent(s) qualified for the allowance for spouse/dependents) * 350 000 + 100 000 (+ 210 000
in case the taxpayer has a qualified spouse or dependent(s)))
- income based tax: (1 + number of spouse and dependent(s) qualified for the allowance for spouse/dependents) * 350 000 + 100 000 (+ 320 000
in case the taxpayer has a qualified spouse or dependent(s)))
1.2.4. Tax rate selected for this study
State tax (income tax) rates as aforementioned. The local tax (personal inhabitant’s taxes) rates
chosen
for the purpose of this Report represent the standard rate.
2. Compulsory Social Security Contribution to Schemes Operated Within the
Government Sector
2.1.
Employees’ contributions
2.1.1. Pension
9.15% of total remuneration (standard remuneration and bonuses). The insurable ceiling of the monthly
amount of pensionable remuneration is JPY 650 000 and the insurable ceiling of the standard amount of
bonus is JPY 1 500 000.
2.1.2. Sickness
As from April 2012 about 5.00%, (about 4.75% before March 2012), of total remuneration, (standard
remuneration and bonuses). The insurable ceiling of the monthly amount of standard remuneration is
JPY 1 390 000 and the insurable ceiling of the yearly amount of standard bonus is JPY 5 730 000.
2.1.3. Unemployment
0.3% of total remuneration for Commerce and industry in general except for Business of agriculture,
forestry and fisheries, and the rice wine brewing business, and Construction business. It is 0.4% for those
exceptions.
2.1.4. Work injury and children
None.
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2.2.
Employers’ contributions
2.2.1. Pensions
9.15% of total remuneration (standard remuneration and bonuses). The insurable ceiling of the monthly
amount of pensionable remuneration is JPY 650 000 and the insurable ceiling of the standard amount of
bonus is JPY 1 500 000.
2.2.2. Sickness
As from April 2012, about 5.00% (about 4.75% before March 2012) of total remuneration. The insurable
ceiling of the monthly amount of standard remuneration is JPY 1 390 000 and the insurable ceiling of the
yearly amount of standard bonus is JPY 5 730 000.
2.2.3. Unemployment
0.6% of total remuneration for Commerce and industry in general except for Business of agriculture,
forestry and fisheries, and the rice wine brewing business, and Construction business. It is 0.7% for
Business of agriculture, forestry and fisheries, and the rice wine brewing business, and 0.8% for
Construction business.
2.2.4. Work injury
0.25% to 8.8% of total remuneration, the contribution rate depending on each industry's accident rate over
the last three years and other factors. There are twenty-eight rates for fifty-four industrial categories at
present.
2.2.5. Children
0.36% of total remuneration (Child and Childcare contribution). This contribution is used for child-rearing
support measures such as child allowance.
3. Cash Benefits
3.1. Benefits related to marital status
Not available.
3.2. Benefits for dependent children
From April 2012 (Income caps are applied beginning from June 2012 payments):
a) For persons earning incomes below the income cap
‒
JPY 15 000 (per month) is paid to parents/guardians for each child who is under 3 years old
or for the third or subsequent child from 3 years old until he/she graduates from elementary
school.
JPY 10 000 (per month) is paid to parents/guardians for each child who is for the first or
second child from 3 years old until he/she graduates from elementary school or who is a junior
high school student.
JPY 5 000 (per month) is paid to parents/guardians for each child until he/she graduates from
junior high school as the Special Interim Allowances.
‒
b) For persons earning incomes not less than the income cap
‒
The income cap is set at JPY 6 220
000 (the principal’s gross earnings net of
certain deductions (a casualty
loss deduction , a medical expenses deduction, deduction for small enterprise-based mutual aid premiums
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and similar payments, disability deduction, widow (or widower) deduction and working student deduction),
plus JPY 380 000 per dependent).
3.3. Child rearing allowance
The benefit is available to single mothers who take care of and provide protection to a child. The benefit is
available also to single fathers who take care of and provides living expenses, supervision and protection
to the child.
It is available until March 31 after the child’s 18th birthday or until age 20 for those with specific disabilities.
The benefit is not taxable.
Claimants can receive either a full benefit or a partial benefit depending on their income. Amounts for the
full benefit over time are as follows:
Benefit amount
(in JPY per month)
One child
42 370
42 000
41 880
41 720
41 550
41 430
41 140
41 020
42 000
42 330
42 330
42 290
42 500
42 910
43 160
Additional amount for the second child
Additional amount for the third child and after
2000/1
2003/10
2004/4
2006/4
2011/4
2012/4
2013/10
2014/4
2015/4
2016/4
2016/8
2017/4
2018/4
2019/4
2020/4
5 000
3 000
10 000
9 990
10 040
10 140
10 190
6 000
5 990
6 020
6 080
6 110
The rates and withdrawal rates for the partial payment over time are as follows:
One child
Legislative
change
2000/1
2002/8
2003/10
2004/4
2006/4
2011/4
2012/4
2013/10
2014/4
2015/4
2016/4
2016/8
2017/4
2018/4
2018/8
2019/4
2020/4
The case of partial
payment
28 350
42 360
41 990
41 870
41 710
41 540
41 420
41 130
41 010
41 990
42 320
42 320
42 280
42 490
42 490
42 900
43 150
coefficient
-
0.0187052
0.0185434
0.0184913
0.0184162
0.0183410
0.0182890
0.0181618
0.0181098
0.0185434
0.0186879
0.0186879
0.0186705
0.0187630
0.0226993
0.0229231
0.0230559-
Additional amount for the second
child
The case of partial
coefficient
payment
Additional amount for the third child
and after
The case of partial
coefficient
payment
5 000
-
3 000
-
9 990
9 980
10 030
10 030
10 130
10 180
0.0028844
0.0028786
0.0028960
0.0035035
0.0035385
0.0035524
5 990
5 980
6 010
6 010
6 070
6 100
0.0017283
0.0017225
0.0017341
0.0020979
0.0021189
0.0021259
The benefit is means-tested.
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Those with incomes above the threshold for the full benefit receive a partial benefit, and those with incomes
above the threshold for the partial benefit receive nothing.
The income measure used is gross annual income minus the employment income deduction minus
JPY 80 000 - the amount paid towards public and private insurance premiums.
Income thresholds are based on the number of dependents (see the following table):
Number of dependants
Income-tested threshold of
full benefit
490 000
870 000
1 250 000
1 630 000
2 010 000
2 390 000
Applicant
Income-tested threshold of
partial benefit
1 920 000
2 300 000
2 680 000
3 060 000
3 440 000
3 820 000
0
1
2
3
4
5
The amount of partial benefit is calculated as follows:
For families with one child:
Benefit amount = 43 160－{(Amount of income
－
“Income–tested threshold of full benefit”)
×0.0230559 +10}
The additional amount for the second child is calculated as follows:
Benefit amount = 10 190－{Amount of income
－
“Income–tested threshold of full benefit”)
×0.0035524 +10}
And the additional amount for the third and subsequent children as follows:
Benefit amount = 6 110－{(Amount of income
－
“Income–tested threshold of full benefit”)
×0.0021259 +10}
4. Main changes in the Tax/benefit Systems since 1998
As part of the Fiscal Year 1999 tax reform, the highest marginal rate of the personal income tax imposed
by the central government was reduced from 50% to 37%. The top rate of the local inhabitant’s tax was
reduced from 15% to 13%. A proportional tax reduction was granted with respect to the national income
tax and the local inhabitant’s tax. The amount is equal to the lesser of 20% (local inhabitant’s tax: 15%) of
the amount of tax before reduction or JPY 250 000 (local inhabitant’s
tax: JPY
40 000).
As part of the FY 2005 tax reform, the rate of proportional tax reduction was reduced from 20% to 10%
(local inhabitant’s tax: from 15% to 7.5%) and the ceiling was reduced from JPY
250 000 to JPY 125 000
(local inhabitant’s tax
from JPY 40 000 to JPY 20
000) as from 2006 (local inhabitant’s tax: FY 2006). In
the FY 2006 tax reform, the proportional tax reduction was abolished as from 2007 (local inhabitant’s tax:
FY 2007).
As part of the FY 2006 tax reform, the progressive rate structure of national income tax was reformed into
a 6 brackets structure
with tax rates ranging from 5% to 40%, and the rate of local inhabitant’s tax became
proportional at a single rate of 10%.
As part of the FY 2012 tax reform, the upper limit on employment income deduction (JPY 2 450 000) was
set for those who earn employment income of more than JPY 15 000 000 as from 2013 (personal
inhabitant’s tax: FY 2014).
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As part of the FY 2013 tax reform, the tax rate of 45% was set for the income beyond JPY 40 000 000 from
2015 creating a 7 brackets structure.
As part of the FY 2014 tax reform, the upper limit on employment income deduction was determined to be
gradually reduced. In 2016 (as for personal inhabitant’s taxes, in
FY2017), the limit became JPY 2 300 000
for salary income more than JPY 12 000
000. Moreover, in 2017 (as for personal inhabitant’s taxes, in
FY2018), the limit became JPY 2 200 000 for salary income more than JPY 10 000 000.
As part of the FY 2017 tax reform, as regards allowance for spouse and special allowance for spouse, the
maximum spousal income qualifying for the tax allowance (maximum JPY 380 000) were raised from
JPY 380 000 to JPY 850 000. At the same time, an upper income limit was introduced as a requirement
for taxpayers to qualify for allowance for spouse and special allowance for spouse. The reform goes into
effect in 2018. (As for personal inhabitant’s taxes, allowance for spouse and special allowance for spouse
will be revised similarly. This reform will go into effect in FY2019.)
As part of the FY 2018 tax reform, following tax systems will be revised. The reform will go into effect in
2020 (as for personal inhabitant’s taxes, in FY2021):
The amount of employment income deduction and pension income deduction will be reduced
uniformly by JPY 100 000 while the amount of personal deduction will be raised uniformly by
JPY 100 000.
The amount of employment income deduction from income exceeding JPY 8 500 000 will be
reduced to JPY 1 950 000. However, in consideration of child care and long-term care, measures
will be taken to avoid increase in burden on households with a dependent relative(s) under 23
years of age and households with a member(s) dependent on care (*).
* Relatives receiving “special deduction for persons with disabilities”
A cap of JPY 1 955 000 will be put on pension income deduction for pension income exceeding
JPY 10 000 000. The deduction will be reduced for pensioners with income other than pension
exceeding JPY 10 000 000 after deductions.
Personal deduction will be diminished for people with total income exceeding JPY 24 000 000 after
deductions, and the amount will be further reduced gradually to zero when total income exceeds
JPY 25 000 000.
Eligible age for cash benefits for dependent children was raised from three to six as from 1 June 2000,
from six to nine as from 1 April 2004 and from nine to twelve as from 1 April 2006. Benefit amount has
been doubled to JPY 10 000 for the first and second child under the age of three as from 1 April, 2007.
As from 2010, JPY 13 000 per month is paid to parents/guardians regardless of their income for each child
until he/she graduates from junior high school.
As from April 2012 (Income caps are applied beginning from June 2012 payments):
a) For persons earning incomes below the income cap
‒
JPY 15 000 (per month) is paid to parents/guardians for each child who is under 3 years old
or for the third or subsequent child from 3 years old until he/she graduates from elementary
school.
JPY 10 000 (per month) is paid to parents/guardians for each child who is for the first or
second child from 3 years old until he/she graduates from elementary school or who is a
junior high school student.
JPY 5 000 (per month) is paid to parents/guardians for each child until he/she graduates
from junior high school as the Special Interim Allowances.
‒
b) For persons earning incomes not less than the income cap
‒
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4.1. Changes to labour taxation due to the COVID pandemic in 2020 and 2021
4.1.1. Non-taxable benefit payments
No income tax shall be imposed on the following benefits provided by a municipality or special ward, and
the right to receive such benefits may not be seized by disposition of the national tax delinquency;
Certain benefits provided in order to support households in view of the impact of COVID-19 and
measures to prevent its spread.
Certain benefits provided in order to mitigate the economic impact on households which children
belong to as a result of COVID-19 and measures to prevent its spread.
4.1.2. Special provision for deferral of tax payment
If a taxpayer has a considerable decrease in business income due to the impact of COVID-19 and is
deemed to have difficulties to pay tax (only the state tax for which payment is due from 1 February 2020
to 1 February 2021), the tax payment may be deferred for one year without collateral or delinquency tax.
Similar special provision is also established for individual inhabitant tax which enables to defer tax
collection.
4.1.3. Special provision of deduction for charitable contribution by individuals in relation
to the cancellation of cultural, arts or sports events cancelled because of the COVID-19
pandemic.
If individuals waive the right to claim a refund of the amount paid for admissions to cultural, arts or sports
events cancelled because of the government's request in order to prevent the spread of COVID-19, the
deduction for charitable contribution (income or tax deduction) shall be applied for the waived amount (up
to JPY 200 000).
Similar special provision is also established for individual inhabitant tax.
4.1.4. Flexible treatment of the requirements for application of the special tax deduction
available for housing loans
If individuals cannot start to use the house by 31 December 2020 or by 6 month after the day of purchase
due to the delay in housing construction caused by COVID-19, and if they use the house by 31 December
2021, under certain conditions, more flexibility is added to the application requirements of the tax deduction
for housing loan so that they can be entitled to the deduction for 13 years.
The application requirements are also made more flexible for individual inhabitant tax.
5. Memorandum Item
5.1. Average gross annual wage earnings calculation
The source of calculation is the Basic Survey on Wage Structure, published by the Ministry of Health,
Labour and Welfare. This survey covers establishments with ten or more regular employees over the whole
country, and contains statistical figures for monthly contractual cash earnings in June and annual special
cash earnings (such as bonuses) received by various categories of workers. Male and female workers in
manufacturing, mining and quarrying, construction, wholesale and retail trade, transportation and storage,
accommodation and food service activities, information and communication, financial and insurance
activities, real estate activities, professional, scientific and technical activities are surveyed in the statistics.
Their gross annual earnings are calculated by multiplying monthly contractual cash earnings by 12 and
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adding any annual special cash earnings. In the Basic Survey, various allowances such as overtime,
sickness and leave allowances are included in cash earnings.
The survey covers the whole country, and no special assumption is made regarding the place of residence
of the workers surveyed. The calculation method has been changed to adjust weighs taking into account
the response rate since 2020.
5.2. Employer contributions to private pension and health schemes
DB: JPY 2 836 billion (FY 2018)
Employees’ Pension Funds (EPFs): JPY 87 billion (FY
2019)
DC: JPY 1 096 billion (FY2019)
Data of DB and EPFs are the total amount of employers’ contribution and employees’ one and there is no
data of those which indicates only employers’ contribution. Under DC schemes, as from January 2012,
matching contribution which enables employee to pay additional contribution to employer's one became
available. The amount of DC does not include the amount of matching contribution. It is regulated by law
that employers’ contribution must be higher than employees’
one.
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2021 Parameter values
Average earnings/yr
Allowances for central tax
Ave_earn
basic_al
basic_al_lim
5 146 879
480 000
0
24000001
24500001
25000001
380 000
0
480001
950001
1000001
1050001
1100001
1150001
1200001
1250001
1300001
1330001
0
9000001
9500001
10000001
480 000
0
550 000
1800001
3600001
6600001
8500001
Secretariat
estimate
1
2/3
1/3
0
0
380000
360000
310000
260000
210000
160000
110000
60000
30000
0
1
2/3
1/3
0
spouse_al
Spouse_al_sp
taxpayer_lim
Employment income deduction
spouse_al_ceil
child_al
emp_inc_min
emp_inc_sch
0.4
0.3
0.2
0.1
0
1 950 000
3 300 000
6 950 000
9 000 000
18 000 000
40 000 000
-100000
80000
440000
1100000
1950000
Central gov't tax schedule
tax_sch
Allowances for state/local tax
surtax
s_basic_al
s_spouse_al
s_spouse_al_sp
0.05
0.10
0.20
0.23
0.33
0.40
0.45
1.021
430 000
330 000
0
480 001
1000001
1050001
1100001
1150001
1200001
1250001
1300001
1330001
0
330 000
310000
260000
210000
160000
110000
60000
30000
0
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435
S_spouse_al_ceil
s_child_al
pref_per_cap
mun_per_cap
local_sch
SSC_pens
pens_ceil
SSC_sick
sick_ceil
SSC_unemp
SSC_empr_unemp
SSC_empr_oth
Child_transfer
Child_transfer2
Child_transfer_lim
Child_transfer_lim_incr
Child_rear_sch
480 000
0
1 500
3 500
0.1
0.0915
7 800 000
0.05
16 680 000
0.003
0.006
0.0061
120 000
60 000
6 220 000
380 000
43160
10190
6110
80000
Prefectural tax
Municipal tax
Social security contributions
Employer contribution proportion
Child transfer
Child rearing allowance
870000
1250000
1630000
2300000
2680000
3060000
0.023056
0.003552
0.002126
Child_rear_c
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436
2021 Tax equations
The equations for the Japanese system are mostly on an individual basis. But the tax allowances for the
spouse and for children are relevant only to the calculation for the principal earner. This is shown by the
Range indicator in the table below.
The functions which are used in the equations (Taper, MIN, Tax etc) are described in the technical note
about tax equations. Variable names are defined in the table of parameters above, within the equations
table, or are the standard variables “married” and “children”. A reference to a variable with the affix “_total”
indicates the sum of the relevant variable values for the principal
and spouse. And the affixes “_princ” and
“_spouse” indicate the value for the principal and spouse, respectively. Equations for a single person are
as shown for the principal, with “_spouse” values taken as 0.
Line in country table and
intermediate steps
Variable
name
Range
Equation
1.
2.
Earnings
Allowances:
earn
tax_al
P
IF(earn_princ<basic_al_lim1,basic_al*basic_al_rate1,IF(earn_princ<basic_al_lim2
,basic_al* basic_al_rate2,IF(earn_princ<basic_al_lim3,basic_al*
basic_al_rate3,basic_al* basic_al_rate4)))+ ROUNDUP(Married*(earn_spouse-
MIN(emp_inc_max,MAX(emp_inc_min,Tax(earn_spouse,emp_inc_sch)))<=spous
e_al_ceil)*spouse_al*VLOOKUP(positive(earn_princ-
MIN(emp_inc_max,MAX(emp_inc_min,Tax(earn_princ,emp_inc_sch)))),taxpayer_l
im,2,TRUE),-4)) + ROUNDUP(Married*VLOOKUP(Positive(earn_spouse-
MIN(emp_inc_max,MAX(emp_inc_min,Tax(earn_spouse,emp_inc_sch)))),spouse
_al_sp,2,TRUE)*VLOOKUP(positive(earn_princ-
MIN(emp_inc_max,MAX(emp_inc_min,Tax(earn_princ,emp_inc_sch)))),taxpayer_l
im,2,TRUE),-4)+ Children*child_al
+MAX((earn_princ*VLOOKUP(earn_princ,emp_inc_sch,2,TRUE)+VLOOKUP(earn
_princ,emp_inc_sch,3,TRUE)),emp_inc_min) + SSC_princ
MIN(earn_spouse,
IF(earn_spouse<basic_al_lim1,basic_al*basic_al_rate1,IF(earn_spouse<basic_al
_lim2,basic_al* basic_al_rate2,IF(earn_spouse<basic_al_lim3,basic_al*
basic_al_rate3,basic_al* basic_al_rate4)))+
MAX((earn_spouse*VLOOKUP(earn_spouse,emp_inc_sch,2,TRUE)+VLOOKUP(
earn_spouse,emp_inc_sch,3,TRUE)),emp_inc_min) + SSC_spouse)
0
Positive(earn-tax_al)
Positive(Tax(tax_inc, tax_sch))
0
CG_tax_excl*surtax
Positive(earn_princ- (s_basic_al+ ROUNDUP(VLOOKUP(positive(earn_princ-
MIN(emp_inc_max,MAX(emp_inc_min,Tax(earn_princ,emp_inc_sch)))),taxpayer_l
im,2,TRUE)*Married*((earn_spouse-
(earn_spouse>0)*MAX(emp_inc_min,Tax(earn_spouse,emp_inc_sch))<=s_spous
e_al_ceil)*s_spouse_al+VLOOKUP(Positive(earn_spouse-
(earn_spouse>0)*MAX(emp_inc_min,Tax(earn_spouse,emp_inc_sch))),s_spouse
_al_sp,2,TRUE))+Children*s_child_al+
MAX((earn_princ*VLOOKUP(earn_princ,emp_inc_sch,2,TRUE)+VLOOKUP(earn_
princ,emp_inc_sch,3,TRUE)),emp_inc_min) +SSC_princ))
Positive(earn_spouse-(s_basic_al+(earn_spouse>0)*
MAX((earn_spouse*VLOOKUP(earn_spouse,emp_inc_sch,2,TRUE)+VLOOKUP(
earn_spouse,emp_inc_sch,3,TRUE)),emp_inc_min) +SSC_spouse))
(earn_princ-
MAX(emp_inc_min,Tax(earn_princ,emp_inc_sch))>350000+(Married*(earn_princ
- (earn_princ>0)*MAX(emp_inc_min,Tax(earn_princ,
emp_inc_sch))<='s_spouse_al_ceil)+Children>0)*((Married*(earn_princ' -
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3.
4.
5.
6.
7.
8.
Credits in taxable
income
CG taxable income
CG tax before credits
Tax credits :
CG tax
State and local taxes
Local taxable income
taxbl_cr
tax_inc
CG_tax_e
xcl
tax_cr
CG_tax
local_tax_
inc
B
B
B
B
B
P
S
Local tax
local_tax
P
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(earn_princ>0)*MAX(emp_inc_min,Tax(earn_princ,
emp_inc_sch))<='s_spouse_al_ceil)+Children)*350000+100000+210000))*(pref_p
er_cap+mun_per_cap)+(earn_princ-
MAX(emp_inc_min,Tax(earn_princ,emp_inc_sch))>350000+(Married*(earn_princ'
- (earn_princ>0)*MAX(emp_inc_min,Tax(earn_princ,
emp_inc_sch))<='s_spouse_al_ceil)+Children>0)*((Married*(earn_princ' -
(earn_princ>0)*MAX(emp_inc_min,Tax(earn_princ,
emp_inc_sch))<=s_spouse_al_ceil)+Children)*350000+100000+320000))*Positive
(Tax(Positive(earn_spouse-tax_al_spouse),local_sch)-IF(Positive(earn_spouse-
tax_al_spouse)>2000000,MAXA(2500,((Positive(earn_spouse-tax_al_spouse)-
MAX(emp_inc_min,Tax(earn_princ,emp_inc_sch)))-(Positive(earn_spouse-
tax_al_spouse)-2000000))*5%),MINA((Positive(earn_spouse-tax_al_spouse)-
MAX(emp_inc_min,Tax(earn_princ,emp_inc_sch))),Positive(earn_spouse-
tax_al_spouse))*5%))
(earn_spouse - (earn_spouse>0)*MAX(emp_inc_min,Tax(earn_spouse,
emp_inc_sch))>350000)*(pref_per_cap+mun_per_cap+Positive(Tax(local_tax_inc
_spouse,local_sch)-
IF(local_tax_inc_spouse>2000000,MAXA(2500,((local_tax_inc_spouse-
tax_inc_spouse)-(local_tax_inc_spouse-
2000000))*5%),MINA((local_tax_inc_spouse-
tax_inc_spouse),local_tax_inc_spouse)*5%)))
SSC_pens*MIN(earn, pens_ceil)+SSC_sick*MIN(earn,
sick_ceil)+SSC_unemp*earn
IF(Children>0,IF(Positive(princ_inc -
princ_empl_inc)<Child_transfer_lim+(Child_transfer_lim_incr*Children),
Child_transfer,Child_transfer2)*Children,0) +Child_rear(Married, princ_inc -
princ_empl_inc -Child_rear_c,Children,child_rear_sch)
SSC_pens*MIN(earn, pens_ceil)+SSC_sick*MIN(earn,
sick_ceil)+(SSC_empr_unemp+SSC_empr_oth)*earn
S
9.
11.
Employees' soc security
Cash transfers
SSC
cash_tran
s
B
B
13.
Employer's social
security
SSC_emp
r
B
Key to range of equation B calculated separately for both principal earner and spouse P calculated for principal only (value taken as 0 for spouse
calculation).
Note
1
Relatives receiving “special deduction for persons with disabilities”.
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Korea
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in the
tax/benefit system. The methodology also includes the parameter values and
tax equations underlying the data.
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Korea 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
21.6%
n.a.
29.3%
n.a.
23.3%
n.a.
30.8%
n.a.
28.5%
n.a.
32.8%
n.a.
14.8%
n.a.
23.1%
n.a.
2.6%
9.1%
11.8%
20.4%
6.2%
9.1%
15.3%
23.6%
11.1%
8.2%
19.3%
26.6%
0.9%
9.1%
6.2%
15.4%
0
0
0
3 435 575
0
0
0
5 127 723
0
0
0
7 802 556
0
1 200 000
1 200 000
3 435 575
2 874 800
3 703 170
4 290 746
6 404 805
2 874 800
3 151 867
7 183 093 15 146 098
2 874 800
4 290 746
6 404 805
2 874 800
740 000
753 064
75 306
660 000
2 629 406
262 941
500 000
7 946 630
794 663
641 185
251 879
25 188
0
0
0
150 000
740 000
660 000
500 000
491 185
11 432 740 14 275 852 17 308 173 12 432 740
Total 14 350 428 17 891 805 21 581 073 18 350 428
0
0
0
0
17 153 760 29 129 371 56 944 292 13 153 760
1 493 064
3 289 406
8 446 630
893 064
1 500 000
0
0
1 417 688
1 500 000
0
0
2 115 953
1 500 000
0
0
2 772 900
1 500 000
0
3 000 000
1 417 688
67
none
100
none
167
none
67
2
31 504 188 47 021 176 78 525 365 31 504 188
27 801 018 39 838 084 63 379 267 29 552 322
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Korea 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employers' compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
23.3%
12.5%
30.8%
21.1%
23.3%
21.6%
30.8%
29.3%
23.3%
23.3%
30.8%
30.8%
23.3%
21.6%
30.8%
29.3%
4.2%
9.1%
10.8%
19.6%
3.9%
9.1%
11.5%
20.2%
5.4%
9.1%
13.3%
21.8%
4.7%
9.1%
13.9%
22.3%
0
1 200 000
1 200 000
5 127 723
0
1 200 000
1 200 000
0
1 200 000
1 200 000
0
0
0
8 563 298
4 290 746
7 165 546
8 581 493
7 165 546
6 275 593 10 226 263 13 706 185 10 886 263
4 290 746
7 165 546
8 581 493
7 165 546
810 000
1 804 406
180 441
1 550 000
2 782 470
278 247
1 470 000
4 658 811
465 881
1 400 000
3 382 470
338 247
150 000
150 000
150 000
0
660 000
1 400 000
1 320 000
1 400 000
14 275 852 25 708 592 28 551 704 25 708 592
Total 22 391 805 35 242 233 38 783 610 32 242 233
0
0
0
0
24 629 371 43 283 131 55 258 743 46 283 131
2 614 406
4 332 470
6 128 811
4 782 470
1 500 000
1 500 000
3 000 000
2 115 953
3 000 000
0
3 000 000
3 533 641
3 000 000
0
3 000 000
4 231 906
3 000 000
0
0
3 533 641
100-0
2
100-67
2
100-100
2
100-67
none
47 021 176 78 525 365 94 042 353 78 525 365
41 945 584 69 499 102 81 536 168 67 639 102
8 563 298 10 255 446
The national currency is the Won (KRW). In 2021, KRW 1 144.56 were equal to USD 1. In that year, the
average worker was expected to earn KRW 47 021 176 (Secretariat estimate).
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1. Personal Income Tax System
1.1. Central government income tax system
1.1.1. Tax unit
Each individual is taxed on his/her own income.
Non-taxable wage income includes the:
National pension, National health insurance, Employment insurance and
Workers’ compensation
insurance that are borne by employer;
Overtime payment to productive workers: up to KRW 2 400 000 of overwork payment of productive
workers in manufacturing and mining sectors whose monthly wage is less than KRW 2 100 000
and whose yearly wage is less than KRW 30 000 000.
1.1.2. Allowances and tax credits
1.1.2.1. Standard reliefs
Employment income deduction: the following deduction (up to KRW 20 000 000) from gross income
is provided to wage and salary income earners:
Salary
Up to KRW 5 000 000
KRW 5 000 000 to KRW 15 000 000
KRW 15 000 000 to KRW 45 000 000
KRW 45 000 000 to KRW 100 000 000
Over KRW 100 000 000
Deduction
70%
KRW 3 500 000 plus 40% of the salary over KRW 5 000 000
KRW 7 500 000 plus 15% of the salary over KRW 15 000 000
KRW 12 000 000 plus 5% of the salary over KRW 45 000 000
KRW 14 750 000 plus 2% of the salary over KRW 100 000 000
Basic allowance: a taxpayer can deduct KRW 1 500 000 from his/her income for each person who
meets one of following conditions:
‒
‒
the taxpayer him/herself;
the taxpayer’s spouse whose taxable income (gross earnings net of employment
income deduction) is less than KRW 1 000 000 (Spouse only have a salary earned
income is less than KRW 5 000 000);
the taxpayer’s (including the spouse's) dependents
(parents, siblings, children) within
the same household whose income after accounting for the employment income
deduction is less than KRW 1 000 000 (Dependent only have a salary earned income
is less than KRW 5 000 000) and whose age is:
1. parents: 60 years or older;
2. brother/sister: 60 years or older or 20 years or younger;
3. children: 20 years or younger (if both partners in the household earn wage-income,
this Report assumes that the principal wage earner will claim the allowance).
‒
Additional allowance: a taxpayer can deduct KRW 1 000 000 (500 000 in the case of (c),
KRW 2 000 000 in the case of(b))from his/her gross income when the taxpayer or his/her
dependents fall into one of the following categories (for this report, only cases (c) and (f) are
modelled):
‒
‒
a person aged 70 years or older(a)
a handicapped person (b)
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‒
a female wage earner who is the head of a household with dependents (but without
spouse) or a female wage earner with spouse when her taxable income is not more
than KRW 30 million(c)
a single parent with descendants including adoptees*(f)
* Overlapping of deductions for (c) and (f) is not allowed. So a taxpayer should select
only one.
‒
‒
National pension deduction: employees can deduct 100% of their National Pension contributions
Insurance premiums: the National health insurance premium and the Employment insurance
premium can be entirely (100%) deducted from taxable income.
Working Tax credit: wage and salary income earners obtain the following tax credit:
Calculated tax
Up to KRW 1 300 000
Over KRW 1 300 000
Amount of tax credit
55% of calculated tax
KRW 715 000 plus 30% of the calculated tax over KRW 1 300 000
Total wage and salary income
Not more than KRW 33 million
Not more than KRW 70 million
Exceeding KRW 70 million
Ceiling on credit amount
KRW 740 000
The greater of KRW 660 000 and KRW 740 000- [(total wage and salary
income -KRW 33 million)* 0.8%]
The greater of KRW 500 000 and KRW 660 000- [(total wage and salary
income- KRW 70 million)* 50%]
1.1.2.2. Main non-standard tax reliefs
Wage and salary income earners may deduct from gross income the expenses for the following items
during the tax year:
Saving/Payment for housing: 40% of deposits of an account for purchasing a house, which is held
by a person who does not own a house, and 40% of repayments of loans including interest
borrowed in order to lease a house smaller than 85 square meters in size by a person owning no
house may be deducted up to three million won per year.
Credit card purchases: Employees may deduct 15% of their credit card (30% of their debit card,
prepaid card or cash receipt) purchases that exceed 25% of their total income up to the lesser of
KRW 3 000 000 or 20% of their total income in the case of the total income not over
KRW 7 000 000 (up to the lesser of KRW 2 500 000 or 20% of their total income in the case of the
total income from over KRW 70 000 000 to KRW 120 000 000 and up to the lesser of
KRW 2 000 000 or 20% of their total income in the case of the total income over KRW 120 000 000)
However, for expenditures spent for traditional markets and public transportation the allowed
deduction is equivalent to 40% (30% for the expenditures of books, performances, and museums)
of the expenditure and the ceiling is raised by an additional KRW 1 000 000 respectively.
1.1.2.3. Child tax credit
Where a resident with taxable income has dependent children from 7 years old including adoptee,
he/she gets annual tax credit of KRW 150 000 for having a child, KRW 300 000 for having two
children and KRW 300 000 plus KRW 300 000 per an excess child over two children in case of
having more than three children.
Resident gets tax credit of KRW 300 000 for the first child, KRW 500 000 for the second Child,
andKRW 700 000 for the third child or more for birth and adoption of the year.
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1.1.2.4. Credit for Pension Insurance Premiums
A resident who paid pension contributions to a pension account may deduct the amount equal to
12% of the premiums paid from his/her global income tax amount, only up to KRW 4 million for
pension savings account as well as KRW 7 million for sum of the pension savings account and
retirement pension account.
A resident whose labour income is not exceeding KRW 55 million when he has labour income only
or whose global income is not exceeding KRW 40 million would deduct 15% of the premium.
1.1.2.5. Special tax credit
Wage and salary income earners may obtain following tax credit during the tax year:
Insurance premiums (a): 12% of the general insurance premium up to KRW 1 000 000 can be
deducted from his/her income tax amount.
Medical expenses (b): 15% of the medical expenses exceeding 3% of taxable income can be
deducted from his/her income tax amount. The medical expenses for taxpayer’s dependents who
are eligible for the basic deduction are limited to KRW 7 000 000 and the medical expenses for the
taxpayer himself, taxpayer’s dependents who are aged 65 years or older and handicapped persons
are not limited.
‒
In addition, 20% of medical expenses for the treatment of infertility can be deducted from
his/her income tax amount. There is no deduction limitation.
Educational expenses (c): 15% of tuition fees for pre-school, elementary, middle school and college
(but the graduate school fee deduction is allowed only for the taxpayer himself), either for the
taxpayer himself or his/her dependents (including the taxpayer's spouse, children, and siblings),
can be deducted from his/her income tax amount. The tuition fee for the taxpayer himself is not
limited. For the taxpayer’s dependents, the limits of tuition
fees are as follows:
‒
‒
‒
For pre-school: up to KRW 3 000 000 per child;
For elementary, middle and high school: up to KRW 3 000 000 per student;
For college/university: up to KRW 9 000 000 per student.
Charities (d):15% of the amount of donation (in case of the donation exceeding KRW 10 000 000,
30% of the excess amount over KRW 10 million) is deducted from income tax amount. The limits
of donations are as follows:
‒
‒
donations to a government body, donations for national defence, natural disaster, and
certain charitable associations: up to gross income;
donations to public welfare or religious associations: up to 30% of gross income.
Standard Credits: Alternatively, a taxpayer may choose an annual standard credit of KRW 70 000
(KRW 130 000 for wage and salary earners and KRW 120 000 for business owners meeting
certain requirements), if he or she fails to claim deductions for insurance premium, saving/payment
for housing and special tax credit.
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Tax schedule
Over (KRW)
0
12 000 000
46 000 000
88 000 000
150 000 000
300 000 000
500 000 000
1 000 000 000
Not more than (KRW)
12 000 000
46 000 000
88 000 000
150 000 000
300 000 000
500 000 000
1 000 000 000
Marginal tax rate (%)
6
15
24
35
38
40
42
45
1.2. Local income tax
1.2.1. Tax base
The local income tax base is the income tax paid to the central government.
1.2.2. Tax rate
A uniform rate of 10% is applied. However, the local government can adjust the rate between the lower
limit of 5% and the upper limit of 15%.
1.2.3. Tax rate (selected for this study)
A country-wide rate of 10% is used in this Report.
2. Compulsory Social Security Contribution to Schemes Operated Within the
Government Sector
2.1.
Employees’ contribution
2.1.1. National pension
The National pension contribution rate is 4.5% of the standardised average monthly wage income as of
2020.
The scope of the standardised average monthly wage income is from KRW 330 000 to KRW 5 240 000 as
of 1 July 2021.
If the average monthly wage income of a person is less than KRW 330 000, the average monthly wage
income of the person is regarded as KRW 330 000 and the rate (0.045) is applied. If the average monthly
wage income of a person is more than KRW 5 240 000, the average monthly wage income of the person
is regarded as KRW 5 240 000 and the rate (0.045) is applied; so the minimum of the national pension
contribution per year is KRW 178 200 (KRW 330 000 x 0.045 x 12 months), and the maximum of the
national pension contribution per year is KRW 2 829 600 (=KRW 5 240 000 x 0.045 x 12 months).
2.1.2. National health insurance
The National health insurance premium, which has a rate of 3.825136 % (National health insurance: 3.43
%, Long term care insurance 11.52 % of National Health insurance premium rate), is levied on average
monthly wage income as of 1 January 2021.
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The scope of the monthly National health insurance premium (excluding Long term care insurance
premium) is from KRW 9 570 to KRW 3 523950. To include Long term care insurance, we should multiply
1.1152. Thus, the scope of the total monthly premium is from KRW 10 672 to 3 929 909. If the calculated
premium is less than KRW 10 672, the worker should pay KRW 10 672. Likewise, if the calculated premium
is more than KRW 3 929 909, the worker only pays KRW 3 929 909.
2.1.3. Employment insurance
0.8% of gross income as of 1 October 2019.
2.1.4.
Workers’ compensation
insurance
Compulsory application, premiums paid only by employers.
2.2.
Employers’ contribution
2.2.1. National pension
The national pension contribution rate is 4.5% of the standardised average monthly wage income as of
2020.
The scope of the standardised average monthly wage income is from KRW 330 000 to KRW 5 240000 as
of 1 July, 2021.
If the average monthly wage income of a person is less than KRW 330 000, the average monthly wage
income of the person is regarded as KRW 330 000 and the rate (0.045) is applied. If the average monthly
wage income of a person is more than KRW 5 240 000, the average monthly wage income of the person
is regarded as KRW 5 240 000 and the rate (0.045) is applied; so the minimum of the national pension
contribution per year is KRW 178 200 (KRW 330 000 x 0.045 x 12 months), and the maximum of the
national pension contribution per year is KRW 2 829 600 (=KRW 5 240 000 x 0.045 x 12 months).
2.2.2. National health insurance
The National health insurance premium, which has a rate of 3.825136 % (National health insurance
3.43 %, Long term care insurance: 11.52 % of National health insurance premium rate), is levied on
average monthly wage income as of 1 January, 2021.
The scope of the monthly National health insurance premium (excluding Long term care insurance
premium) is from KRW 9 570 to KRW 3 523 950. To include Long term care insurance, we should multiply
1.1152. Thus, the scope of the total monthly premium is from KRW 10 672 to 3 929 909. If the calculated
premium is less than KRW 10 672, the employer should pay KRW 10 672. Likewise, if the calculated
premium is more than KRW 3 929 909, the employer only pays KRW 3 929 909.
2.2.3. Employment insurance
the insurance premium is between 1.05% and 1.65% of total wage as of 1 October 2019;
the insurance premium selected for this study is 1.05%.
2.2.4.
Workers’ compensation insurance
the insurance premium consists of an industry-specific rate which is set by the Ministry of
Employment and Labor multiplied by total wage;
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446
the average rate of all industries (announced by the Ministry of Employment and Labor and
selected for this study) is 1.53 %.
3. Universal Cash Transfers
Child Benefit
Child home care allowance is granted every month to those who have children aged 6 years or younger:
KRW 200 000 for a child aged 12 months or younger, KRW 150 000 for a child aged 1 to 2 years and
KRW 100 000 for a child aged 2 to 6 years.
If a child attends a nursery or pre-school, monthly childcare service voucher is provided instead of the child
home care allowance. The amount of the benefit differs by the age of the child, type of nursery, class of
nursery etc.
On top of those two benefits, universal child benefit of KRW 100 000 is paid monthly to those who have
children if the child is under the age of 7.
4. Main Changes in Tax/Benefit System since 2000
2000
2001
2002
Contribution to National Pension are to be deductible from 2001, upper cap of employment income deduction limit (KRW 12 000
000) is abolished from 2001
Personal income tax rates are lowered by 10% (10, 20 ,30, 40% were reduced to 9, 18, 27, 36%, respectively) from 2002
Limits of deduction for education fees are expanded from 2003. For pre-school: from KRW 1 000 000 to KRW 1 500 000. For
elementary, middle school and high school: from KRW 1 500 000 to KRW 2 000 000. For college and university: from
KRW 3 000 000 to KRW 5 000 000.
Limit of deduction for interest of long-term mortgage loan for housing is expanded from KRW 3 000 000 to KRW 6 000 000 from
2003
Employment income deduction and tax credit applicable to low income are increased. The deduction rate for the taxable wage
income range of KRW 5 000 000 to KRW 15 000 000 is increased from 45% to 47.5%. The tax credit rate for calculated tax below
KRW 500 000 is increased from 45% to 50% and the maximum tax credit is increased from KRW 400 000 to KRW 450 000.
Limits of deduction for education fees are expanded. For pre-school: from KRW 1 500 000 to KRW 2 000 000. For college and
university: from KRW 5 000 000 to KRW 7 000 000.
Limit of deduction for interest on long-term mortgage loan for housing is expanded from KRW 6 000 000 to KRW 10 000 000.
The marginal deduction rate for the taxable wage income range from KRW 5 000 000 to KRW 15 000 000 is increased from 47.5%
to 50%.
The tax credit rate for tax amounts below KRW 500 000 is increased from 50% to 55% and the maximum permitted tax credit goes
up from KRW 450 000 to KRW 500 000.
Personal income tax rates are lowered by 1% point (9, 18, 27, 36% were reduced to 8, 17, 26, 35%, respectively).
Lump-sum tax relief are expanded from KRW 600 000 to KRW 1 000 000.
Eligibility for the extra allowance amount has been changed. Previously, an income earner with a small number of dependents
(e.g. spouse, child) eligible for basic allowance was eligible for an allowance of up to KRW 1 000 000 depending on the number of
dependents. As from 2007, however, an income earner with two or more dependent children eligible for basic allowance is eligible
for an allowance equivalent to KRW 500000 if there are 2 children plus an additional KRW 1 000 000 for every additional child
(e.g. 2 children: KRW 500 000; 3 children: KRW 1 500 000; 4 children: KRW 2 500 000, etc.).
Tax schedule has been changed : from KRW 10 000 000, KRW 40 000 000 , KRW 80 000 000 to KRW 12 000 000,
KRW 46 000 000, KRW 88 000 000;
New items have been added to the additional allowance with respect to lineal descendants who are born or adopted during the
concerned taxable year;
Credit card purchase deduction has been changed : Employees may deduct 20% (previously 15%) of their credit/debit card
purchases that exceed 20% (previously 15%) of their total income;
Deduction for donations to public welfare or religious associations has been increased up to 15% of gross income. Previously, the
limit was 10% of gross income.
Personal income tax rates have been changed: from 8%, 17%, 26%, 35% to6%, 16%, 25%, and 35%.
Employment income deduction has been changed: from 100%, 50%, 15%, and 10% 5% to 80%, 50%, 15%, and 10%. 5%
Personal income tax rates have been changed: from 6%, 16%, 25%, 35% to6%, 15%, 24%, and 35%.
2003
2004
2005
2007
2008
2009
2010
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2012
2013
Personal income tax rates have been changed: from6%, 15%, 24%, and 35% to 6%, 15%, 24%, 35% and 38%
A new additional allowance is added: a single parent with lineal descendants or adopted children who are eligible for basic
exemption can deduct KRW 1 000 000.
Insurance premiums, medical expenses, education expenses, loans for house, designated donations, saving deposits for housing
subscription, investment in employee stock ownership associations or in associations for investment in start-ups, and credit cards
are allowed income deduction with a ceiling at KRW 25 000 000 in total. However, for the amount of designated donations
exceeding the ceiling, deduction can be carried forward for 5 years.
Tax schedule has been changed : KRW 300 000 000 to KRW 150 000 000
Personal and special income deductions( e.g. medical expenses, educational expenses) have been shifted toward tax credit
Employment income deduction has been changed: 80% to 70%, 50% to 40%.
The ceiling amount of earned income tax credit has been changed : KRW 500 000 to KRW 740 000(the salary <33 000 000),
KRW 660 000(the salary < 70 000 000)
Refundable CTC(Child Tax Credit) has established
Personal income tax rate 40% is newly created over KRW 500 000 000
Tax schedule has been changed: Tax base over KRW 150 000 000 up to KRW 500 000 000 divided into over KRW 150 000 000
up to KRW 300 000 000 and over KRW 300 000 000 up to KRW 500 000 000
The Highest income tax rate has been changed: 40%->42%
Charities tax credit’s deduction rate has been adjusted.
Regarding non-taxable overtime payment to productive workers, the upper limit of monthly wage for recipient of tax exemption has
been increased to KRW 2 100 000.
Regarding non-taxable overtime payment to productive workers, the upper limit of yearly wage for recipient of tax exemption has
been increased to KRW 30 000 000.
The employment income deduction’s limitation of KRW 20 000 000 has been newly set up.
Tax schedule has been changed: tax base over KRW 500 000 000 is divided into over KRW 500 000 000 to KRW 1 000 000 000
and over KRW 1 000 000 000. Tax rate to be applied is 42% and 45% respectively.
2014
2015
2017
2018
2019
2020
2021
4.1. Changes to labour taxation due to the COVID pandemic in 2020 and 2021
Due date of payment for
2019’s income tax has been deferred from 1
June 2020 to 31 August
2020.
Deduction rate for credit card purchases has been increased temporarily. On March, the deduction
rate of the credit card purchases is 30%, the deduction rate of the debit card, prepaid card and
cash receipt purchases is 60%, the deduction rate of the expenditures for books, performances
and museums is also 60%, and the deduction rate of the expenditures for traditional markets and
public transportation is 80%. From April to July, all of the deduction rates are increased to 80%
respectively. On top of that, limitation of deduction has been raised. The limitation of deduction is
the lesser of KRW 3 300 000 (originally 3 000 000) or 20% of their total income in the case of the
total income not over KRW 70 000 000 (the lesser of KRW 2 800 000 (originally 2 500 000) or 20%
of their total income in the case of the total income from over KRW 70 000 000 to
KRW 120 000 000, and the lesser of KRW 2 300 000 (originally 2 000 000 for 2020) or 20% of their
total income in the case of the total income over KRW 120 000 000). Moreover, if the size of
purchase has been increased over 5% in 2021 compared to 2020, 10% of such excess can also
be deducted, up to KRW 1 000 000.
Monthly payment of the National pension can be exempted for 3 times between Mar 2020 and Jun
2020 and 9 times between Jan 2021 to Sep 2021, when he/she meets specific conditions(e.g. the
income has been decreased).
The National health insurance premium is reduced from Mar 2020 to May 2020 for some workers.
Criterions such as the size of income and the place where he/she works are considered when
deciding the rate of reduction (30% or 50%),
Monthly payment of the Employment insurance premium and
Workers’ compensation
insurance
premium for Mar 2020 to May 2020, Jan 2021 to Mar 2021, Apr 2021 to Jun 2021 and Jul 2021 to
Sep 2021 is deferred for 3 months respectively, when the employee works for the company that
employed workers less than 30.
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A company that employed
workers less than 30 can also get a 30% relief of Workers’ compensation
insurance premium from Mar 2020 to Aug 2020 and from Jan 2021 to Mar 2021.
On March 2020, additional
‘childcare coupons’ that worth KRW 400 000 are provided per child to
households with children aged less than 7 years as of Mar 2020, to help address challenges caused
by the COVID-19 outbreak.
5. Memorandum Item
5.1. Identification of the Average Worker (AW)
Sectors used: industry Sectors B-N with reference to the International Standard Industrial
Classification of All Economic Activities, Revision 4 (ISIC Rev.4).
Geographical coverage: whole country.
Type of workers: wage workers (male and female).
5.2. Method to calculate wages
Establishment Labor Force Survey (ELFS) by the Ministry of Employment and Labor is used to calculate
the AW. The statistics were obtained through a sample survey of approximately 13 000 firms with one or
more permanent employees throughout the whole country.
Basic method of calculation used: average monthly wages multiplied by 12.
5.3.
Employer’s reserve for employee’s retirement payment
An employer should pay to a retiree the retirement payment which is not less than 30
days’ wage and
salary per one year of service (about 8.3% of gross income or more). An employer can contribute to the
Retirement Payment Reserve Fund established within the company or Retirement Insurance Fund
established outside the company to prepare for the retirement payment. Such contribution is treated as
business expense under certain constraints. Because contribution to the Retirement Fund is not
compulsory, this survey does not include such contribution except the contribution converted to employer's
contribution to the national pension plan (see Section 2.2.1).
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2021 Parameter values
Average earnings/yr
Tax allowances
spouse
dependents including children
additional allowance
additional allowance 2
Employment income deduction
Ave_earn
basic_al
spouse_al
spouse_al_lim
dep_al
add_all
add_all_lim
add2_all
empdedsch
47 021 176
1 500 000
1 500 000
1 000 000
1 500 000
500 000
30 000 000
1 000 000
0
5000000
15 000 000
45 000 000
100 000 000
20000000
0.55
0.3
740 000
660 000
500 000
150 000
130 000
866 667
0.06
0.15
0.24
0.35
0.38
0.4
0.42
0.45
0.1
1 200 000
1
0.045
2772900
175500
0.03825136
47158908.48
128069.568
0.008
0.045
0.03825136
0.0105
0.0153
Secretariat estimate
0.7
0.4
0.15
0.05
0.02
Earned income special credit threshold
credit limit
Max_empded
earntaxcred
credlimit
1 300 000
Ave_earn<33 000 000
Ave_earn< 70 000 000
Ave_earn> 70 000 000
Child tax credit
Lump sum tax credit
Tax schedule
child_cred
lump_cred
lump_thresh
tax_sch
12 000 000
46 000 000
88 000 000
150 000 000
300 000 000
500 000 000
1 000 000 000
Local tax rate
Cash Transfer for kids under 7 age
max number of kids permitted to be under 7
Social security contributions
Employer contributions
local_rate
cash_child
child_und7_max
SSC_pens
SSC_pens_max
SSC_pens_min
SSC_sick
SSC_sick_max
SSC_sick_min
SSC_unemp
emp_pens
emp_sick
emp_unemp
emp_inj
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450
2021 Tax equations
The equations for the Korean system are independent between spouses except that the principal earner
has tax allowances for the spouse and for any children.
The functions which are used in the equations (Taper, MIN, Tax etc) are described in the technical note
about tax equations. Variable names are defined in the table of parameters above, within the equations
table, or are the standard variables married and children. A reference to a variable with the affix total
indicates the sum of the
relevant variable values for the principal and spouse. And the affixes “_princ” and
“_spouse” indicate the value for the principal and spouse, respectively. Equations for a single person are
as shown for the principal, with spouse values taken as 0.
Line in country table and
intermediate steps
1.
2.
Earnings
Allowances:
employment income
basic
spouse
dependents
additional allowances
additional allowances
national pension deduction
Main non-standard tax relief
Total
Credits in taxable income
CG taxable income
CG tax before credits
Tax credits :
earned income special tax
credit
child tax credit
lump-sum tax credit
Total
CG tax
State and local taxes
Employees' soc security
Cash transfers
Employer's soc security
Variable
name
earn
emp_al
bas_al
sp_al
dp_al
add_al_pri
nc
add_al_sp
ouse
np_de
non-std_al
tax_al
taxbl_cr
tax_inc
CG_tax_ex
cl
earn_cr
child_cr
lump_cr
tax_cr
Range
Equation
B
B
P
P
P
S
B
B
B
B
B
B
B
P
B
B
MIN(Empincded(earn, empincdedsch),max_empded)
basic_al
Married*spouse_al*(earn_spouse-emp_al_spouse<=spouse_al_lim)
Children*dep_al
IF(AND(Married='0,Children>0),' add2_all,0)
IF(AND(earn_spouse>0,earn_spouse<=add_all_lim),add_all,0)
Min(earn*SSC_pens, SSC_pens_max)
IF(earn*(SSC_sick+SSC_unemp)>lump_thresh,earn*(SSC_sick+SSC_unem
p),0)
emp_al+bas_al+sp_al+dp_al+add_al+np_al
0
Positive(earn-tax_al)
Tax(tax_inc, tax_sch)
MIN(earntaxcred(CG_tax_excl), credlimit(earn))
child_cred*(children-(cash_trans>0))
IF(non-std_al='0,' lump_cred, 0)
earn_cr+child_cr+lump_cr
3.
4.
5.
6.
7.
8.
9.
11.
13.
CG_tax
local_tax
SSC
cash_trans
SSC_empr
B
B
B
J
B
CG_tax_excl-tax_cr
local_rate*CG_tax
MAX(SSC_pens_min,MIN(earn*(SSC_pens),SSC_pens_max))+MAX(SSC_
sick_min,MIN(earn*(SSC_sick),SSC_sick_max))+earn*(SSC_unemp)
=cash_child*child_und7_max*(Children>0)
MAX(SSC_pens_min,MIN(earn*(SSC_pens),SSC_pens_max))+MAX(SSC_
sick_min,MIN(earn*(emp_sick),SSC_sick_max))+earn*(emp_unemp+emp_i
nj)
Key to range of equation:
B calculated separately for both principal earner and spouse
P calculated for principal only (value taken as 0 for spouse calculation)
S calculated for spouse only
J calculated once only on a joint basis
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Latvia
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in the
tax/benefit system. The methodology also includes the parameter values and
tax equations underlying the data.
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Latvia 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory contributions
Employer's compulsory social security contributions
Payroll taxes
Total
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
33.0%
n.a.
45.8%
n.a.
33.0%
n.a.
45.8%
n.a.
31.4%
n.a.
44.5%
n.a.
33.0%
n.a.
45.8%
n.a.
12.8%
10.5%
23.3%
37.9%
16.0%
10.5%
26.5%
40.5%
18.5%
10.5%
29.0%
42.6%
1.0%
10.5%
6.4%
24.3%
2 413
4
2 418
3 602
4
3 607
6 016
4
6 020
2 413
4
2 418
0
0
7 850
0
0
11 225
0
0
18 094
530
530
9 580
1 074
2 381
1 603
4 045
2 678
7 407
1 074
1 181
1 074
1 603
2 678
1 074
0
1 307
0
0
2 441
0
0
4 730
0
0
107
0
3 698
0
6 533
1 307
3 064
0
12 206
2 441
2 678
0
22 823
4 730
9 698
0
533
107
0
1 074
0
1 603
0
2 678
6 000
1 074
2 624
1 461
0
2 624
67
none
10 231
100
none
15 270
167
none
25 501
67
2
10 231
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Latvia 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory contributions
Employer's compulsory social security contributions
Payroll taxes
Total
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
33.0%
23.3%
45.8%
37.9%
33.0%
33.0%
45.8%
45.8%
33.0%
33.0%
45.8%
45.8%
33.0%
33.0%
45.8%
45.8%
8.1%
10.5%
15.2%
31.4%
10.0%
10.5%
18.4%
34.0%
12.1%
10.5%
20.8%
36.0%
14.7%
10.5%
25.2%
39.5%
3 602
4
3 607
6 016
9
6 024
7 204
9
7 213
6 016
9
6 024
530
530
12 955
530
530
20 805
530
530
24 181
0
0
19 076
1 603
2 845
2 678
5 225
3 207
6 889
2 678
6 425
1 603
2 678
3 207
2 678
0
1 241
0
0
2 548
0
0
3 682
0
0
3 748
0
9 064
0
6 206
1 241
12 762
0
12 739
2 548
12 128
0
18 412
3 682
6 762
0
18 739
3 748
6 000
1 603
6 000
2 678
6 000
3 207
0
2 678
1 461
4 084
2 922
4 084
100-0
2
15 270
100-67
2
25 501
100-100
2
30 540
100-67
none
25 501
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Since 2014, the Latvian currency is the Euro (EUR). In 2021, EUR 0.84 was equal to USD 1. That year,
the average worker in Latvia earned EUR 15 270 annually (Secretariat estimate).
1. Personal income tax system
From 1st January 2018, Latvia has introduced an ambitious tax reform. One of the main goals of this reform
is to reach Latvian government as well as international expert’s expectations
–
to reduce the tax wedge,
especially for low-wage earners.
1.1. Central government income tax
In 2018 with the labour tax reform the progressive income tax system was introduced for the first time, as
well as the differential non-taxable minimum, the allowance for dependents and the non-taxable minimum
for pensioners is increased, and the minimum monthly wage is raised.
1.1.1. Tax unit
The tax unit are individuals.
1.1.2. The main tax allowance
1.1.2.1. Standard tax reliefs
A general (basic) allowance:
Since 2016, the differentiated non-taxable minimum is introduced.
The differentiated non-taxable minimum varies depending on the person's income level: higher for lower
wages, but lower or zero for higher wages. The differentiated non-taxable minimum is gradually raised.
In 2019 the differentiated non-taxable minimum varies from EUR 0 to 230 per month, but in 2020 and in
2021 - from EUR 0 to 300 per month (see table below).
Differentiated non-taxable
minimum criteria’s:
2017
2018
2019
2020
2021
Maximum
non-taxable
minimum,
EUR per month
Minimum
non-taxable
minimum,
EUR per month
Taxable income
1
minimum
threshold up to which the
maximum annual non-taxable
minimum is applied,
EUR per
month
Taxable income
1
maximum
threshold up to which the
annual non-taxable minimum
is applied,
EUR per month
115
60
400
200
0
440
230
0
440
300
0
500
300
0
500
1 100
1 000
1 100
1 200
1 800
1. Calculating the taxable income not only the salary is taken into account, but also other income (such as dividends and income from real estate
etc.). Similarly, if a person works in several jobs, the salaries are summed up and the non-taxable minimum is applied to the total revenue
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For example, in 2021, the maximum tax allowance amount is EUR 300 per month and it is applied to the
taxable income below EUR 500 per month. If the taxable income is between EUR 500 per month and EUR
1 800 per month, the differentiated annual non-taxable minimum is calculated according to a specific
formula. The allowance gradually decreases until it reaches zero and is not applied. It is important to note
that from 2018, the differentiated non-taxable minimum in full amount is applied already during the tax
year. It is based on the State Revenue Service (SRS) forecast which
takes into account the taxpayer’s
annual income of the previous year. In 2017 the non-taxable minimum was applied only in the minimum
amount for all taxpayers (EUR 60) and only in the next taxation year, when the taxpayer submitted the
annual tax return, it was applied on the basis of the annual taxable income data of a person.
The allowance for dependents
The allowance for dependents is also deductible from the income before taxes.
The tax allowance for each dependant (which in most cases are children) is gradually raised - in 2018 to
EUR 200 per month or EUR 2 400 per year, in 2019 to EUR 230 per month or EUR 2 760 per year and in
2020 to EUR 250 per month or EUR 3 000 per year. In 2017, it was EUR 175 per month or EUR 2 100 per
year. In 2021 this allowance remains in the same amount as in the preceding year.
The taxpayer can apply the allowance for a child aged 18 years and younger and for a child while
he or she continues the acquisition of the general, professional, higher or special education, but
not longer than until reaching 24 years of age. The allowance for dependents is applicable for a
taxpayer's child and in certain cases and under certain conditions for sisters, brothers,
grandchildren, spouses, parents and grandparents with disability as well as persons under
guardianship.
As of 2016, the rule of law narrowed, removing allowances for unemployed spouse, parents or
grandparents, except if these persons are with disabilities.
From 2017, the tax allowance for dependents was expanded by non-working spouse, who is taking care
of a minor child with a disability, if the non-working spouse does not receive taxable income or State
pension.
In addition, as of July 1, 2018, the allowance is applicable for unemployed spouse who is taking care of:
one child below 3 years of age;
three or more children below 18 years or below 24 years of age (if he/she studies), of which at least
one is below 7 years of age;
five children below 18 years of age or below 24 years of age (if he/she studies).
To support youth employment during the summer (from June 1st to August 31st), parents can still receive
tax allowance for dependents (children while they are employed).
Relief for compulsory
social security contributions: Employee’s state social security
contributions are
deductible from the income before taxes.
Tax credits: none for employees.
1.1.2.2. The main exemptions:
income from rural tourism and agricultural production, as well as of mushrooming, berry-picking or
the collection of wild medicinal plants and flowers or an uncultivated species or individuals of non-
game species - edible snails (Helix pomatia), if it does not exceed EUR 3 000 per taxation year,
including the sums of State aid for agriculture or of the European Union aid for agriculture and rural
development, in amount of EUR 3 000 per taxation year;
insurance compensations, except such insurance compensations paid on the basis of a life, health
and accident insurance contract entered into by the employer and a life-long pension insurance
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contract (with accrued funded pension assets in accordance with the Law on State Funded
Pensions);
insurance compensations which have been disbursed upon the occurrence of an insurable event
in relation to the life and health of the insured person due to an accident or illness, in accordance
with the life insurance policy (including with accumulation of funds) regardless of who has entered
into the insurance contract;
the supplementary pension capital, which has been formed from contributions of private individuals
or their spouse or a person related to their relatives up to the third stage within the meaning of the
Civil Law into private pension funds according to licensed pension plans and paid to participants
in pension plans;
income from Latvian or other EU Member State or EEA State and local government bonds;
capital gains on immovable property, if the ownership of the payer has been for more than 60
months (5 years) and it has been the declared as place of residence of the person for at least 12
months (1 year);
capital gains on immovable property, if the ownership of the payer has been for more than 60
months (5 years) and the last 60 months (5 years) this immovable property has been the only real
estate of the payer;
capital gains on immovable property which has occurred in relation to the division of property in
the case of dissolution of marriage, if it has been the declared place of residence of both spouses
at least 12 months until the day of entering into the alienation contract;
capital gains on immovable property (the relevant immovable property is registered in the Land
Register as only immovable property of the payer), if this income is invested a new in a functionally
similar immovable property within 12 months following the alienation of the immovable property or
before alienation of the immovable property;
income from the alienation of personal property (movable objects such as furniture, clothing and
other movable objects belonging to an individual intended for personal use) except income from
the sale of items (tangible or intangible) prepared for sale or purchased, the capital gains and other
income from capital and scrap sales;
scholarships paid from the budget, association or foundation resources;
scholarships up to 280 euros per month paid by an entrepreneur in accordance with the procedure
set out by the Cabinet of Ministers for the organization and implementation of work environment
training shall be paid by the merchant, institution, association, foundation, natural person registered
as a performer of economic activity, as well as individual enterprise, including farmer or fishermen's
farm, and other economic operators;
grants paid to a student who attends a medical education program to promote the acquisition of an
educational program and which is paid out from the institution of health care institution;
income obtained as a result of inheritance except author's fees (royalty) which is paid to the
inheritors of the copyright and for the State funded pension capital which is inherited in case of the
death of a participant of a State funded pension scheme;
allowance (alimony);
prizes of lotteries and gambling if the amount (total amount) of the prize (value thereof) does not
exceed EUR 3 000 per taxation year;
goods and services lottery prizes;
material and monetary prizes (premiums) received at competitions and contests, the total value of
which in the taxation year does not exceed EUR 143, and the prizes and premiums acquired at
international contests the total value of which does not exceed EUR 1 423 a year, as well as the
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financial incentive paid out to the laureates of the prizes of the Baltic Assembly and prizes of the
Cabinet;
revenues from gifts up to EUR 1 425 from natural person, other than a close relative;
revenues from gifts in full amount from natural persons, if the giver is connected to the payer by
marriage or kinship to the third degree;
dividends, income equal to dividends or notional dividends if the enterprise income tax has been
paid etc.
1.1.3. Tax schedule
From 2018, the personal income tax (PIT) system is progressive (in 2017 the PIT rate was a flat tax rate
of 23%).
In 2021, the PIT rates are set:
20% - for income up to EUR 20 004 per year;
23% - for income exceeding EUR 20 004 but not exceeding EUR 62 800 per year (in 2018 not
exceeding EUR 55 000 per year);
31 % - for income exceeding EUR 62 800 per year (in 2018 exceeding EUR 55 000 per year).
The tax rate 20% and 23% (depending on the level of income) is applicable monthly in the workplace where
a payroll tax book is submitted. In the workplace where a payroll tax book is not submitted, only the 23%
rate should be applied.
The rate 31% is calculated only in the annual tax return. During the year, the tax is paid as Solidarity tax
for an employee whose revenue exceeds EUR 62 800 per year. The Solidarity tax part of 10.0% is
transformed into the Personal income tax rate of 31%. The compulsory social security contributions from
income above EUR 62 800 per year shall not be paid.
1.2. Regional and local income tax
There are no regional and local income taxes.
2. Compulsory social security contributions to schemes operated within the
government sector
In 2018, the compulsory social security contribution rate was increased by one percentage point from
34.09% to 35.09% to ensure financing of the health sector (0.5% paid by the employee and 0.5% paid by
the employer). From 2021 the social security contribution rate has been reduced by 1 percentage point to
the same rate level as it was in force before 2018, i.e. from 35.09% to 34.09% (for employers from 24.09%
to 23.59%, for employees from 11% to 10.5%)
The social security contributions covers:
state pension insurance;
social insurance in case of unemployment;
social insurance in respect of accidents at work and occupational diseases;
disability insurance;
maternity and sickness insurance;
parental insurance;
health insurance.
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In 2021, the maximum object of mandatory social payments is EUR 62 800 per year.
2.1.
Employees’ contributions
Employees pay 10.5% of their earnings in social security contributions. The taxable base is the total
amount of the gross wage or salary including vacation payments, fringe benefits and remuneration of
expenses related to work above a certain threshold. The assessment period is the calendar month.
2.2.
Employers’ contributions
Social security contributions are also paid by employers at a rate of 23.59% on behalf of their employees.
The taxable base and the assessment period are the same as for employees’ contributions.
The total contribution rates paid by employees and employers in 2021 are divided:
Scheme name
Pension insurance
Unemployment insurance
Insurance of accidents at work and occupational diseases
Disability insurance
Maternity and sickness insurance
Parental insurance
Health insurance
Total
Rate of contribution (%)
23.91
1.6
0.66
2.29
3.47
1.16
1.00
34.09
2.3. Solidarity tax
From 2016 the Solidarity tax was introduced.
From 2019 the Solidarity tax rate has been reduced from 35.09% (2018) to 25.50%, and from 2021 to 25%.
See more in the table below on the distribution of Solidarity tax rate from 2017 to 2021.
The difference between 2018 and onwards is that:
in 2018 the Solidarity tax rate is set at the same level as the current social security contributions
rates (11% and 24.09%). Solidarity tax is applied during the tax year to the same rate as the social
security contributions.
in 2019 and 2020 Solidarity tax was set at 25.5%, which was less than the current social security
contributions rate of 35.09% (11% and 24.09%). In 2021 the Solidarity tax is reduced to 25%. Like
in 2019 and 2020, in 2021 Solidarity tax is applied during the tax year at the same rate as the social
security contributions (34.09% in 2021, 35.09% in 2019 and 2020). Therefore, the overpaid
solidarity tax is refunded to the employer in the next taxation year.
The tax is paid for the income exceeding the amount of the maximum social security contribution object.
From 2019 the social security contribution ceiling was raised to EUR 62 800 per year (in 2018 was
EUR 55 000 per year). The taxation period is the calendar year.
The purpose of the Solidarity tax is to eliminate the existing regressivity in the labour tax system and to
equalize the tax burden on labour between low-wage earners and high wage earners. This problem
appeared when the social contribution ceiling was re-introduced in 2014.
The Solidarity tax applies to all socially insured individuals
–
employees, self-employed, if their income
during the calendar year exceeds the amount of the maximum mandatory social security contributions.
Employers are also subject to solidarity tax (in the same way, as they are liable for paying employer social
insurance contributions).
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459
Solidarity tax rate distribution
2018
Solidarity tax rate
Employer's rate distribution:
State budget (not tied to social)
services) pension (2nd pillar
Funded
pension scheme)
1
Private pension in the Fund's
Pension Plan (3nd pillar pension
scheme)
1
State Pension
Pension insurance
Health care
Employee's rate distribution:
State budget (not tied to social
services) income tax
2
Personal
Health care
0.50%
11.00%
10.50%
0.50%
35.09%
24.09%
6.00%
4.00%
2019-2020
25.50%
14.50%
2021
25%
14.50%
13.59%
14.00%
3
0.50%
11.00%
10.50%
0.50%
14.00%
3
0.50%
10.50%
10.00%
0.50%
1. If a person is not a member of a funded pension scheme, a private pension fund is transferred 10%.
2. The Solidarity tax (paid by employee for income above EUR 62 800 per year in 2019 - 2021) part of 10.0% (before 2021 10.5%) is transformed
into a Personal income tax rate of 31% (before 2021 31.4%). It means that, by submitting the annual income declaration and performing the
conversion of the PIT into three PIT rates (the third rate of 31%), the share of paid Solidarity Tax is equal to PIT rate 31% (before 2021 31.4%).
3. From 2019 to 2020, 14% of the paid solidarity tax was transferred to the State pension special budget and registered in the personal account
of the taxpayer in accordance with the law On State Pensions (in 2018 13.59% were transferred to the State pension special budget). As of
2021, 14% of the paid solidarity tax are transferred to the State pension special budget unpersonalised.
2.3.1. Payroll tax
The Business risk fee is paid in the state basic budget, and then transferred to the Employee claim
guarantee fund, which is administrated by the state agency “Insolvency administration”. The Insolvency
administration is a public institution controlled by the Ministry of Justice.
If an enterprise is insolvent, the Insolvency Administration satisfies employee claims for their unpaid
salaries, compensations for the paid annual leaves and compensations for dismissal in case of the end of
the employment relationships.
The Business risk fee does not confer entitlement to any kind of social benefits.
The Business risk fee is a constant payment for a person EUR 0.36 per employee per month.
3. Universal cash transfers
3.1. Transfers related to marital status
None.
3.2. Transfers for dependent children
From 2015, support for families has been introduced through differentiated family state benefits:
EUR 11.38 per month for the first child,
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EUR 22.76 per month for the second child,
EUR 34.14 per month for the third child,
EUR 50.07 per month for the fourth and each subsequent child (only from 2017).
EUR 10 per month for 2 children;
EUR 66 per month for 3 children,
additionally EUR 50 per month for each subsequent child
From March 1, 2018 a supplement to the state benefit for families is paid:
For example, for family with six children the supplement payment is EUR 216 per month (EUR 66 (for 3) +
EUR 50 + EUR 50 + EUR 50).
The state pays family benefits to all children until they reach the age of 15. Children enrolled in basic or
secondary schools or vocational education institutions operating on the basis of basic education have the
right to receive family benefits until the age of 20.
In addition there are four other types of family benefits for which the payment depends on either the age
of the child(ren) and/ or the status of the person(s) looking after them: maternity and paternity benefit;
childbirth benefit; parental benefit; child care benefit (additional benefit for child with disabilities). These
are not included in the modelling.
4. Main changes in tax/benefit system in 2021
The social security contribution rate has been reduced by 1 percentage point, i.e. from 35.09% to
34.09% (for employers from 24.09% to 23.59%, for employees from 11% to 10.5%.
The income threshold, up to which the personal income tax non-taxable minimum is not applicable,
has been raised from EUR 1 200 to EUR 1 800 per month.
The personal income tax upper rate has been decreased from 31.4 to 31%.
The non-taxable minimum for pensioners has been increased from EUR 300 to EUR 330.
The solidarity tax rate has been decreased from 25.5% to 25%.
The minimum wage has been raised from EUR 430 to EUR 500 per month.
4.1. Changes to labour taxation due to the COVID pandemic in 2020 and 2021
No specific changes to labour taxation were made due to the COVID pandemic.
5. Memorandum items
5.1. Average gross annual wage earnings
In Latvia the gross earnings figures cover wages and salaries paid to individuals in formal employment
including payment for overtime. They also include additional bonuses and payments and other payments
such as for the annual and supplementary vacations, public holidays, sick pay (sick-leave certificate A),
payment for public holidays and other days not worked, social security compulsory contributions paid by
the employees and personal income tax, as well as labour remuneration subsidies.
5.2. Employer contributions to private pension and health schemes
Some employer contributions are made to private health and pension schemes but there is no relevant
information available on the amounts that are paid.
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461
2021 Parameter values
Average earnings/yr
Basic allowance
Minimum non-taxable minimum
Maximum non-taxable minimum
Taxable income maximum threshold up to which
the annual non-taxable minimum will be applied
Taxable income minimum threshold up to which
the maximum annual non-taxable minimum will be
applied
Coefficient
Allowance for dependants
Income tax schedule
Basic_al
MIN_non_taxable
MAX_non_taxable
Income_for_MIN_non_taxable
Income_for_MAX_non_taxable
0
3,600
21,600
6,000
Ave_earn
15 270
Secretariat estimate
Coefficient
Child_al
Tax_sch
Tax_rate_2
Tax_rate_3
payroll
Ceiling
SSC_rate1
Sol_tax_rate_1
SSC_rate2
Health_ins2
Sol_tax_rate_2
CA_first
CA_second
CA_third
CA_fourth and each next
ACA_2ch
ACA_3ch
ACA_each next
numdays
0,23077
3,000
0.20
0.23
0.31
4.32
62,800
0.2359
0.145
0.10
0.005
0.10
136.56
273.12
409.68
600.84
120
792
600
365
20 004
62 800
Payroll tax - Business risk fee
Income ceiling
Employers SSC
Employers Solidarity Tax
Employees SSC (without health ins.)
Employees health insurance
Employees Solidarity tax (without health ins.)
Child allowances
Additional child allowance
Days in tax year
Note: Calculating taxable income not only the salary is taken into account, but also other income (such as economic activity, pension etc.).
Similarly, if a person works in several jobs, the salaries are summed up and the non-taxable minimum is applied to the total revenue.
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2021 Tax equations
The equations for the Latvian system are mostly on an individual basis.
The functions which are used in the equations (Taper, MIN, Tax etc) are described in the technical note
about tax equations. Variable names are defined in the table of parameters above, within the equations
table, or are the standard variables “married” and “children”. A reference to a variable with the affix “_total”
indicates the sum of the relevant variable values for the principal and spouse. And the affixes “_princ” and
“_spouse” indicate the value for
the principal and spouse, respectively. Equations for a single person are
as shown for the principal, with “_spouse” values taken as 0.
Line in country table and
intermediate steps
1.
2.
Earnings
Allowances:
Variable name
earn
tax_al
Rang
e
P
S
Equation
Non-taxable minimum
Basic_al
B
3.
4.
5.
Credits in taxable income
CG taxable income
CG tax before credits
taxbl_cr
tax_inc
CG_tax_excl
B
B
B
6.
7.
8.
9.
10.
11.
12.
Tax credits :
CG tax
State and local taxes
Employees' soc security
Employees health insurance
Employees’ Solidarity tax
Cash transfers
tax_cr
CG_tax
local_tax
SSC_empee
Health_ins2
Sol_tax_ee
cash_trans
B
B
B
B
B
J
13.
14.
15.
Additional child allowances
Employer's soc security
Employer’s Solidarity tax
SSC_empr
Payroll taxes
Sol_tax_er
J
B
B
B
=MINA(Basic_al+ SSC_empee_princ+ Health ins2 _empee_princ
+(Children>0)*(Child_al*Children);earn_princ)
=MINA(Basic_al+ SSC_empee _spouse+ Health ins2
_empee_spouse,earn_spouse)
=IF(earn<=0;0;(IF(earn-Income_for_MAX_non_taxable<0;
MAX_non_taxable;(IF((MAX_non_taxable-Coefficient*(earn-
Income_for_MAX_non_taxable))> MIN_non_taxable; (MAX_non_taxable-
Coefficient*(earn-Income_for_MAX_non_taxable)); MIN_non_taxable)))))
0
=Positive(earn-tax_al)
=IF((earn- tax_al)<0,0,IF(tax_al>inc_thresh_1,0,IF(earn> inc_thresh_1,(
inc_thresh_1- tax_al)*Tax_rate_1,(earn-tax_al)* Tax_rate_1))+IF((earn-
tax_al)<0,0,IF(tax_al>inc_thresh_2,0,IF(earn> inc_thresh_2,( inc_thresh_2-
IF(tax_al> inc_thresh_1, tax_al, inc_thresh_1))*, Tax_rate_2,IF(earn>
inc_thresh_1,(earn-IF(tax_al> inc_thresh_1, tax_al,
inc_thresh_1))*Tax_rate_2,0))))+IF((earn- tax_al)<0,
0,IF(tax_al>inc_thresh_2,IF(earn> inc_thresh_2,(earn- tax_al)*
Tax_rate_3,0),IF(earn> inc_thresh_2, (earn- inc_thresh_2)*
Tax_rate_3,0))))
0
=IF(CG_tax_excl-tax_cr>0; CG_tax_excl-tax_cr;””””)- tax_cr_non_waste
0
= MIN(Ceiling;earn)*SSC_rate2
= earn* Health_ins2
=IF(earn<Ceiling,0,(earn-Ceiling)*Sol_tax_rate_2)
=IF(Children<1;0;IF(Children=1;CA_first;IF(Children=2;CA_first+CA_secon
d;IF(Children=3;CA_first+CA_second+CA_third;IF(Children=4;CA_first+CA
_second+CA_third+CA_fourth_and_each_next;IF(Children>4;CA_first+CA_
second+CA_third+CA_fourth_and_each_next*(Children-3)))))))
=IF(Children<2;0;IF(Children=2;ACA_2ch;IF(Children=3;ACA_3ch;IF(Childr
en>3;ACA_3ch+ACA_each_next*(Children-3)))))
= MIN(Ceiling;earn)*SSC_rate1
=payroll
=IF(earn<Ceiling,0,(earn-Ceiling)*Sol_tax_rate_1)
Key to range of equation B calculated separately for both principal earner and spouse P calculated for principal only (value taken as 0 for spouse
calculation) J calculated once only on a joint basis.
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Lithuania
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in the
tax/benefit system. The methodology also includes the parameter values and
tax equations underlying the data.
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LITHUANIA 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's wage dependent contributions and taxes
Employer's compulsory social security contributions
Payroll taxes
Total
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
43.1%
n.a.
44.1%
n.a.
43.1%
n.a.
44.1%
n.a.
43.1%
n.a.
44.1%
n.a.
43.1%
n.a.
44.1%
n.a.
13.7%
19.5%
33.2%
34.4%
17.0%
19.5%
36.5%
37.6%
19.6%
19.5%
39.1%
40.2%
13.7%
19.5%
11.9%
13.5%
184
40
224
275
60
335
459
100
559
184
40
224
0
0
8 371
0
0
11 884
0
0
19 017
2 669
2 669
11 039
2 445
4 166
3 649
6 827
6 093
12 230
2 445
4 166
2 445
3 649
6 093
2 445
0
1 721
0
0
3 178
0
0
6 137
0
0
1 721
0
3 930
0
8 606
1 721
2 819
0
15 892
3 178
562
0
30 685
6 137
3 930
0
8 606
1 721
3 930
2 819
562
3 930
67
none
12 536
100
none
18 711
167
none
31 247
67
2
12 536
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LITHUANIA 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's wage dependent contributions and taxes
Employer's compulsory social security contributions
Payroll taxes
Total
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
43.1%
41.1%
44.1%
42.2%
43.1%
43.1%
44.1%
44.1%
43.1%
43.1%
44.1%
44.1%
43.1%
43.1%
44.1%
44.1%
17.0%
19.5%
22.2%
23.6%
15.7%
19.5%
29.8%
31.0%
17.0%
19.5%
32.0%
33.2%
15.7%
19.5%
35.2%
36.3%
275
60
335
459
100
559
550
120
670
459
100
559
2 669
2 669
14 553
1 680
1 680
21 934
1 680
1 680
25 448
0
0
20 254
3 649
6 827
6 093
10 993
7 297
13 654
6 093
10 993
3 649
6 093
7 297
6 093
0
3 178
0
0
4 900
0
0
6 357
0
0
4 900
0
2 819
0
15 892
3 178
6 749
0
24 498
4 900
5 637
0
31 784
6 357
6 749
0
24 498
4 900
2 819
6 749
5 637
6 749
100-0
2
18 711
100-67
2
31 247
100-100
2
37 422
100-67
none
31 247
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The Lithuanian currency is the Euro (EUR). In 2021, EUR 0.84 was equal to USD 1. In 2021, the average
worker in Lithuania was expected to earn EUR 18 711 (Secretariat estimate).
1. Personal income tax system
1.1. Central government income tax
1.1.1. Tax unit
The tax unit is an individual.
1.1.2. Tax allowances
1.1.2.1. Standard tax reliefs
A general (basic) allowance (tax-exempt amount)
is applied in calculating the taxable income of
residents to the extent the income is derived from employment or similar relationships. However,
the size of the annual tax-exempt amount depends on the total amount of annual taxable income
before taxes and all allowances (hereinafter
–
annual income). In 2021 the annual tax-exempt
amount is EUR 4 800 for individuals whose annual income does not exceed twelve minimum
monthly wages effective on 1 January of a respective calendar year (EUR 7 704 in 2021). For
others, the annual tax-exempt amount is estimated using the following formula:
4 800– 0.18 x (annual income
–
twelve minimum monthly wages effective on 1 January of a
respective calendar year).
If according to this formula a negative amount is calculated, then the tax-exempt amount is not
applied. As such, no basic personal allowance applies if annual income exceeds EUR 34 368.
An allowance for disadvantaged
is applied as follows: in 2021 the annual tax-exempt amount
applicable to individuals with a working capacity level of 0-25% or individuals who have reached
the retirement age and have an officially recognized high level of special needs, or individuals with
high-level disability, is EUR 7 740. The annual tax-exempt amount applicable to individuals who
have a working capacity level of 30-55% or individuals who have reached retirement age and have
an officially recognized level of medium or low special needs, or individuals with medium or low-
level disability, is EUR 7 200. The tax allowance for disadvantaged is not included in the Taxing
Wages calculations.
1.1.2.2.
Non
–
standard tax reliefs applicable to income from employment
Contributions to 3
rd
pillar pension funds, as well as additional voluntary health insurance
contributions paid by the employer on behalf of an employee, are treated as non-taxable income
(when such contributions combined do not exceed 25% of the gross wage).
The following expenses incurred by a resident of Lithuania during the tax period may be deducted
from his annual income (a total no more than 25% of annual income worth of expenses):
Life insurance contributions paid for his own benefit or for the benefit of his spouse or minor children
(adopted children) under life insurance contracts which provide for an insurance benefit not only
upon the occurrence of an insurance event, but also upon the expiry of the term of the insurance
contract.
2nd pillar pension contributions, paid by employees, exceeding 3% of taxable wage related income.
Voluntary 3rd pillar pension contributions paid for his own benefit or for the benefit of his spouse
or minor children (adopted children) to pension funds.
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Payments for studies (for vocational training under a formal vocational training programme, when
appropriate qualification is obtained, a module of the formal vocational training programme leading
to the acquisition of an appropriate competence (competences) and/or for studies when a higher
education qualification is obtained) made by studying residents of Lithuania. If the resident does
not have annual income, the deduction of expenses from the income can be made by parents
and/or spouse. If payments for studies are made with borrowed funds (a loan is taken out from a
credit institution for that purpose), the repaid amount of the loan during the tax period may be
deducted from income.
Payments for repairs of housing (except renovation of multi-apartments), repairs of passenger cars
and childcare
services (made for one’s own benefit or for the benefit of one’s spouse).
The deduction of expenses described above on life insurance and pension contributions applies
only to expenses of up to a total of EUR 1 500 per year. The deduction of expenses for studies is
unlimited, while expenses for services on housing / passenger car repairs and child care services
are limited to EUR 2 000 per year.
1.1.3. Tax schedule
A two-bracket progressive personal income tax rate system is applied on taxable wage related
income: 20% applies for income equal to or below the threshold of 60 average wages per year
(EUR 81 162 in 2021), 32% applies for income above the threshold. The tax is withheld by the
employer at 20% rate from employee’s wage and paid up to two times a month.
The 32% rate is
applied and the difference between 20% rate and 32% rate is paid by the employee once per year,
when filing the annual income tax return.
1.2. Regional and local income tax
There are no regional or local income taxes.
2. Compulsory social security insurance system
The compulsory social security insurance system consists of the following types of social security
contributions:
pension insurance;
health insurance;
sickness insurance;
maternity insurance;
unemployment insurance;
insurance from accidents at work and occupational diseases.
The share of the wage above the “ceiling” is not subject to social security contributions (except Health
insurance contributions). In 2021, the ceiling is set at 60 average wages per year (AW).
The AW applied to calculate the social security contribution base is approved by the law of Approval on
Budget Indicators of the State Social Insurance Fund for the relevant year. It is the average gross monthly
earnings (including salary data for the sole proprietorships) published by the Statistics of Lithuania of Q3
and Q4 for the year before the previous year and Q1 and Q2 for the previous year.
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2.1.
Employees’ contributions
Since 1 January 2021, the rate of the employee’s social security contributions is 19.5%, as follows:
pension insurance
–
8.72%;
health insurance
–
6.98%;
sickness insurance
–
2.09%;
maternity insurance
–
1.71%.
Employees pay social security contributions from their gross wage (including basic wage, bonuses,
premiums, additional pays, severance pays, compensations calculated for annual and special leave as
well as the monetary compensations calculated for unused annual leave, allowances and other benefits).
The assessment period is the calendar month.
2.2.
Employers’ contributions
Since 1 January 2021, the overall
rate of the social security contributions of the employer’s is 1.47%, as
follows:
unemployment insurance
–
1.31% for termless employment contracts and 2.03% for fixed-term
employment contracts;
insurance from accidents at work and occupational diseases
–
the overall rate is 0.16% (this is the
rate that is modelled). In practice four categories of employers are set according to their history of
accidents at work and occupational diseases. The tariffs for each of these categories are:
Category
Category I
Category II
Category III
Category IV
Rate of contribution (%)
0.14
0.47
0.70
1.40
A minimum amount (“floor”) of social security contributions is applied. Employers must calculate and pay
employer’s and employee’s share of social security contributions from a base not lower than minimum
monthly wage, which in 2021 is EUR 642. Exceptions apply in cases where:
The person has more than one insurer in Lithuania during the respective period or is insured by
the State for pension insurance;
The person receives social insurance pension from the State Social Insurance Fund;
The person is not older than 24 years;
The person is disabled;
The person receives allowance for maternity or paternity leave.
2.3. Payroll tax
Employers pay 0.16% of the gross wage to the Guarantee fund.
If a company goes bankrupt the Guarantee fund is used to satisfy employees’
claims
for the amount of his
creditor’s claim, but not more than 6 minimal monthly wages.
Employers pay 0.16 % of the gross wage to the Long-term employment benefit fund.
The Long-term employment benefit fund is used for paying severance payments to long-tenure employees
having lost jobs.
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The ceiling for employer contributions will no longer apply from 2021. Some employers are exempt from
these taxes (0.16% to the Guarantee Fund and 0.16% to the Long-term employment benefit fund), namely
the Lithuanian Central bank and budget institutions (exempt from both Guarantee and Long-term
employment benefit funds contributions), political parties, trade unions, religious communities and societies
(exempt from Guarantee fund contributions). Given that the model covers the private sector only (sectors
B to N by ISIC Rev.4) and that the Guarantee fund and Long-term employment benefit fund contributions
are paid by the majority of employers within those sectors, these contributions are included in the model.
3. Universal cash transfers
3.1. Transfers related to marital status
None.
3.2. Transfers for dependent children
Child benefits in Lithuania depend on the age and number of children as well as the size of income of the
family. In 2018 a non means-tested universal child benefit was introduced for all families raising children
up to 18 years of age and over, if he / she is studying under the general education curriculum, but not
longer, until he / she reaches the age of 21. In 2021, the size of the universal child benefit is EUR 840 per
child per year. An additional child benefit (EUR 494.4 per child per year, which is paid on top of the
universal benefit) is granted if family’s income per person per year did not exceed EUR
3 072 for families
with up to two children. For families with three or more children and disabled children the additional child
benefit is paid regardless of the amount of family income.
4. Main changes in tax/benefit system since 2000
4.1. Tax system
In 2000 the 3
rd
pillar private pension funds were introduced, allowing employees to voluntarily
choose to accumulate for additional pension by taking part in the 3
rd
pillar private pension funds or
negotiate it with employer as part of employment contract. Contributions to such funds are financed
by employees themselves, if they chose to take part in pension scheme voluntarily or by the
employer on behalf of the employee.
In 2003 a possibility to deduct certain expenses from taxable annual income incurred by a resident
of Lithuania was introduced.
In 2004 the 2
nd
pillar pension system was introduced, allowing voluntary participation in the pension
accumulation system which consists of a share of social security contributions paid by the
employer, transferred to the pension fund on behalf of the employee.
The personal income tax rate was lowered gradually from 33% to 27% as of 1 July 2006, then
further to 24% in 2008 and again to 15% in 2009.
In 2009 employee health insurance contributions were introduced together with a lower personal
income tax rate.
In 2009 a flat tax-exempt amount was replaced with a regressive tax exempt formula, gradually
diminishing the tax-exempt amount at some level of income, therefore introducing an element of
progressivity into taxation of wages.
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In 2014 the 2
nd
pillar pension system was modified. A possibility to increase the size of the private
pension contribution was introduced by allowing employees to contribute additionally from their
own gross wage with an additional contribution from the State.
In 2017 the deduction of expenses described in
1.122.
on life insurance and voluntary 3rd pillar
pension funds savings tax reliefs were given a “ceiling” and apply only to insurance premium of up
to a total of EUR 2 000 per year.
In 2018 the additional tax exempt amount (child allowance) was replaced by direct child benefits,
which are paid without testing for family income.
In 2018 a minimum amount (“floor”) of social security contributions was established. Employers
calculate and pay employer’s share of social security contributions from a base not lower than
minimum monthly wage. As of 1 July
2018 employers must pay not only the employer’s share, but
also the employee’s share of social security contributions from a base not lower than
minimum
monthly wage.
In 2019 a labour taxation reform was introduced. Most of the employer's SSC (a total of 28.9 p.p.)
were shifted to the employee. The overall employer’s
SSC rate in 2018 was 30.5%, an aggregated
of:
o
o
o
o
o
o
pension insurance
–
22.3%;
health insurance
–
3%;
sickness insurance
–
1.4%;
maternity insurance
–
2.2%;
unemployment insurance
–
1.4%;
insurance from accidents at work and occupational diseases
–
0,2%
Starting from 1 January 2019 pension insurance, health insurance, sickness insurance and
maternity insurance were shifted to the employee side (22.3%+3%+1.4%+2.2%=28.9%)
This resulted in a gross salary increase by 28.9% (enforced by law), as well as recalculation of
SSC, personal income tax and payroll tax rates accordingly to neutralize the shift. Moreover, a
share of SSC, covering the general part of pension, was shifted to personal income tax to ensure
a sustainable financing source for financing the general part of pension from the State budget.
Finally, personal income tax and SSC rates were reduced by a total of 1.55 p.p. (in the new taxation
system) to ensure that take home pay does not decrease in case a person decides to participate
in the 2
nd
pillar pension system after the 2019 reform (which includes employee's contribution).
In 2019, a two-bracket progressive taxation for labour income was introduced. The first bracket is
taxed at 20%, while the second bracket
–
at 27% personal income tax rate (above the threshold of
120 average wages per year).
In 2019, the ceiling for both employee’s and employer’s SSC (excluding health insurance
contributions) and payroll taxes (contributions to the Guarantee fund and Long-term employment
benefit fund) was introduced. It is applicable for the annual income above 120 average wages
In 2020, the tax rate for second bracket was increased from 27% to 32% personal income tax rate
and the threshold above which 32% rate is applied was reduced from 120 to 84 average wages
per year.
In 2020,
the ceiling for both employee’s and employer’s SSC (excluding health insurance
contributions) and payroll taxes was reduced from 120 to 84 average wages per year.
From 2021 the ceiling is applied only for the employee's overall employment income (combined
from all employers, as opposed to each employer individually, as was applied previously), except
for health insurance contributions. The ceiling is no longer applied for the SSC paid by the
employer.
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In 2021 the ceiling for employee’s SSC (excluding health insurance contributions) was reduced
from 84 to 60 average wages per year.
In 2021 the personal income tax threshold above which 32% rate is applied was reduced from 84
to 60 average wages per year.
4.2. Benefit system
Between 2000 and June 2004, the child benefits were paid for all children up to 3 years of age,
provided that none of the parents received maternity (paternity) benefits. Families with three or
more children, below a set threshold of income per family member, were given more generous
benefits for children up to 3 years of age, as well as benefits for children from 3 years to 16 years
of age.
Between July 2004 and 2008, the child benefits were paid without testing family income. The range
of the age of children for which the benefits were paid depended on the size of the family. Different
age ranges were applied for families with three or more children (the top of the range remained 18
years throughout the period) and families with up to two children (the top of the age range was
gradually increased from 7 years to 9 years in 2006, from 9 years to 12 years in 2007 and from 12
years to 18 years in 2008).
In 2009, testing of family income was introduced for families with up to two children above 3 years
of age.
In 2010, the testing for the fact and the size of the maternity (paternity) benefit was introduced for
children up to 2 years of age and testing of family income was extended to all children above 2
years of age.
Between 2012 and 2016, testing of family income applied to all children and only in families with
three or more children the child benefit was paid for children over 7 years of age.
In 2017, testing of family income was abolished for families with three or more children regarding
child benefits. Moreover, families with up to two children under 7 years of age were included in the
means-tested child benefit scheme.
In 2018, a universal child benefit replaced the abolished tax exempt amount for children. The
universal child benefit is paid for every child from birth to the age of 18 years and over, if he / she
is studying under the general education curriculum, but not longer, until he / she reaches the age
of 21. The size of the universal child benefit is EUR 30.02 per child per month. Large and low-
income families receive the additional child benefit (on top of the universal child benefit): to children
from birth to the age of 2 years amounting to EUR 28.5 per child per month and to children from 2
to 18 years of age amounting to EUR 15.2.
In 2019, the universal child benefit is paid for every child from birth to the age of 18 years and over,
if he / she is studying under the general education curriculum, but not longer, until he / she reaches
the age of 21. The size of the universal child benefit increased from EUR 30.02 to EUR 50.16 per
child per month, while for the disabled children
–
to EUR 69.92. Large and low-income families
receive the additional child benefit (on top of the universal child benefit) amounting to EUR 20.14
per child per month.
In 2020, the universal child benefit is paid for every child from birth to the age of 18 years and over,
if he / she is studying under the general education curriculum, but not longer, until he / she reaches
the age of 21. The size of the universal child benefit increased from EUR 50.16 to EUR 60.06 per
child per month. The size of the additional child benefit (on top of the universal child benefit) for
large and low-income families increased from EUR 20.14 to EUR 40.17 per child per month, the
additional child benefit of the same amount has been established for disabled children.
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In 2021, the universal child benefit is paid for every child from birth to the age of 18 years and over,
if he / she is studying under the general education curriculum, but not longer, until he / she reaches
the age of 21. The size of the universal child benefit increased from EUR 60.06 to EUR 70 per child
per month. Large and low-income families and disabled children receive the additional child benefit
(on top of the universal child benefit) amounting to EUR 41.2 per child per month.
4.3. Changes to labour taxation and benefit system due to the covid-19 pandemic
In relation to the COVID-19 pandemic, the Lithuanian Government and the tax authorities decided to apply
certain personal income tax and social security contribution related measures to assist tax payers with
their ongoing obligations.
Related measures by the PIT administrator - State Tax Inspectorate under the Ministry of Finance of the
Republic of Lithuania (hereinafter - STI):
STI published a list of tax payers which were directly hit and experienced adverse effects of COVID-
19 pandemic. These tax payers are automatically subject to certain reliefs, applicable for tax debts
incurred before 31 August 2021, and the following fiscal measures apply to the listed
entrepreneurs:
‒
‒
Recovery of unpaid taxes is suspended.
Interest on late payment are not to be calculated.
Accumulated unpaid taxes have can be paid without interest until 31 December 2022.
In order to conclude a tax loan agreement without interest, taxpayers have to submit an
application to the STI by 31 August 2021, and the agreement must be concluded by 31
December 2021. Otherwise, all accumulated unpaid taxes should be paid by 31 October
2021.
Possibility to pay accumulated unpaid taxes exists beyond 31 December 2022.
Companies that cannot pay accumulated taxes within the set deadline can apply to STI for
postponement of tax payment. Interest will be charged only on subsequent installments.
‒
Taxpayers not on the COVID-19 list, but which have also experienced negative consequences of COVID-
19, may apply to the tax authorities for the reliefs, as well as for conclusion of a tax credit agreement.
Related measures by the SSC administrator (State Social Insurance Fund Board):
Aid measures apply to adversely affected insurers. An adversely affected insurer is an insurer
whose activities are restricted because the quarantine has been announced in the territory of the
Republic of Lithuania or the quarantine has been announced in the territory of the municipality, and
if an insurer specifies in the prescribed application that he operates in this territory of the
municipality, and:
-
-
who is automatically listed on the list “Legal entities that are subject to tax aid measures due
to COVID-19
without submitting an application” that is published by the STI; or
whose application for tax aid measures due to COVID-19 has been approved by the STI.
Insurers, having not found themselves among the published taxpayers, but having suffered adverse effects
due to COVID-19, may apply to STI for the said aid measures by submitting an application for the
application of selected aid measures.
Recovery of unpaid taxes is suspended. State Social Insurance Fund Board would not start tax recovery
if these companies have social security debts arising from a declaration filed from 16th March 2020 till 16th
of June 2020 and from 7th of November 2020 (in local quarantines from 26th of October 2020) till the end
of quarantine.
The annual tax-exempt amount for the fiscal year 2020 was increased from EUR 4200 (as
budgeted for 2020 before COVID-19) to EUR 4800 for individuals whose annual income does not
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exceed twelve minimum monthly wages effective on 1 January 2020 (EUR 7 284 in 2020). For
others, the annual tax-exempt amount is estimated using the following formula:
4 800– 0.19 x (annual income
–
twelve minimum monthly wages effective on 1 January of a
respective calendar year).
One-off child benefit to reduce the effects related with the COVID-19 pandemics was paid out in
2020. Low-income families with up to two children and families with three or more children, as well
as families raising children with disabilities, are entitled to one-off payment of 200 euros per child.
Other families with children are entitled to one-off payment of 120 euros per child.
5. Memorandum items
5.1. Average gross annual wage earnings calculation
The average gross wage is estimated by the Statistics Lithuania. For the purpose of this exercise the
average annual earnings equal twelve average monthly gross wages in the industry sectors B–N by ISIC
Rev.4 (private sector, including individual enterprises). The gross wage is monetary remuneration, which
includes the basic wage, additional pays, overtime, compensations calculated for annual and special leave
and payment for idle time.
5.2. Employer contributions to private pension and health schemes
2
nd
pillar private pension funds.
Between 2004 and 2018, employees could voluntarily choose to
participate in the pension accumulation system which in 2018 consisted of three types of contributions to
the pension fund: (1) a share of social security contributions paid by the employer was transferred to the
pension fund on behalf of the employee (2 p.p. from the total contribution paid by the employer); (2) an
additional contribution of 2% deducted from the employee’s gross wage to the pension fund; (3) another
2% of the Lithuanian average gross wage was transferred by the State. In total, if an employee chooses
to participate in the pension accumulation system, roughly 6% (2+2+2) of gross wage was accumulated in
the pension fund. However, the supplementary part of a social insurance pension will decrease for the
period of participation in the accumulation of pensions depending on the amount of contributions paid.
From 2019 all persons at age below 40, insured by social insurance, are enrolled in the 2
nd
pillar system
with a possibility to opt-out. The procedure of auto-enrolment will be repeated every 3 years until the person
reaches the age of 40. Pension accumulation system consists of two types of contributions to the private
pension fund: (1) employee’s contribution – 3% deducted from the employee’s gross wage; (2) State’s
contribution
–
1.5% of the Lithuanian average gross wage is transferred by the State on behalf of the
employee. Therefore, the overall contribution to the private 2
nd
pillar pension funds is 4.5%, which
corresponds to 6% (2+2+2) applicable before the tax reform of 2019.
3
rd
pillar private pension funds.
Employees can voluntarily choose to accumulate for additional pension
by taking part in the 3
rd
pillar private pension funds or negotiate it with employer as part of employment
contract. Contributions to such funds are financed by employees themselves, if they chose to take part in
pension scheme voluntarily or by the employer on behalf of the employee. Personal income tax relief
related to the 3
rd
pillar contributions are applied (see section 1.1.2.2).
Additional voluntary health insurance.
Employees can voluntarily choose to additionally insure their
health for services and medicines that are not covered under the mandatory health insurance scheme.
Contributions to such insurance schemes are financed by employees themselves and / or third parties on
behalf of the employee (employer, family members, etc.). Personal income tax relief related to the
contributions paid by the employers are applied (see section 1.1.2.2).
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2021 Parameter values
Average earnings/yr
Threshold for SSC ceilings
Allowances
Ave_earn
Threshold_SSC_ceilings
Max_basic_al
Threshold_max_basic_al
Reduction_coeficient
Tax_sch
tax_cred
SSC_employer_min
SSC_rate_empr1
SSC_rate_empr2
PRT_rate_empr
SSC_rate_empee1
SSC_rate_empee2
Universal Child benefits
For each child
Need-based child benefits
for each child
Need-based family threshold
each member
Days in tax year
UCB
CB
F_thrsh
numdays
18 711
81162
4 800
7704
0.18
0.20
0.32
0
7704
0.0147
0.2097
0.0032
0.1252
0.0698
840
494.40
3072
365
Secretariat estimate
Income tax schedule
Tax credit
Minimum threshold for employer SSC and payroll tax
Employer’s SSC
Employer’s payroll tax
Employee’s SSC
81162
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2021 Tax equations
The equations for the Lithuanian system are mostly on an individual basis. But child benefit is only
calculated once.
The functions which are used in the equations (Positive, MIN, etc) are described in the technical note about
tax equations. Variable names are defined in the table of parameters above, within the equations table, or
are the standard variables “married” and “children”. A reference to a variable with the affix “_total” indicates
the sum of the relevant variable values for the principal and spouse.
Line in country
table and
intermediate steps
1
2
Earnings
Allowances
Variable
name
Range
Equation
earn
earn_net
basic_al
J
B
=Ave_earn
=earn_total-CG_tax_total-SSC_empee_total
=Positive(IF(earn<Max_basic_al;earn;IF(earn<Threshold_max_basic_al;Max_basi
c_al;Max_basic_al-Reduction_coefficient*(earn-Threshold_max_basic_al))))
0
=earn-basic_al
=Tax(tax_inc,Tax_sch)
0
3
4
5
6
7
8
Credits in taxable
income
CG taxable income
CG tax before
credits
Tax credits
(wastable)
CG tax
State and local
taxes
Employees' soc
security
Cash transfers
Employer’s wage
dependent
contributions and
taxes
Employer's soc
security
taxbl_cr
tax_inc
CG_tax_excl
tax_cr
CG_tax
local_tax
B
B
B
B
B
=Positive(CG_tax_excl-tax_cr)
0
9
10
11
SSC_empee
cash_trans
B
J
=IF(earn<Threshold_SSC_ceilings;earn*(SSC_rate_empee1+SSC_rate_empee2)
;(Threshold_SSC_ceilings*SSC_rate_empee1+earn*SSC_rate_empee2
=Children*UCB+IF(earn_net<F_thrsh*(Married+1)+F_thrsh*Children;CB*Children;
0)
12
SSC_empr
B
13
Employer's payroll
PRT_empr
B
=IF(
AND(earn>0, earn<SSC_employer_min),
earn * SSC_rate_empr1 + (SSC_employer_min- earn)*SSC_rate_empr2,
earn *SSC_rate_empr1
)
=IF(
AND(earn >0, earn <SSC_employer_min),
SSC_employer_min*PRT_rate_empr,
earn *PRT_rate_empr
)
=SSC_empr+PRT_empr
14
Total
Cont_empr
B
Key to range of equation B calculated separately for both principal earner and spouse P calculated for principal S calculated on the spouse J
calculated once only on a joint basis.
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Luxembourg
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in the
tax/benefit system. The methodology also includes the parameter values and
tax equations underlying the data.
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Luxembourg 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government rounded taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
44.6%
n.a.
51.4%
n.a.
51.3%
n.a.
57.2%
n.a.
49.6%
n.a.
55.7%
n.a.
55.2%
n.a.
60.7%
n.a.
10.7%
12.2%
23.0%
32.3%
19.6%
12.3%
31.9%
40.2%
26.8%
12.4%
39.2%
46.6%
5.5%
12.2%
0.8%
12.9%
0
0
34 718
6 237
0
0
45 787
9 309
0
0
68 308
15 546
7 614
7 614
44 705
6 237
5 518
10 349
8 282
21 477
13 893
44 022
5 518
7 975
5 518
8 282
13 893
5 518
0
608
4 830
0
0
222
13 195
0
0
0
30 129
0
1 392
2 000
2 457
0
608
222
0
608
4 980
540
0
6 000
0
39 050
5 438
7 433
540
0
8 453
0
58 800
13 417
12 412
540
0
13 432
0
98 850
30 129
4 980
540
0
6 000
0
39 050
4 457
480
480
480
480
67
none
45 066
100
none
67 263
167
none
112 330
67
2
45 066
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Luxembourg 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government rounded taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
35.1%
36.2%
43.0%
44.0%
51.3%
51.3%
57.2%
57.2%
51.3%
51.3%
57.2%
57.2%
51.3%
51.3%
57.2%
57.2%
7.6%
12.3%
8.5%
19.7%
14.1%
12.3%
19.6%
29.4%
18.2%
12.3%
24.9%
34.0%
14.1%
12.3%
26.4%
35.4%
7 614
7 614
61 515
9 309
7 614
7 614
90 259
15 546
7 614
7 614
101 065
18 619
0
0
82 646
15 546
8 282
13 362
13 800
29 684
16 564
41 076
13 800
29 684
8 282
13 800
16 564
13 800
0
222
5 081
0
0
829
15 884
0
0
443
24 512
0
0
829
15 884
0
222
829
443
829
7 433
540
0
8 453
0
58 800
5 302
12 412
1 080
4 500
18 952
0
93 350
16 714
14 865
1 080
4 500
21 405
0
113 100
24 955
12 412
1 080
4 500
18 952
0
93 350
16 714
480
960
960
960
100-0
2
67 263
100-67
2
112 330
100-100
2
134 527
100-67
none
112 330
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The national currency is the Euro (EUR). In 2021, EUR 0.84 equalled USD 1. The Secretariat has
estimated that in that same year the average worker earned EUR 67 263 (Secretariat estimate).
1. Personal income tax system
1.1. Taxes levied by central government
1.1.1. Tax unit
Spouses and partners are taxed jointly on their income. The income of minor children is included in
determining the couple’s taxable income.
However, any earned income that children may derive from work
is excluded from joint taxation.
From 2018 onwards, there is the option to file separate tax returns for married couples and civil partners.
1.1.2. Tax reliefs and tax credits
1.1.2.1. Standard reliefs in the form of deductions from income
Wage-earners are entitled to a standard minimum deduction of EUR 540 for work-related expenses
other than travel, unless their actual deductible expenses are higher. This deduction is doubled for
spouses taxed jointly.
The first 4 distance units (i.e. 4 * 99 = EUR 396 per year) of the lump sum deduction for travel
expenses between a taxpayer’s home and his working places are abolished. The maximum
deduction will be limited to EUR 2 574 per year.
Like other taxpayers, wage-earners having no special expenses (interest charges, insurance
premiums or contributions other than for social security) may take a standard deduction of EUR
480 for special expenses. Actual insurance premiums are deductible up to the limit set by law.
If both spouses have earned income and are taxed jointly, they qualify for an earned income
allowance of EUR 4 500.
Social security contributions: contributions paid to compulsory health insurance and pension
schemes are deductible in full.
Dependency insurance: the dependency contribution is not deductible for income tax purposes.
1.1.2.2. Standard reliefs in the form of tax credits
Wage-earners and pensioners receive a refundable tax credit. The tax credit will increase
progressively until it is capped at EUR 696 per year for taxpayers earning between EUR 11 265
and EUR 40 000. Between EUR 40 000 and EUR 80 000, the tax credit will decline progressively.
Over EUR 80 000, the tax credit is 0.
Single-parents receive a refundable tax credit. The tax credit will be increased to EUR 1 500 per
year for taxpayers earning up to EUR 35 000. Between EUR 35 000 and EUR 105 000, the tax
credit will decline progressively. Over EUR 105 000 the tax credit is EUR 750 like in the past.
A new tax credit for social minimum wage earners was introduced in January 2019. The tax credit
is fixed to EUR 70 per month for employees earning a monthly gross wage between EUR 1 500
and EUR 2 500. For employees with monthly gross wages between EUR 2 500 and EUR 3 000,
the tax credit declines progressively. Employees with monthly gross wages higher than EUR 3 000
will not benefit anymore from the tax credit. This tax credit come on top of the already existing tax
credit for employees.
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1.1.2.3. Non-standard allowances deductible from taxable income
Interest charges are deductible insofar as they are not considered operating expenses or
acquisition expenses, and provided they are unrelated economically to the exempt income.
Taxpayers may deduct premiums paid to insurers licensed in an EU country in respect of life, death,
accident, disability, illness or liability insurance, as well as dues paid to recognised mutual
assistance companies.
From 2017 onwards, the deductibility of interest charges and for insurance and legal responsibility
is aggregated under one category and limited to EUR 672.
Payments to an insurance company or credit institution in respect of an individual retirement
scheme are deductible. These payments are capped at EUR 3 200 and must meet certain
investment policy constraints.
Contributions to building society savings are deductible up to the limit of EUR 672. If the taxpayer
is under 40 years old, this limit will be doubled to EUR 1 344.
Interest charges in respect of the rental value of owner-occupied housing are deductible only up to
an annual ceiling. During the first five years, the ceiling is EUR 2 000; for the following five years it
is EUR 1 500; thereafter it is EUR 1 000. These ceilings are increased by an equal amount for the
taxpayer’s spouse/partner, and
for each qualifying child.
As from 1 January 2009, the maximal deduction of premium related to the mortgage life insurance
on the taxpayer’s principal residence is EUR 6 000. This ceiling is increased by an equal amount
for the taxpayer’s spouse/partner
and by 1 200 for each qualifying child. For taxpayers over the
age of 30, the allowable deduction of EUR 6 000 is increased by 8% (e.g. EUR 480) for each year
over 30, with a ceiling of 160%.
Upon request, taxpayers may be granted exemptions for extraordinary expenses that are
unavoidable, and that considerably reduce their ability to pay taxes (e.g. uninsured health care
costs, support for needy relatives, uninsured funeral costs beyond the taxpayer’s means, domestic
or childcare expenses, expenses for children
outside the taxpayer’s household, or expenses for
children in a single-parent household).
The deductibility for domestic costs is set at EUR 5 400.
From 2019 onwards, self-employed have the possibility to deduct premiums paid into a
supplementary pension scheme for the self-employed as special expenses, as well as a flat-rate
and final discharge. The financing of supplementary pension schemes is deductible up to 20% of
annual income.
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1.1.3. Tax schedule reliefs
Income tax is determined on the basis of the following schedule (amounts in Euros):
0% for the portion of income up to 11 265
8% for the portion of income between 11 265 and 13 137
9% for the portion of income between 13 137 and 15 009
10% for the portion of income between 15 009 and 16 881
11% for the portion of income between 16 881 and 18 753
12% for the portion of income between 18 753 and 20 625
14% for the portion of income between 20 625 and 22 569
16% for the portion of income between 22 569 and 24 513
18% for the portion of income between 24 513 and 26 457
20% for the portion of income between 26 457 and 28 401
22% for the portion of income between 28 401 and 30 345
24% for the portion of income between 30 345 and 32 289
26% for the portion of income between 32 289 and 34 233
28% for the portion of income between 34 233 and 36 177
30% for the portion of income between 36 177 and 38 121
32% for the portion of income between 38 121 and 40 065
34% for the portion of income between 40 065 and 42 009
36% for the portion of income between 42 009 and 43 953
38% for the portion of income between 43 953 and 45 897
39% for the portion of income between 45 897 and 100 002
40% for the portion of income between 100 002 and 150 000
41% for the portion of income between 150 000 and 200 004
42% for the portion of income exceeding 200 004
The income tax liability of single taxpayers is determined by applying the above schedule to taxable
income.
The income tax liability of married taxpayers and partners corresponds to double the amount obtained if
the above schedule is applied to half of their income (class 2).
For widow(er)s, taxpayers with a dependent child allowance and persons over 64 years of age (class 1a),
tax is calculated as follows: the schedule is applied to adjusted taxable income reduced by half of the
difference between that amount and EUR 45 060, with the marginal tax rate capped at 39% for the portion
of income between EUR 37 842 and EUR 100 002, 40% for the portion of income between EUR 100 002
and EUR 150 000, 41% for the portion of income between EUR 150 000 and EUR 200 004, and 42% for
the portion of income exceeding EUR 200 004.
Income tax as determined by the applicable schedules is subject to a 7% “solidarity” surtax to finance the
employment fund. The rate is 9% for the taxable income exceeding EUR 150 000 (tax classes 1 and 1a),
respectively EUR 300 000 (tax class 2).
1.1.4. Income exemptions
A taxpayer may claim a deduction for a dependent child under 21 years of age who is not part of the
household. This deduction is allowed for expenses actually incurred but may not exceed EUR 4 020.
1.2. Local (municipal) taxes
No particular income tax is levied by municipalities, which receive a direct share of the income tax revenue
collected by the State. This share is equal to 18% of tax revenue.
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2. Compulsory social security contributions to schemes operated within the
government sector
Employer’s share (%)
a) Pension and disability insurance
b) Health insurance
c) Dependency insurance
d) Health in the workplace
e) Accident insurance
8
3.05
0.14
0.75
Employee’s share (%)
8
3.05
1.4
Ceiling on contributions (in euros)
132 115.80
132 115.80
Monthly allowance 535.50
1
1. (Monthly allowance: EUR 550.48 = 0.25* social minimum salary / 12). The social minimum salary in 2021 is equal to EUR 26 423.16.
No distinction is made according to family status or gender.
As from 1 January 2009 the differences in social security contributions between workers and employees
are abolished.
The temporary budget balancing tax, the “impôt d’équilibrage budgétaire temporaire” (IEBT), introduced in
2015, is abolished from 1 January 2017.
Employers
must make payments to the Employers’ Mutual Insurance Scheme. This scheme provides
insurance for employers against the financial cost of continued payment of salaries or wages to workers
who become incapacitated. Employers are required to pay the remuneration of an employee who is unable
to work until the end of the month in which the seventy-seventh day of incapacitation occurs within a
reference period of twelve successive calendar months. The Scheme is administered by a Board of
Directors which is mainly composed of employer representatives (Chamber of Commerce, Chamber of
Trade, Chamber of Agriculture and Federation of Independent Intellectual Workers). Employer
contributions depend on the rate of “financial absenteeism” within the company, and
range from 0.53 % to
2.88 %. A representative rate of 1.90 % is used in the Taxing Wages calculations.
3. Universal cash transfers
3.1. For married persons
None.
3.2. For dependent children
Every child raised in the Grand Duchy entitles the person on whom the child is dependent to a monthly
family allowance. Family allowances are adjusted regularly for the cost of living.
There has been a reform of the family allowance system in 2016.
For families that are eligible for family allowance before 1 August 2016, the old system remains, and the
amounts for 2021 are:
Effective date
1 eligible child
2 eligible children
3 eligible children
As of 1 July 2006
EUR 185.60
EUR 440.72
EUR 802.74
Starting with the fourth eligible child, the allowance is raised by EUR 361.82 per child.
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Additionally, a child bonus amounting to EUR 76.88 per child per month is paid in cash irrespective of the
taxable income of the parents as from 1 January 2009. This amount is paid by the National Family Benefits
Administration.
For children born on or after 1 August 2016, the child bonus amounting to EUR 76.88 per child per month
has been abolished and incorporated in the new higher amounts:
Effective date
1 eligible child
2 eligible children
3 eligible children
As of 1 August 2016
EUR 265
EUR 530
EUR 795
The amounts indicated above (under the old regime as well as under the new regime) are increased by
EUR 20 for children aged 6 to 11 and by EUR 50 for those aged 12 years or older. These new additional
amounts, depending on the children’s age, are applicable for all children and are replacing the amounts of
EUR 16.17 respectively EUR 48.52 from 1 August 2016 onwards.
4. Main changes since 2008
4.1. Partnerships
The Act of 9 July 2004 introduced the notion of partnerships into tax law. The Act construes the term
“partnership” as a relationship between two persons, called “partners”, of opposite sex or the same sex,
who live together as a couple and declare themselves as such.
As from 1 January 2008, the fiscal treatment of the partnerships is modified. The deduction for
extraordinary expenses is replaced by the joint taxation of partners as it already exists for spouses.
4.2. Introduction of tax credits
The following changes were made as of 1 January 2017:
The existing tax credit of EUR 300 for employees, self-employed people and pensioners will be
increased progressively until it is capped at EUR 600 per year for taxpayers earning between
EUR 11 265 and EUR 40 000. For taxpayers earning between EUR 40 000 and 80 000, the tax
credit will decline progressively. Taxpayers earning more than EUR 80 000 will not benefit anymore
from the tax credit. From 2021 onwards, the amount of EUR 600 is increased to EUR 696.
The existing tax credit of EUR 750 for single parents with children will be increased to EUR 1 500
per year for taxpayers earning up to EUR 35 000. For taxpayers earning between EUR 35 000 and
EUR 105 000, the tax credit will decline progressively. For taxpayers earning more than
EUR 105 000, the tax credit will remain at its current level of EUR 750.
A new tax credit for social minimum wage earners was introduced. The tax credit is fixed to EUR 70
per month for employees earning a monthly gross wage between EUR 1 500 and EUR 2 500. For
employees with monthly gross wages between EUR 2 500 and EUR 3 000, the tax credit declines
progressively. Employees with monthly gross wages higher than EUR 3 000 will not benefit
anymore from the tax credit.
The following changes were made as of 1 January 2019:
This tax credit come on top of the already existing tax credit for employees.
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4.3. Changes to labour taxation due to the COVID pandemic in 2020 and 2021
In order to mitigate the negative impact of the covid-19 pandemic on the economy, the Luxembourg
government introduced several measures to support taxpayers financially. Concerning labour taxation, the
following measures were introduced:
The date for submitting PIT tax returns is postponed from 31 March 2020 to 30 June 2020.
The deductibility for domestic costs is increased from EUR 5 400 to EUR 6 750 for the period of 1
April 2020 to 31 December 2020, for taxpayers who employ a housekeeper for domestic tasks.
Cross-border workers living in France, Germany and Belgium are allowed to work from home (e.g.
teleworking) during the crisis without their wage being taxed in their country of residence.
With regards to measures not directly effecting labour taxation but from which the majority of taxpayers
can benefit:
Short-time working in the event « force majeure » in relation with the current COVID-19 crisis is
possible from 18 March 2020 to 30 June 2020. The short-time working scheme is an accelerated
procedure that is intended to protect jobs in companies that had to completely or partially cease
their activities due to the crisis. The scheme applies to employees that can no longer be employed
on a full-time
basis. The state will pay a compensation up to 80% of the employee’s wage, and the
reimbursement is limited to 250% of the social minimum wage for unskilled workers aged 18 or
over. Any difference between the amount of the compensation paid and the social minimum wage
will be borne by the Unemployment Fund.
A specific procedure has been set up to allow parents to take leave for family reasons if they have
to look after their children.
Possibility to cancel the first two quarterly advance tax payments for 2020, tax types concerned:
corporate income tax, communal business tax and personal income tax (only if profit from
commercial or craft activities, from agricultural or forestry activities or from exercising a liberal
profession).
Possibility to postpone for 4 months the payment of PIT based on tax returns (concerns only tax
returns with a payment deadline after 29 February 2020). Tax types concerned: corporate income
tax, communal business tax, net wealth tax and personal income tax (only if profit from commercial
or craft activities, from agricultural or forestry activities or from exercising a liberal profession). This
does not affect e.g. the withholding of PIT for employees.
The deadline for submitting a claim or a formal hierarchical appeal has been suspended until 30
June 2020.
For 2021, the following measures were introduced or extended:
For physical persons, the deadline for submitting the 2019 tax returns is postponed to 31 March
2021. The deadline for submitting the 2020 tax returns is postponed to 30 June 2021.
Extension of the short-time working scheme until 30 June 2021.
Extension of scheme allowing cross-border workers living in France, Germany and Belgium to
work from home (e.g. teleworking) during the crisis without their wage being taxed in their country
of residence.
With regards to measures not directly affecting labour taxation but from which some categories of physical
persons can benefit:
Possibility, for physical persons exercising a liberal profession, and active in the HORECA sector,
to cancel the last two quarterly advance tax payments for 2020, and the first two quarterly advance
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tax payments for 2021. This measures targets personal income taxes, but only if profit derives
from a commercial activity.
Tax allowance in favor of owners who reduce or give up part of the rents to be due by companies
in 2021. The tax allowance is double the amount of the reduction granted and limited to
EUR 15 000.
5. Memorandum item
5.1. Identification of the average worker
Average gross hourly wages by industry and by gender are determined on the basis of biannual surveys
on industry wages and working hours. These surveys cover gross compensation for regular hours (working
hours + leave time) plus overtime pay. Hourly wages include bonuses and allowances such as premiums
for output, production or productivity. In contrast, non-periodic compensation (bonuses, profit-sharing) that
is not paid systematically in each pay period is not included. Nevertheless, in order to allow for comparisons
between countries, gross annual pay is adjusted on the basis of average non-periodic compensation as
calculated from triennial surveys of labour costs.
Regarding working hours, the time taken into account is the time effectively offered, including regular
working hours, overtime, night shifts and work on Sunday.
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2021 Parameter values
Average earnings/yr
Tax allowances: general
professional expenses
travel expenses
extra if both spouses earning
Low earner allowance
Low earner allowance (couples)
Class 1a limit
Tax schedule
Ave_earn
gen_dedn
prof_exp
travel_exp
extra_dedn
allow_1
allow_2
cl_1a_lim
tax_sch
480
540
0
4 500
67 263
Secretariat estimate
Child credit maximum
Social Minimum Salary
Multiplier for unemployment
ch_cred
min_salary
unemp_rate_1
Unemp_rate_2
Unemp_lim
SSC_rate
SSC_ceil
infirm
infirm_abatement
workhealth
SSC_empr
SSC_acc
empr_mutual
CB_1
CB_2
CB_ex
ch_bonus
wtc_basic_1
wtc_basic_2
wtc_incomelim_1
45 060
0
0.08
0.09
0.10
0.11
0.12
0.14
0.16
0.18
0.20
0.22
0.24
0.26
0.28
0.30
0.32
0.34
0.36
0.38
0.39
0.40
0.41
0.42
0
26 423.16
1.07
1.09
150 000
0.1105
132 115.80
0.014
0.25
0.0014
0.1105
0.0075
0.0190
185.6
440.72
20
50
922.50
396
696
936
11 265
13 137
15 009
16 881
18 753
20 625
22 569
24 513
26 457
28 401
30 345
32 289
34 233
36 177
38 121
40 065
42 009
43 953
45 897
100 002
150 000
200 004
Social security contributions
Employer contributions
Child benefit (1 child)
2 children
extra age 6-11
extra age above 11
Child bonus
Worker tax credit
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wtc_incomelim_2
wtc_incomelim_3
wtc_incomelim_4
wtc_incr_rate
wtc_decr_rate
sptc_basic_1
sptc_basic_2
sptc_incomelim_1
sptc_incomelim_2
sptc_decr_rate
smwtc_basic
smwtc_incomelim_1
smwtc_incomelim_2
smwtc_incomelim_3
smwtc_decr_rate
discount
max_rate
11 265
40 000
80 000
0.029044438
0.0174
1500
750
35 000
105 000
0.010714286
840
18 000
30 000
36 000
0.14
0.50
0.42
Single parent tax credit
Minimum wage tax credit
Class 1a Discount
Maximum Marginal Rate
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2021 Tax equations
The equations for the Luxembourg system are on a joint basis except for social security contributions. The
functions which are used in the equations (Taper, MIN, Tax etc.) are described in the technical note about
tax equations. Variable names are defined in the table of parameters above, within the equations table, or
are the standard variables “married” and “children”. A reference to a variable with the affix “_total” indicates
the sum of the relevant variable values for the principal and spouse. And the
affixes “_princ” and “_spouse”
indicate the value for the principal and spouse, respectively. Equations for a single person are as shown
for the principal, with “_spouse” values taken as 0.
Line in country table
and intermediate steps
1.
2.
Earnings
Allowances:
Basic
work-related
Other
Total
Credits in taxable
income
family quotient
CG taxable income
unadjusted taxable
income
CG tax before credits
Variable name
earn
basic
work_rel
other_al
tax_al
taxbl_cr
quotient
tax_inc
Range
Equation
3.
J
J
J
J
J
J
J
IF(earn_spouse='0,' 1, 2)*gen_dedn
IF(earn_spouse='0,' 1, 2)*(prof_exp)
(earn_spouse>0)*extra_dedn
min(basic+work_rel+other_al+SSC_ded_total, earn)
0
1+Married
earn-tax_al
4.
5.
tax_excl
J
6.
Tax credits :
worker_cr
J
monoparent_cr
Minimum wage
credit
J
J
7.
8.
9.
CG tax
State and local taxes
Employees' soc security
deductible portion
Cash transfers
Employer's soc security
tax_cr
CG_tax
local_tax
SSC
SSC_ded
cash_trans
SSC_empr
J
J
J
B
B
J
B
11.
13.
((Children=0)*IF(Married='0,Tax(tax_inc,' tax_sch), quotient*Tax(tax_inc/quotient,
tax_sch)) + (Children>0)*IF(Married='0,' Taxclass1a(tax_inc, tax_sch, discount,
cl_1a_lim, max_rate), quotient*Tax(tax_inc/quotient,
tax_sch)))*IF(tax_inc>unemp_lim*(1+Married,unemp_rate_2,unemp_rate_1)
Positive(IF(earn_princ>wtc_incomelim_1,wtc_basic_1+(Positive(MIN(earn_princ,
wtc_incomelim_2)-wtc_incomelim_1)*wtc_incr_rate)-(Positive(earn_princ-
wtc_incomelim_3)*wtc_decr_rate),0))+
Positive(IF(earn_spouse>wtc_incomelim_1,wtc_basic_1+(Positive(MIN(earn_spo
use,wtc_incomelim_2)-wtc_incomelim_1)*wtc_incr_rate)-(Positive(earn_spouse-
wtc_incomelim_3)*wtc_decr_rate),0))
IF(AND(Married=0,Children>0),IF(earn<sptc_incomelim_1,sptc_basic_1,sptc_ba
sic_1-((MIN(earn,sptc_incomelim_2)-sptc_incomelim_1)*sptc_decr_rate)),0)
if (earn_p> smwtc_incomelim_1,if (earn_p<
smwtc_incomelim_2,smwtc_basic,Positive(smwtc_incomelim_3
-earn_p)*smwtc_decr_rate),0) + if (earn_s> smwtc_incomelim_1,if (earn_s<
smwtc_incomelim_2,smwtc_basic,Positive(smwtc_incomelim_3
-earn_s)*smwtc_decr_rate),0)
worker_cr+monoparent_cr+minimum wage credit
tax_excl-tax_cr
0
SSC_rate*MIN(earn, SSC_ceil)+infirm*Positive(earn-
infirm_abatement*min_salary)+()
SSC_rate*MIN(earn, SSC_ceil)
((Children='1)*(CB_1+CB_ex)+'
(Children=2)*(CB_2+2*CB_ex))*12+Children*ch_bonus
(SSC_empr+workhealth)*MIN(earn,
SSC_ceil)+SSC_acc*MIN(earn,SSC_ceil)+empr_mutual*MIN(AA7,SSC_ceil)
Key to range of equation B calculated separately for both principal earner and spouse P calculated for principal only (value taken as 0 for spouse
calculation) J calculated once only on a joint basis.
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Mexico
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in the
tax/benefit system. The methodology also includes the parameter values and
tax equations underlying the data.
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Mexico 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employers' compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
12.1%
n.a.
17.4%
n.a.
17.6%
n.a.
23.4%
n.a.
22.9%
n.a.
28.4%
n.a.
12.1%
n.a.
17.4%
n.a.
4.0%
1.3%
5.3%
16.8%
8.9%
1.4%
10.2%
19.6%
13.4%
1.5%
14.9%
22.7%
4.0%
1.3%
5.3%
16.8%
0
0
86 400
12 588
0
0
122 243
15 922
0
0
193 539
22 844
0
0
86 400
12 588
1 140
4 834
1 854
13 927
3 360
33 866
1 140
4 834
1 140
1 854
3 360
1 140
0
2 611
3 694
0
0
0
12 073
0
0
0
30 506
0
0
2 611
3 694
0
2 611
0
0
2 611
3 064
0
88 171
6 305
3 248
0
132 922
12 073
3 623
0
223 781
30 506
3 064
0
88 171
6 305
3 064
3 248
3 623
3 064
67
none
91 234
100
none
136 170
167
none
227 404
67
2
91 234
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Mexico 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employers' compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
17.6%
5.3%
23.4%
16.8%
17.6%
12.1%
23.4%
17.4%
17.6%
17.6%
23.4%
23.4%
17.6%
12.1%
23.4%
17.4%
8.9%
1.4%
10.2%
19.6%
6.9%
1.3%
8.3%
18.5%
8.9%
1.4%
10.2%
19.6%
6.9%
1.3%
8.3%
18.5%
0
0
122 243
15 922
0
0
208 643
28 510
0
0
244 486
31 844
0
0
208 643
28 510
1 854
13 927
2 995
18 761
3 709
27 854
2 995
18 761
1 854
2 995
3 709
2 995
0
0
12 073
0
0
2 611
15 767
0
0
0
24 145
0
0
2 611
15 767
0
0
2 611
0
2 611
3 248
0
132 922
12 073
6 312
0
221 093
18 378
6 496
0
265 844
24 145
6 312
0
221 093
18 378
3 248
6 312
6 496
6 312
100-0
2
136 170
100-67
2
227 404
100-100
2
272 341
100-67
none
227 404
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492
The national currency is the peso (MXN). In 2021, MXN 20.14 were equal to USD 1. That year, the
estimated earnings of the average worker are MXN 136 170 (Secretariat estimate).
1. Personal Income Tax
1.1. Central government income tax
1.1.1. Tax unit
Each person is taxed separately.
1.1.2. Tax allowances and tax credits
1.1.2.1. Standard tax reliefs
There are two basic allowances, a yearly holiday bonus and an end-of-year bonus.
Holiday Bonus: Mexico's Labour Law stipulates a minimum holiday bonus of 25% of six days of
the worker’s wage. The maximum exemption according to the Tax Law is equivalent to 15 UMAs.
1
End-of-year bonus: The minimum end-of-year bonus established in the Labour Law is 15 days of
the worker’s wage. The Tax Law exempts end-of-year-bonuses
up to 30 UMAs.
1.1.2.2. Main non-standard tax reliefs
Deductions:
Compulsory school transportation costs.
Medical expenses (doctor, dental, psychology and nutrition fees and hospital expenses): For
expenses made by the taxpayer on behalf of his or her spouse and straight line relatives, the
deduction is allowed only if the taxpayer´s relative earns less than the minimum annual wage.
Complementary contributions of certain retirement accounts are considered eligible as long as they
do not exceed 10% of taxable income and MXN 163 467 (5 annual UMAs).
Funeral expenses: for the spouse and straight-line relatives up to 1 annual UMA.
Charitable donations made to institutions such as:
‒
‒
Federal, state, and municipal governments.
Non-profit organisations involved in the fields of social beneficence, education, culture,
and research and technology.
Deposits on special savings accounts, payments of insurance premium of pension plans, and for
the acquisition of shares of investment societies as long as they do not exceed MXN 152 000.
Health insurance premiums for individuals, if the beneficiary is the taxpayer, and/or his family.
Real interest expenditure of mortgage loans if the value of the property does not exceed
MXN 5 052 581. Real interest expenditure is defined as the excess of interest expense over the
inflation rate.
Deduction of taxpayer's educational expenditures for himself, on behalf of his/her spouse, parents
or children, among others, for the following educational levels.
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493
Educational Level
Kinder Garden
Primary Education
Secondary Education
Technical Profession
High School
Maximum Annual Deduction (MXN)
14 200
12 900
19 900
17 100
24 500
Since 2016, the limit amount for personal deductions was increased. The new limit is the minimum between
15% of taxpayer's gross income and an amount equivalent to 5 annual UMAs (MXN 163 467 in 2021). The
limit does not apply to private school´s tuition, charity donations, complementary contributions to
retirement´s personal accounts, professional fees, and medical expenses in the event of incapacity or
disability.
1.1.2.3. Employment subsidy credit
The employment subsidy credit is decreasing on workers´ income and is assigned based on a table of
income brackets. For monthly income higher than MXN 7 382 no employment subsidy credit is given.
Employees with an income tax lower than the credit receive in cash the difference along with their salary.
The rest of the workers that receive the credit are entitled to a reduction in their tax burden. The
employment subsidy credit is paid by the employers who may credit it against their tax liabilities; the credit
therefore represents a fiscal cost for the government.
1.1.3. Tax schedule and other tables
1.1.3.1. Tax schedule
Taxable income (MXN)
Lower Limit
Upper Limit
0.01
7 735.01
65 651.08
115 375.91
134 119.42
160 577.66
323 862.01
510 451.01
974 535.04
1 299 380.05
3 898 140.13
7 735.00
65 651.07
115 375.90
134 119.41
160 577.65
323 862.00
510 451.00
974 535.03
1 299 380.04
3 898 140.12
Fixed quota (MXN)
0.00
148.51
3 855.14
9 265.20
12 264.16
17 005.47
51 883.01
95 768.74
234 993.95
338 944.34
1 222 522.76
Tax on the amount in excess of the lower limit (%)
1.92
6.40
10.88
16.00
17.92
21.36
23.52
30.00
32.00
34.00
35.00
And over
The income tax schedule is updated in 2021, because the accumulated inflation reached 10% since the
last update in 2018.
1.1.3.2. Employment subsidy credit table
For annual taxable income in a certain income range, the employment subsidy credit is given in the third
column of the following table:
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Lower limit (MXN)
0.0
21 227.53
31 840.57
41 674.09
42 454.45
53 353.81
56 606.17
64 025.05
74 696.05
85 366.81
88 587.97
Upper limit (MXN)
21 227.52
31 840.56
41 674.08
42 454.44
53 353.80
56 606.16
64 025.04
74 696.04
85 366.80
88 587.96
And Over
Tax credit (MXN)
4 884.24
4 881.96
4 879.44
4 713.24
4 589.52
4 250.76
3 898.44
3 535.56
3 042.48
2 611.32
0.00
1.2. State and local income taxes
States do not levy taxes on income.
1.3. Payroll taxes
Mexico does not have a Federal pay-roll tax. However, most States apply a state pay-roll tax with an
average rate of 2.57%. These taxes are not considered in this Report since there are a wide range of
practices with respect to the definition of the tax base that does not allow obtaining a reliable estimation.
2. Compulsory Social Security Contributions to Schemes Operated within the
Government Sector
2.1.
Employees’ contributions
Social security contributions are divided as follows:
For sickness and maternity insurance, 0.625% of the workers monthly wage, plus 0.40% of the amount in
excess of 3 UMAs. For disability and life insurance, 0.625% of the monthly wage.
In 2021, a ceiling of 25 UMAs applies to the salary that is used to calculate the social security contributions.
2.2.
Employers’ contributions
For sickness and maternity 20.40% of the UMA, plus 1.10% of the amount in excess of 3 UMAs,
plus 1.75% of the monthly wage.
For disability and life insurance, 1.75% of worker’s monthly wage.
For social services and nursery, 1% of worker’s monthly wage.
For insurance for work injuries of employees, 1.987% of worker’s monthly wage.
2
In 2021, a ceiling of 25 UMAs applies to the salary that is used to calculate the social security contributions.
3. Universal Cash Transfers
3.1. Transfers related to marital status
None.
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3.2. Transfers for dependent children
None.
4. Main Changes in the Tax/Benefit System since 1995
The Social Security Law enacted in July 1997 changed fundamentally the financing of non-government
employees’ social security, which shifted from a pay-as-you-go
scheme to funded individual accounts. The
government does not manage these accounts; new private financial institutions were created specifically
for this purpose. However, the contractual obligation is between the workers and the government, not with
the private administrator of the funds, because legally they are still considered as contributions to social
security, independently of who manages the funds. It should be noted that the federal government also
contributes to each pension account, and guarantees a minimum pension to every beneficiary of the social
security system, independently of the administration of the funds as well.
4.1. Changes to labour taxation due to the COVID pandemic in 2020 and 2021
Federal Government.
The Tax Administration Service extended the deadline for filing the individual 2020 annual tax
return until May 31st, 2021 (originally April 30).
The Tax Administration Service extended the deadline for filing the individual 2019 annual tax
return until June 30, 2020 (originally April 30).
Examples of tax measures at Subnational Governments.
Waiver of the Payroll Tax corresponding to the month of January 2021 for taxpayers of sectors
affected by the pandemic in the historic downtown area of Mexico City & for all the restaurants in
Mexico City.
The Mexico City Government suspended tax inspection acts from December 17th, 2020 to January
6th, 2021.
The Mexico City Government extended the deadline to obtain a discount on the payment of the
Tax on Vehicle Ownership from the end of March to the end of July. The City Government also
announced the deferral of tax returns and payments obligations included in the Mexico City Tax
Code, extending the deadline to the end of the month. Tax inspection acts were suspended from
March 23rd to May 29th.
Individuals and companies were exempted of surcharges, fines and other expenses generated
during the first three bimesters of 2020 for non-compliance with the payment of the property tax.
Additionally, a 5% discount was granted on the payment of this tax for the fourth bimester, as well
as for advance payments of the tax corresponding to the fifth and sixth bimesters.
The State of Mexico also extended the deadline for the payment of the Tax on Vehicle Ownership
to the end of July. The Government also granted a 100% discount in the tax on lodging for the
months of April, May, June and July and a 50% discount for the payment of payroll tax for
companies with up to 50 employees for April and May.
The Government of the State of Sonora announced for March and April a 50% discount for the
payment of payroll tax for companies with up to 50 employees and a 100% discount for the Tax on
Lodging. The State Government also announced the deferral for the payment of permits for the
sale of alcoholic beverages and for the revalidation of vehicles permits, and also the suspension
of tax inspection acts. The measures were extended until June.
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5. Memorandum Items
5.1. Method used to identify an average worker and to calculate his gross
earnings
The income data refer to average workers. It should be noted that in the sample used for this survey,
medium and large size firms are over-represented. In Mexico, there are no state or local government
income taxes. Information on non-standard tax reliefs is not available.
Figures for 1999 and subsequent years cannot be compared with preliminary figures from previous editions
of this publication for two reasons: first, the wage level of the average worker is now based on observed
data instead of being estimated; second, social security contributions taken into account no longer include
contributions made by employers and employees to privately managed individual accounts. Contributions
no longer included in the calculation of social security contributions are specified in the table below.
5.2. Main employees’
and employers' contributions to private pension, health, etc.
schemes
Account
Employers’ contributions
Retirement
Discharge and old age insurance
Housing Fund (INFONAVIT)
Discharge and old age insurance
2.00
3.15
5.00
1.125
% of workers’ monthly wage
Employees’ contributions
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2021 Parameter values
Average earnings/yr
Unit of Measure and Update
UMA
Ave_earn
89.62
136 170
Secretariat estimate
Income tax
tax_table
0.00
7 735.01
65 651.08
115 375.91
134 119.42
160 577.66
323 862.01
510 451.01
974 535.04
1 299 380.05
3 898 140.13
0.0
21 227.53
31 840.57
41 674.09
42 454.45
53 353.81
56 606.17
64 025.05
74 696.05
85 366.81
88 587.97
0
148.51
3 855.14
9 265.20
12 264.16
17 005.47
51 883.01
95 768.74
234 993.95
338 944.34
1 222 522.76
4 884.24
4 881.96
4 879.44
4 713.24
4 589.52
4 250.76
3 898.44
3 535.56
3 042.48
2 611.32
0.00
0.0192
0.0640
0.1088
0.1600
0.1792
0.2136
0.2352
0.3000
0.3200
0.3400
0.3500
Tax credit basic
Basic_crd
Employees SSC
SSC_rate
SSC_rate_sur
SSC_empr
SSC_empr_min
SSC_empr_sur
0.0125
0.0040
0.06487
0.2040
0.0110
Employers SSC
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498
2021 Tax equations
The equations for the Mexican system in 2021 are on an individual basis.
The functions which are used in the equations (Taper, MIN, Tax etc) are described in the technical note
about tax equations. Variable names are defined in the table of parameters above, within the equations
table, or are the standard variables “married” and “children”. A reference to a variable with the affix “_total”
indicates the sum of the relevant variable values for the principal and spouse. And the affixes “_princ” and
“_spouse” indicate the
value for the principal and spouse, respectively. Equations for a single person are
as shown for the principal, with “_spouse” values taken as 0.
Line in country table and
intermediate steps
1.
2.
3.
4.
5.
6.
7.
8.
9.
11.
13.
Earnings
Allowances
Credits in taxable income
CG taxable income
CG tax before credits
Tax credits
CG tax
State and local taxes
Employees' soc security
Cash transfers
Employer's soc security
Variable name
earn
tax_al
taxbl_cr
tax_inc
CG_tax_excl
tax_cr
CG_tax
local_tax
SSC
cash_trans
SSC_empr
Range
Equation
B
B
B
B
B
B
B
B
B
B
MIN(earn, MIN(earn*(6/365)*0.25, UMA*15)+ MIN(earn*(15/365), UMA*30))
0
Positive(earn-tax_al)
Tax(tax_inc, Tax_sch)
VLOOKUP(tax_inc, Basic_crd, 2)
CG_tax_excl-tax_cr
0
MIN(earn*ssc_rate, UMA*25*30.4*12*ssc_rate)+MIN(Positive(earn-
(3*30.4*12*UMA))*ssc_rate_sur, UMA*(25-3)*30.4*12*ssc_rate_sur)
0
MIN(earn*ssc_empr,
UMA*25*30.4*12*ssc_empr)+30.4*12*UMA*ssc_empr_min
+MIN(Positive(earn-(3*30.4*12*UMA))*ssc_empr_sur, UMA*(25-
3)*30.4*12*ssc_empr_sur)
Memorandum item: Non-
wastable tax credit
tax expenditure
component
cash transfer component
taxexp
transfer
B
B
tax_cr-transfer
IF(CG_tax<0, -CG_tax, 0)
Key to range of equation B calculated separately for both principal earner and spouse P calculated for principal only (value taken as 0 for spouse
calculation).
Notes
1
For 2021, the value of the UMA is 89.62, mean while the general minimum wage is 141.70 and 213.39
in the northern border region. The municipalities constituting the northern border region are as follows:
Ensenada, Playas de Rosarito, Tijuana, Tecate and Mexicali in the state of Baja California; San Luis Río
Colorado, Puerto Peñasco, General Plutarco Elías Calles, Caborca, Altar, Sáric, Nogales, Santa Cruz,
Cananea, Naco and Agua Prieta in the state of Sonora; Janos, Ascensión, Juárez, Praxedis G. Guerrero,
Guadalupe, Coyame del Sotol, Ojinaga and Manuel Benavides in the state of Chihuahua; Ocampo, Acuña,
Zaragoza, Jiménez, Piedras Negras, Nava, Guerrero and Hidalgo in the state of Coahuila de Zaragoza;
Anáhuac in the state of Nuevo León, and Nuevo Laredo; Guerrero, Mier, Miguel Alemán, Camargo,
Gustavo Díaz Ordaz, Reynosa, Río Bravo, Valle Hermoso and Matamoros in the state of Tamaulipas.
2
The amount of the work injury fee depends on the risk level in which the company is classified. The
Mexican Institute of Social Security provided a weighted average rate that considers the economic
activities from C to K of the International Standard Classification.
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499
Netherlands
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in the
tax/benefit system. The methodology also includes the parameter values and
tax equations underlying the data.
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Netherlands 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances:
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits :
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income (net of credits)
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employers' compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
37.4%
n.a.
44.1%
n.a.
45.4%
n.a.
51.2%
n.a.
51.4%
n.a.
51.4%
n.a.
43.7%
n.a.
49.6%
n.a.
4.9%
13.8%
18.7%
27.6%
15.6%
11.9%
27.5%
35.3%
26.4%
9.6%
35.9%
40.7%
3.0%
8.1%
-7.1%
4.6%
0
0
30 137
4 540
0
0
40 128
6 711
0
0
59 202
7 487
6 741
6 741
39 693
4 540
0
5 108
5 108
6 940
0
6 598
6 598
15 210
0
8 857
8 857
33 214
0
3 010
3 010
4 125
1 574
1 832
0
1 065
8 612
0
293
24 357
0
2 291
1 115
0
1 717
1 717
0
35 360
3 405
3 076
3 076
0
52 263
9 676
5 834
5 834
0
86 582
24 650
1 717
1 717
0
35 360
3 405
0
0
0
0
67
none
37 077
100
none
55 339
167
none
92 416
67
2
37 077
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Netherlands 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances:
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits :
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income (net of credits)
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employers' compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
51.7%
15.7%
56.8%
24.9%
45.4%
37.4%
51.2%
44.1%
45.4%
45.4%
51.2%
51.2%
45.4%
37.4%
51.2%
44.1%
15.4%
11.4%
20.5%
29.1%
10.5%
10.4%
18.6%
27.4%
14.9%
10.0%
23.0%
31.3%
11.3%
12.7%
24.0%
32.2%
3 507
3 507
44 013
6 711
2 186
2 186
75 266
11 251
2 186
2 186
85 258
13 421
0
0
70 265
11 251
0
6 316
6 316
14 832
0
9 609
9 609
19 335
0
11 099
11 099
27 606
0
11 707
11 707
22 150
1 161
8 516
0
3 355
9 726
0
2 846
16 507
0
2 638
10 444
0
3 076
3 076
0
52 263
9 676
4 793
4 793
0
87 623
13 082
6 151
6 151
0
104 526
19 353
4 793
4 793
0
87 623
13 082
0
0
0
0
100-0
2
55 339
100-67
2
92 416
100-100
2
110 678
100-67
none
92 416
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The national currency is the Euro (EUR). In 2021, EUR 0.84 was equal to USD 1. In that year, the average
worker earned EUR 55 339 (Secretariat estimate).
1
1. Personal Income Tax System (Central Government)
1.1. Central government income tax
There are three categories (‘boxes’) of taxable income:
Taxable income from work and owner-occupied housing;
Taxable income from a substantial interest in a limited liability company;
Taxable income from savings and investments.
This description is limited to the most relevant aspects of taxable income from the first category, ‘taxable
income from work and owner-occupied
housing’, because of its relevance for the AW.
1.1.1. Tax unit
Husbands and wives are taxed separately on their personal income, which includes income from business,
profession and employment, pensions and social security benefits. Certain parts of income may be freely
split between husbands and wives, such as the net-income from owner occupied housing and the income
from savings and investments.
1.1.2. Tax allowances
1.1.2.1. Standard allowances
1.1.2.2. Non-standard allowances applicable to AW
Related to wage earnings:
For distances of more than 10 km between home and work, fixed amounts for travel expenses with
public transportation are deductible. The maximum deduction for employees who travel by public
transport is EUR 2 185 for distances of more than 80 km. If the travel expenses are reimbursed or
the employer provides transport, there is no deduction; the reimbursement is untaxed (also for
employees who travel by car) if it is below certain specified amounts.
Employee contributions to private (company provided) pension schemes.
Related to owner occupied housing:
o
o
Excess of mortgage interest over net imputed rent.
Medical expenses and other exceptional expenses: Fiscal deduction of exceptional health
expenses is reduced to the specific costs as a result of a chronic illness. As specific costs are
seen medical treatment (not paid for by insurance company), diet costs, special medicine
described by a doctor, extra domestic care, special expenses for clothing and transportation
costs. Visual tools and insurance premiums are not seen as specific costs and are therefore
not deductible. Expenses for wheelchairs, scooters for the disabled and home adjustments
made because of a chronic illness are not deductible.
Related to personal circumstances:
All expenses except for medical treatment expenses may be increased by a factor. This factor is
income and age dependent. The factor amounts to 1.4 if the person is below the legal pension age
and has an income on or below EUR 35 941. The factor amounts to 2.13 if the person is on or
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503
above the legal pension age and has an income on or below EUR 35 941. People with an income
above EUR 35 941 cannot apply the factor.
For a single person: the specific expenses (after multiplication with the factor) in excess of 1.65%
of income are deductible if income exceeds EUR 7 989 and is below EUR 42 434. If income is
lower than or equal to EUR 7 989, the non-deductible limit is EUR 139. For a person with a partner:
the joint income is used to determine the non-deductible amounts and the non-deductible limit is
EUR 278.
If income exceeds EUR 42 434 the specific expenses in excess of 1.65% of EUR 42 434 increased
with 5.75% of income above EUR 42 434 are deductible.
Some educational expenses: in direct connection with vocational education. Expenses above the
threshold of EUR 250 are deductible. Expenses above EUR 15 000 are not deductible.
Donations to certain institutions (charity) that serve the public good are deductible if in excess of
1% of the income and in excess of EUR 60. No more than 10% of the income may be deducted in
this way.
1.1.3. Tax schedule
The tax schedule for income from work and owner-occupied housing is as follows:
Taxable Income (EUR)
Tax Rate (%)
Social security contributions
< 66 years and 4 months
> 66 years and 4 months
27.65
-
9.75
-
-
0–35 129
35 129–68 507
68 507 and over
9.45
37.10
49.50
The contributions for the general social security schemes are levied on income from work and owner-
occupied housing in the first and second income tax bracket. These social security contributions are not
deductible for income tax purposes. Individuals above the pension age pay 9.75% (for widows and orphans
pensions, and exceptional medical expenses). Individuals below the pension age pay 27.65%, (for widows
and orphans pensions, exceptional medical expenses, and old age income provision). For further
information see Section 2.1.
1.1.4. Tax credits
1.1.4.1. Standard tax credits
The tax credits are deducted partly from the income tax liability and partly from the contributions that are
made to the general social security schemes (see Section 1.13). For most families, the share of the credit
attributed to tax is related to the ratio of the tax rate to the sum of the tax rate and the social security
contributions rate in the first bracket of the tax schedule. In 2021, this ratio was 25.47%
(= 9.45% / (9.45% + 27.65%), implying that 25.47% of the (tax) credit is attributed to the personal income
tax and the remaining 74.53% to social security contributions.
Division of credits for tax and social security contributions is essential in the OECD publications. In the
Netherlands no division is made in the general tax scheme between tax and SSC.
Note that the tax/benefit position tables show the total amount of social security contributions net of the
credits that are claimed.
General tax credit: The general tax credit is dependent on income since 2014, meaning that higher
incomes receive less general tax credit. Since 2016, the general tax credit is fully phased out,
meaning that higher incomes receive no general tax credit. In 2021, the maximum of the general
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tax credit is EUR 2 837 when no reduction is applicable (people who are on or above the legal
pension age receive less general tax credit, because they do not pay social contributions for the
state pension) and taxable income is below or equal to EUR 21 043. For incomes above this
threshold, the general tax credit is fully phased out at a rate of 5.977% (per euro). So incomes
above EUR 68 507 receive no general tax credit.
Work credit: The amount of work credit depends on taxable income from work and is phased in on
three trajectories; the first one runs from EUR 0 to EUR 10 108. On this first trajectory, work credit
equals 4.581% of taxable income from work. On the second trajectory, which runs from
EUR 10 108 to EUR 21 835, the work credit equals EUR 463 plus 28.771% of the part of income
that is above EUR 10 108. On the third trajectory, which runs from EUR 21 835 to EUR 35 652,
the work credit equals EUR 3 837 plus 2.663% of the part of income that is above EUR 21 835. So
at an income of EUR 35 652, the maximum of EUR 4 205 is reached. Above this income of
EUR 35 652, the work credit is fully phased out at a rate of 6.0% (per euro) so that incomes above
EUR 105 736 receive no work credit.
Income dependant combination credit: A taxpayer who is either a single parent and working or the
working partner with the lowest income, and who has children below the age of 12 and has his/her
taxable income from work exceeding EUR 5 153, is entitled to an income dependent combination
credit of 11.45% of taxable income from work above EUR 5 153. The maximum total combination
credit is EUR 2 815 and reached at an income level of EUR 29 738.
Single parent credit: abolished since 2015.
Additional single parent credit: abolished since 2015.
Elderly tax credit: individuals above the pension age receive a tax credit of EUR 1 703 if their
income is below EUR 37 970. This tax credit is gradually phased out to 0 at a rate of 15.0% for
incomes above EUR 37 970. Individuals above the pension age who do not have a partner receive
an additional tax credit of EUR 443 that is not income dependent.
The amount of the tax credit is limited to the amount of tax and premiums payable (non-refundable tax
credit). If, however, a taxpayer with insufficient income to fully exploit his/her tax credit has a partner with
a surplus of tax and premiums payable over his/her own tax credit, the tax credit of the former taxpayer is
increased by (at most) the surplus tax and premiums payable by his/her fiscal partner. The cap for this
increase is at 13.33% of sum of the general tax credit, the work credit and the income dependent
combination credit. As a consequence, the tax credit of the former taxpayer will exceed tax and premiums
payable, resulting in a payout of the residual tax credit to the taxpayer by the tax authority.
1.2. State and local income taxes
None.
2. Compulsory Social Security Contributions to Schemes Operated Within the
Government Sector
2.1.
Employees’ contributions
General schemes (for everyone earning income from (former) employment)
Old age pension: The age is adjusted such that elderly will receive Old Age (state) pension at the
age of 66 years and 4 months old in 2021 and at 67 years old in 2024. The Old age premium
percentage is 17.9% of taxable income in the first tax bracket. This scheme does not apply to
individuals above the current pension age.
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Widows and orphans pension: 0.10% of taxable income in the first tax bracket.
Long-term care: 9.65% of taxable income in the first tax bracket.
Schemes for employees:
Unemployment: 0% of the gross earnings below EUR 58 311 (this contribution is only for the
general unemployment fund); employees do not have to pay an unemployment premium in order
to reduce administration costs. Employers pay both an unemployment premium and a premium for
invalidity for their employees (see par.2.2).
For basic health insurance each adult pays an average amount of EUR 1 478 a year to a self-
chosen private health insurance company. This premium is a non-tax compulsory payment and it
is not included in the Taxing Wages calculations but only in the NTCP calculations.
Employees might obtain compensation for the nominal contribution of on average EUR 1 478 for
the basic health insurance, depending on the household’s personal situation and taxable
income.
This is called the health care benefit. This benefit is included in the NTCP calculations as it
compensates for the basic health insurance premium of on average EUR 1 478 (see
https://oe.cd/taxing-wages
for more details on non-tax compulsory payments as well as the Special
Feature in the 2009 edition of the
Taxing Wages
Report). The care benefit is calculated as follows:
o
o
Single parent households: 1705
–
1.915% * 21 835
–
13.58% * (taxable income
–
21 835)
Married couples: number of adults * 1705
–
4.225% * 21 835
–
13.58% * (taxable income
principal and spouse
–
21 835).
2.2.
Employers’ contributions
Schemes for employers:
Unemployment: 3.95% of gross earnings below EUR 58 311 for the general unemployment fund
and a contribution of 0% of gross earnings below EUR 58 311 for the industrial insurance
associations redundancy payments fund;
Invalidity: 8.89% of gross earnings below EUR 58 311;
For medical care employers contribute 7.0% of gross earnings net of
employees’ pension
premiums and unemployment social security contributions until a maximum of gross earnings of
EUR 58 311. This contribution is modelled as a NTCP from the employer to the Health Care Fund.
The spending of this fund mainly compensates private insurance companies for their (public)
obligation to insure individuals with a high health risk.
3. Universal Cash Transfers
3.1. Transfers related to marital status
None.
3.2. Transfers for dependent children
Families with children receive a tax free benefit, depending on the number and age of the children. For a
family with two children in the age group of 6 to 12 years, the total benefit amounts to EUR 2 185.79 a
year.
An additional income dependent child benefit exists (kindgebonden budget). This benefit also depends on
the number of children per family. A family can only claim the extra child benefit when it has children under
the age of 18 years old for whom it also receives the tax free and income independent child benefit. The
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maximum value is EUR 1 204 per year for families with one child in 2021. The maximum value is
EUR 2 226 a year for families with two children. The benefit is reduced at a rate of 6.75% per euro when
the family’s yearly taxable income exceeds a threshold. Since 2020 this threshold is different
for single
parents and couples. For single parents the threshold equals EUR 21 835, for couples it equals
EUR 38 853. As from 2015 an extra benefit for single parents is introduced (independent of the number of
children and the age of the children) which amounts to EUR 3 242 per in 2021. This amount is also
phased out at a rate of 6.75% from the threshold. Therefore this total benefit is completely phased out for
families with two children when the taxable income exceeds EUR 102842 for single parents and
EUR 71 831 for couples.
4. Main Changes in the Tax/Benefit Systems Since 2000
In 2001, the tax system was changed thoroughly. The tax rates have been lowered; the basic allowance
and its supplements have been transformed into tax credits. The deduction for labour costs has also been
replaced by a tax credit. Certain other deductions have been reduced or abolished. Extra tax credits for
households with children were introduced.
In 2002 and 2003 the tax system was only slightly changed. The additional combination credit was
introduced in 2004. The various child credits were integrated and streamlined in 2006.
Public insurance for medical care has been reformed in 2006. A new standard health insurance system
was introduced. Until 2005, no public health insurance contributions were levied on income in excess of
EUR 33 000. However, taxpayers earning more than EUR 33 000 were obliged to take a private insurance.
These private health insurance contributions were not included in the Taxing Wages calculations because
they were made to a privately-managed fund (and are therefore not taxes). Since 2006, every individual
contributes a nominal contribution to a privately-managed fund (on average EUR 1 064, depending on the
competition between insurance companies, a year in 2009) and, in addition for employees, a percentage
of gross income (6.9%) net of employees’ pension premiums and unemployment social security
contributions until a maximum of gross income of EUR 32 369 (in 2009). For this last contribution, the
employee receives mandatory compensation of his employer for the same amount. The premium itself,
however, is not modelled (either as an employee or employer SSC) in Taxing Wages. Instead it is modelled
as a non-tax compulsory payment from the employer to a public-managed health insurance fund. The
spending of this fund mainly compensates private insurance companies for their (public) obligation to
insure individuals with a high health risk. Taxpayers might obtain compensation for the nominal contribution
to the private insurance company of on average EUR 1 064 in 2009, depending on the households
personal situation and taxable income. This is called the health care benefit and is part of the NTCP (see
Section 2.1).
In 2007, the tax system has not been changed, except for some parameter updates. In 2008, the child
credit has been replaced by an extra child benefit.
In 2009, the general tax credit will be reduced for non-working spouses in order to cut down the
capitalization of this tax credit in 2024. A non-working spouse can in 2024 capitalise the general tax credit
only against his/her own earned income. In 2009 the employment credit is extended for income exceeding
EUR 42 509. This credit will be reduced by maximum EUR 24, whereas the employment credit is increased
for lower incomes. The income dependant combination credit is introduced in order to promote the labour
participation of single parents or partners of married workers. The income-dependent combination credit
has been increased considerably. The extra child benefit depends on the total income of the family and
the number of children per family. The income-dependent child benefit is higher when more children under
the age of 18 years are member of the family. As from 2009 onwards, employees do not have to pay an
unemployment premium mainly to reduce administration costs for employers. Employers pay now both an
unemployment premium and a premium for invalidity for their employees (see also par. 2.2).
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In 2013, the income base for SSC and Income-Tax is harmonised. Standardising or harmonisation of the
income tax base for levying SSC and Taxes is introduces in 2013 and is called the Law “WUL” i.e.
Harmonising the income base for SSC and Taxes (see publication CPB the Netherlands). So, the income
tax base is since 2013 exclusive the income dependant health care contribution and employees will no
longer have to pay taxes over income dependant health care contributions, instead they pay a higher tax
rate in the first tax bracket and mainly Work credit is adjusted. The tax rate in the first tax bracket has been
increased from 1.95% to 5.85% and the Work credit is reduced for employees with a higher income such
that the effect of this harmonisation is budgetary neutral.
The main adjustment in 2014 is the General tax credit which is made income dependent. Higher income
will receive less general credit and the reduction is 2% per euro of income between EURO 56 495 and
EURO 19 645 per year. See also par 1.141.
In 2015, the child arrangements are reduced from 10 items to 4 items. For that reason Single parent credits
have stopped. Cash transfers for parents with children and low income increase. And for single parents
with children an extra cash benefit of EUR 3 050 is introduced to compensate the loss of single parent
credits.
Not all child arrangements are part of the TW model because these are quite specific arrangements for
disabled children and parents with low income with children.
Long term health care is modernised. The SSC rate for (AWBZ Dutch) reduced with 3% to 9.65% of taxable
income. The tax rates in the first two brackets are raised with 3% because Social spending is still used but
now for other general social purposes.
In 2016, as part of a EUR 5 billion package of tax reductions on work, the general tax credit and the work
credit were phased out fully, meaning that higher incomes no longer receive the general tax credit and the
work credit.
Multiple tax credits were increased and made more income dependent in 2019. The working credit is
increased, but phased out at a faster rate of 6% (instead of 3.6%). The combination credit starts at EUR 0
instead of EUR 1 052, but increases with 11.45% instead of 6.159%. The elderly tax credit has been
increased and is now gradually phased out at a rate of 15%, instead of a sudden drop of more than
EUR 1 300 above a threshold income. Also, a first step has been made to unify the tax rates in the first
three brackets.
In 2020, the number of tax brackets has been reduced from four to three. For people below the retirement
age there are effectively only two different brackets, since their combined rate of tax and social security
contributions is the same in the first and second bracket. Secondly, a new phase in trajectory has been
introduced for the work credit. Thirdly, the threshold after which the income dependent child benefit is
phased out is now higher for couples than for single parents.
4.1. Changes to labour taxation due to the COVID pandemic in 2020 and 2021
The covid-19 pandemic has not led to changes in labour taxation for employees. Employers and self-
employed do have the option to postpone payment of labour taxes. Also, some of the requirements for
self-employed to qualify for certain deductibles (e.g. a minimum number of hours to qualify for a self-
employed deduction) have been temporarily loosened.
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5. Memorandum Items
5.1.
Identification of the AW and calculation of the AW’s gross earnings
The calculation of the annual gross earnings of an AW is based upon data on gross earnings of full time
workers in industry C-K. These data have been obtained through a yearly sample survey carried out by
the Central Bureau of Statistics. Included in the AW annual salary are irregular payments, such as holiday
allowances, loyalty payments and bonuses. Payments for working overtime are not included. However, the
CBS has stopped carrying out the ‘employment and wages’ survey in July 2006 due to new legislation.
On
Inquiry at the Central Bureau of Statistics (CBS) the information from the wage declarations by employers,
delivered nowadays at the tax department, will be implemented by the CBS for the new survey about
employment and wages. These changes produced a delay in delivery of the information on wages and
employment for 2006.
On the base of new information on wages per industry sector, the AW is delivered to EUROSTAT in
November 2009 by the CBS for years 2006 and 2007. The standard classification NACE Rev. 1 for
industrial sectors C-K is used.
The new classification NACE Revision 2 (sectors B-N) will be applicable as from 2008 onwards. The
estimation of the AW for 2008 according to the new classification is applicable at the beginning of May
2010. The AW for 2009 is available since November 2010. For 2008 the average annual gross earnings
(full-time NACE REV 2) comes to EUR 43 146, for 2009 EUR 44 412, and EUR 45 215 in 2010. The latest
information according to EUROSTAT is an AW in 2011 of EUR 46 287 (NACE Rev 2).
The average wages from 2012 onwards include the private and the public sectors, since values on the
private sectors only (sectors B to N) are not available. The values were provided by Statistics Netherlands.
5.2.
Main employers’ contributions to private
pension, health and related
schemes
In addition to the obligatory contributions of employees to private insurance companies, all employers pay
contributions to a public-managed health fund. More information is included in the Special Feature where
the contributions to the public-managed health funds are also presented.
Employers have to pay at least 70% of the gross wage of their sick employees for two years. Many
employers have insured themselves privately for the risks of their employees being sick. This insurance
for illness of their employees is not compulsory.
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509
2021 Parameter values
Average earnings/yr
minimum wage
Social security contributions
Employees' schemes
Ave_earn
min_wage
SSC_ceil
Unemp_rate1
Unemp_franchise1
55 339
21940
58311
0
0
0.07
999999
58311
1478
0
0.01915
0.13580
0.04225
0.13580
21834.96
1700.00467
0.179
0.001
0.0965
35129
0.0395
0
0
0
0.0889
0
0.07
0
0
0
0.0945
0.0945
0.371
0.495
2837
0
21043
68507
0.05977
378.266667
463
3374
368
0
10108
21834
Secretariat estimate
Medical care
Med_rate
Med_limit
Med_ceil
Med_adult
Med_child
Med_compensation1
Med_compensation2
Med_compenation 3
Med_compensation 4
Med_key
Med_adult for care benefit
General schemes
Old_rate
Wid_rate
Ex_med_rate
Gen_Schemes_thrsh
Unemp_empr1
Unemp_empr2
Unemp_unempr_franchise1
Unemp_unempr_franchise2
Inv_empr_rate
Inv_empr_franchise
Med_empr
Med_franchise
Payroll tax
Tax schedule
Extra_wage_tax
EWT_threshold
Tax_sch
"tax_sch_lowest"
"tax_thrsh_1"
"tax_sch_2"
21043
35129
68507
Tax credits
Gen_credit_1
Gen_credit_2
Gen_credit1_thr
Gen_credit2_thr
Gen_credit_per
Red_gen_credit
Emp_credit1
Emp_credit2
Emp_credit3
Emp_credit4
Emp_credit1_thr
Emp_credit2_thr
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510
Emp_credit3_thr
Emp_credit4_thr
Comb_credit
Comb_credit_franchise
add_comb_credit
income_dependant_comb_credit1
income_dependant_comb_credit_max
Family cash transfers
income_dependant_comb_par_credit_per
Sing_par_credit
Ex_sing_par_credit_per
Ex_sing_par_credit_max
Ch1_trans
Ch2_trans
Child_ben_1child
Child_ben_2children
Extra_cash_sing_par
Child_ben_redn
Child_ben_ceil
Child_ben_incr_ceil_couple
Non-tax
payments
compulsory
dummyNTCP
NTCP_pension_ee
NTCP_pension_er
NTCP_pension_franchise
NTCP_pension_max
35652
105735.333
0
5153
0
0
2815
0.1145
0
0
0
1093
2185.792
1204
2226
3242
0.0675
21834.96
17018
0
0.0744
0.1116
13999
112189
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2021 Tax equations
The equations for the tax system in the Netherlands in 2021 are repeated for each individual of a married
couple. Tax credits, except a part of the general credit of the spouse, depend also on the tax paid by the
principal if the spouse's income is zero or very low, and the cash transfers are calculated only once. The
functions which are used in the equations (Taper, MIN, Tax etc) are described in the technical note on the
tax equations. Due to adjustments of the work credit in 2016 and 2020, the function Emp_credit(Value)
was altered in those years. Variable names are defined in the table of parameters above, within the
equations table, or are the standard variables “married” and “children”. A reference to a variable with the
affix “_total” indicates the sum of the relevant variable values for the principal and spouse. And the affix
“_spouse” indicates the value for the spouse. No affix is used for the principal values. Equations
for a single
person are as shown for the principal, with “_spouse” values taken as 0.
Line in country table and
intermediate steps
1.
2.
3.
4.
5.
6.
Earnings (gross)
Earnings (net)
Social security
contributions
Credits in taxable income
CG taxable income
CG tax before credits
Tax credits
Variable name
gr_earn
earn
SSC_al
taxbl_cr
tax_inc
CG_tax_excl /
tax_liable
tax_cr
Range
Equation
B
B
B
B
B
P
gr_earn
SSC_f(earn,Unemp_rate1,SSC_ceil,Unemp_franchise1)
MIN(earn-SSC_al, Med_ceil)*Med_rate
earn-SSC_al
Tax(tax_inc,Tax_sch)
MIN(CG_tax_excl+SSC_taxinc,IF((tax_inc<Gen_credit1_thr),Ge
n_credit_1,(Gen_credit_1-
MIN(Gen_credit_per*(Gen_credit2_thr-
Gen_credit1_thr),Gen_credit_per*(tax_inc-
Gen_credit1_thr))))+Emp_credit(tax_inc)+IF(AND(Children>0,ta
x_inc>Comb_credit_franchise),IF(Married='0,income_dependan
t_comb_credit1+MIN(income_dependant_comb_credit_max-
income_dependant_comb_credit1,income_dependant_comb_p
ar_credit_per*(tax_inc' - Comb_credit_franchise)),0)
tax_cr_spouse
S
IF(Married>0,MIN(CG_tax_excl_spouse+SSC_taxinc_spouse+CG_t
ax_excl+SSC_taxinc-
tax_cr,IF(tax_inc_spouse>0,IF((tax_inc_spouse<Gen_credit1_thr),
Gen_credit_1,(Gen_credit_1-
MIN(Gen_credit_per*(Gen_credit2_thr-
Gen_credit1_thr),Gen_credit_per*(tax_inc_spouse-
Gen_credit1_thr)))),Red_gen_credit)+Emp_credit(tax_inc_spouse)+
IF(AND(Children>0,tax_inc_spouse>Comb_credit_franchise),incom
e_dependant_comb_credit1+MIN(income_dependant_comb_credit_
max-
income_dependant_comb_credit1,income_dependant_comb_par_c
redit_per*(tax_inc_spouse - Comb_credit_franchise)),0)),0)
=tax_sch_lowest/SUM(Old_rate+Wid_rate+Ex_med_rate+tax_sch_l
owest)*tax_cr_spouse
tax_liable-tax_cr_inc
0
SSC_f(earn,Unemp_rate1,SSC_ceil,Unemp_franchise1)
SSC_f(earn_spouse,Unemp_rate1,SSC_ceil,Unemp_franchise1)
(Old_rate+Wid_rate+Ex_med_rate)*MINA(tax_inc,Gen_Schemes_t
hrsh)
SSC_earn+SSC_taxinc+SSC_earn_spouse+SSC_taxinc_spouse
tax_cr_inc
7.
8.
9.
CG tax
State and local taxes
Employees' soc security'
based on earnings
Based on taxable income
Total employees' soc
security
CG_tax
local_tax
SSC_earn
SSC_earn_spouse
SSC_taxinc
SSC_liable
tax_cr_SSC
B
B
B
P
S
B
J
B
=SUM(Old_rate+Wid_rate+Ex_med_rate)/SUM(Old_rate+Wid_rate
+Ex_med_rate+tax_sch_lowest)*tax_cr_spouse
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512
Total
10.
11.
Total payments
Cash transfers
SSC
total_payments
cash_trans
J
J
J
SSC_liable-tax_cr_SSC
CG_tax+local_tax+SSC
IF(Children=1,Ch1_trans,IF(Children=2,Ch2_trans,0))+
IF(Children=2;1;0)*MAX(0;(Child_ben_2children+IF(Married='0;1;0)*
Extra_cash_sing_par-
IF((tax)inc+tax_inc_spouse)>Child_ben_ceil+IF(Married=1;1;0)*Chil
d_ben_incr_ceil_couple;1;0)*Child_ben_redn*(tax_inc+tax_inc_spo
use-
(Child_ben_ceil+IF(Married=1;1;0)*Child_ben_incr_ceil_couple))))
SSC_f(earn-(positive(earn-
NTCP_franchise*MIN(earn/min_wage,1))*NTCP_pension_ee),Une
mp_empr1,SSC_ceil,Unemp_unempr_franchise1)+SSC_f(earn-
(positive(earn-
NTCP_franchise*MIN(earn/min_wage,1))*NTCP_pension_ee),Une
mp_empr2,SSC_ceil,Unemp_unempr_franchise2)+SSC_f(earn-
(positive(earn-
NTCP_franchise*MIN(earn/min_wage,1))*NTCP_pension_ee),Inv_e
mpr_rate,SSC_ceil,Inv_empr_franchise)
Function Emp_credit(Value)
If Value <= 0 Then
Emp_credit = 0
ElseIf Value <= Range("Emp_credit1_thr").Value Then
Emp_credit = (Value / Range("Emp_credit1_thr").Value) *
Range("Emp_credit1").Value
ElseIf Value <= Range("Emp_credit2_thr").Value Then
Emp_credit = Range("Emp_credit1").Value + ((Value -
Range("Emp_credit1_thr").Value) /
(Range("Emp_credit2_thr").Value -
Range("Emp_credit1_thr").Value)) * Range("Emp_credit2").Value
ElseIf Value <= Range("Emp_credit3_thr").Value Then
Emp_credit = Range("Emp_credit1").Value +
Range("Emp_credit2").Value + ((Value -
Range("Emp_credit2_thr").Value) /
(Range("Emp_credit3_thr").Value -
Range("Emp_credit2_thr").Value)) * Range("Emp_credit3").Value
ElseIf Value <= Range("Emp_credit4_thr").Value Then
Emp_credit = Range("Emp_credit1").Value +
Range("Emp_credit2").Value + Range("Emp_credit3").Value -
((Value - Range("Emp_credit3_thr").Value) /
(Range("Emp_credit4_thr").Value -
Range("Emp_credit3_thr").Value)) * (Range("Emp_credit1").Value +
Range("Emp_credit2").Value + Range("Emp_credit3").Value -
Range("Emp_credit4").Value)
Else
Emp_credit = 0
End If
End Function
13.
Employer's soc security
SSC_empr
B
Key to range of equations B calculated separately for both principal earner and spouse P calculated for principal only (value taken as 0 for
spouse calculation) J calculated once only on a joint basis.
Note
1
The Dutch labour market is characterized by a substantial share of part-time employees. As explained in
the methodological section of this volume, the average wage measure used in the tax burden calculations
refer to full-time employees only. If the wages of part-timers were taken into account, the average wage
would be substantially lower.
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513
New Zealand
(2021-2022 Income tax year)
(
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in the
tax/benefit system. The methodology also includes the parameter values and
tax equations underlying the data.
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514
New Zealand 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances:
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits :
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
30.5%
n.a.
30.5%
n.a.
30.0%
n.a.
30.0%
n.a.
33.0%
n.a.
33.0%
n.a.
42.5%
n.a.
42.5%
n.a.
14.2%
0.0%
14.2%
14.2%
19.4%
0.0%
19.4%
19.4%
24.8%
0.0%
24.8%
24.8%
15.3%
0.0%
-16.3%
-16.3%
0
0
37 989
0
0
0
53 234
0
0
0
83 014
0
14 000
14 000
51 504
0
0
6 283
0
12 843
0
27 335
0
6 768
0
0
0
0
485
6 283
0
0
12 843
0
0
27 335
0
0
6 768
0
485
0
0
0
0
0
44 272
6 768
0
0
66 077
12 843
0
0
110 349
27 335
0
0
44 272
6 768
67
none
44 272
100
none
66 077
167
none
110 349
67
2
44 272
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515
New Zealand 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances:
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits :
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
55.0%
33.5%
55.0%
33.5%
30.0%
30.5%
30.0%
30.5%
30.0%
30.0%
30.0%
30.0%
30.0%
30.5%
30.0%
30.5%
19.4%
0.0%
6.5%
6.5%
17.3%
0.0%
17.3%
17.3%
19.4%
0.0%
19.4%
19.4%
17.3%
0.0%
17.3%
17.3%
8 549
8 549
61 783
0
0
0
91 223
0
0
0
106 468
0
0
0
91 223
0
0
12 843
0
19 126
0
25 686
0
19 126
0
12 843
0
485
19 126
0
0
25 686
0
485
19 126
0
0
485
0
485
0
0
66 077
12 843
0
0
110 349
19 611
0
0
132 155
25 686
0
0
110 349
19 611
100-0
2
66 077
100-67
2
110 349
100-100
2
132 155
100-67
none
110 349
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The national currency is the New Zealand dollar (NZD). In the year to March 2021, NZD 1.40 was equal to
USD 1 on average. The average worker earned NZD 66 077 (Country estimate).
1
1. Personal Income Tax System
In New Zealand, the tax year starts April 1
st
and ends March 31
st
.
1.1. Central/federal government income taxes
1.1.1.
Tax
unit
Members of the family are taxed separately.
1.1.2. Tax allowances and tax credits
1.1.2.1. Standard reliefs
Refer to section 3.
1.1.2.2. Main non-standard tax reliefs applicable to an average wage
Refer to section 3.
1.1.3. Schedule
Rates of income tax for individuals:
On so much of the income as does not exceed NZD 14 000: 10.5%;
On so much of the income as exceeds NZD 14 000 but does not exceed NZD 48 000: 17.5%;
On so much of the income as exceeds NZD 48 000 but does not exceed NZD 70 000: 30%;
On so much of the income as exceeds NZD 70 000 but does not exceed NZD 180 000: 33%;
On so much of the income as exceeds NZD 180 000:
39%.
1.2. State and local income taxes
New Zealand has no state or local income tax.
2. Compulsory Social Security Contributions to Schemes Operated Within the
Government Sector
New Zealand has no compulsory social security contributions to schemes operated within the Government
sector.
It should be noted that there is an accident compensation scheme administered by the Accident
Compensation Corporation for residents and temporary visitors to New Zealand. This scheme is funded in
part by premiums paid by employees and employers. For employees, the premium represents 1.21% of
their gross earnings. For employers and the self-employed, the premiums are based on a percentage of
the total payroll and the applicable rate varies depending upon the associated accident risk (the average
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517
rate is 0.72%). This scheme is not considered as a compulsory social security contribution for the purposes
of the Report.
3. Universal Cash Transfers
The main entitlements in New Zealand are targeted at families under the blanket title ‘Working for Families’
(‘WFF’). There are four main payments that constitute WFF, which
are described in 3.2
–
3.5 below.
3.1. Amount for marriage
None.
3.2. Amount for children
For all families with children born, or due to be born, on or after 1 July 2018, the Best Start payment
provides NZD 60 per week (3 120 per year) for the first year of the
child’s life. There is no income limit for
receiving the Best Start payment in the first year of the child’s life. The Best Start payment continues to
provide NZD 3 120 per year for the second and third year of a child’s life, but abates at 21.00 cents in
the
dollar for every dollar by which a family’s income exceeds the abatement threshold of NZD 79 000. For
families receiving paid parental leave, the Best Start payment begins after paid parental leave ends.
3.3. Family Tax Credit
From 1 July 2018, for an eldest child, the rate of the Family Tax Credit is NZD 5 878 per year. For
subsequent children the rate is NZD 4 745. The total credit is abated by 25.00 cents on each dollar earned
over NZD 42 700. The abatement is based on the combined income of the parents.
3.4. In Work Tax Credit
The In Work Tax Credit is available to families with dependent children who are in paid employment and
not receiving an income-tested benefit or student allowance. The level of assistance it provides is
NZD 3 770 per family per year (or NZD 72.50 a week for up to three children), plus an additional
NZD 780 per year for fourth and subsequent children. It is also uses the same abatement regime used
with the Family Tax Credit, although it does not begin to abate until the latter has been abated to zero.
Prior to 1 July 2020, it was only available to couple families working a total of 30 hours or more per week,
or to sole parents working 20 hours or more per week. From 1 July 2020 these hours-tests are removed
to allow payment to a wider group of people who may have had a reduction in work hours over 2020 and
2021 (see further explanation below). The removal of the hours-tests is permanent.
From 1 April 2021, the in-work tax credit is available for up to two weeks when taking an unpaid break from
work. This is intended to provide support for those transitioning between jobs or who are unpaid for a
period.
3.5. Minimum Family Tax Credit
The Minimum Family Tax Credit is a scheme that ensures a guaranteed minimum family after-tax income
for all full-time earners with dependent children. The
minimum family tax credit (“MFTC”), provides a top-
up to after-tax income for eligible working families and ensures families do not face a reduction in after-tax
income when they move off a welfare benefit and into paid employment.
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The household income threshold (the level to which after-tax income is topped up to) for the MFTC rose
from NZD 27 768 to NZD 30 576 per year, on 1 April 2021. It was further increased to NZD 31 096, on
1 July 2021.
3.6. Independent Earner Tax Credit
The Independent Earner Tax Credit of NZD 520 is available to individuals with annual net income between
NZD 24 000 and NZD 48 000 that do not receive other forms of tax credits or benefits. It is abated by
13 cents on each dollar earned over NZD 44 000.
4. Main Changes in Personal Tax/Benefit Systems since 2019/20
4.1. Changes to labour taxation and benefits due to the COVID pandemic in 2020
and 2021
The
Government’s initial response to the COVID-19
pandemic was announced on 17 March 2020.
Throughout 2020 some of the policies were adjusted in response to the re-emergence of COVID-19 in
Auckland. These adjustments are noted where applicable.
4.1.1. Main benefits increased by NZD 25 per week
Main benefits increased on 1 April 2020 in line with wage growth (indexation) and then by an additional
NZD 25 per week. This is a permanent increase.
4.1.2. Doubling of Winter Energy Payment
Since 1 July 2018, the Winter Energy Payment (WEP) supports those in receipt of a main benefit,
New Zealand Superannuation or a Veteran’s
Pension to heat their homes in winter by increasing the
amount of money available to them over the winter months (1 May to 1 October). Recipients can choose
to opt out. The WEP is a payment of NZD 450 a year for single people, and NZD 700 for couples or those
with dependent children.
WEP rates were temporarily doubled for 2020 only in response to the COVID-19 pandemic. The payment
is made either weekly or fortnightly between 1 May and 1 October. The 2020 rates were:
NZD 40.91 per week (NZD 900 for 2020) for single people with no dependent children;
NZD 63.64 for couples (NZD 1 400 for 2020), and people with dependent children. Couples are
paid NZD 63.64 whether they live together or separately;
Approximately 1 million people will be eligible for the WEP.
(Main benefits include Jobseeker Support, Supported Living Payment, Sole Parent Support, Youth
Payment, and Young Parent Payment).
4.1.3. Removal of hours test from the In-Work Tax Credit
The requirement to work a minimum number of hours in order to receive the In-Work Tax Credit has been
permanently removed. This allows families that work variable hours or less than 20 (sole parent) or 30
(couple) hours per week to receive the In-Work Tax Credit. The remaining eligibility criteria for the In-Work
Tax Credit remain unchanged. Therefore, recipient families must still be deriving income from work and
cannot be receiving an income-tested benefit or student allowance.
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4.1.4. Working for Families (WFF) tax credits for emergency benefit recipients
Previously, emergency benefit recipients with dependent children and who were on a temporary visa, did
not qualify for WFF tax credits. This is because they do not meet the residency criteria for WFF. This
resulted in a difference in the financial support that these families could access, compared with other main
benefit recipients with children.
In general, to receive a main benefit (including an emergency benefit) a person must be a New Zealand
citizen or permanent resident and have resided in New Zealand for at least two years since becoming a
citizen or resident. However, the Ministry of Social Development has discretion to grant an emergency
benefit in other circumstances when those residency criteria are not met. These circumstances can include
not being eligible for another benefit, that they are in hardship and unable to earn a sufficient livelihood.
The amendment ensures that families on a temporary visa who are granted an emergency benefit are able
to access some WFF payments (Family Tax Credit and Best Start Tax Credit) from 1 April 2021.
COVID-19 restrictions has meant some temporary visa holders are unable to work or to return to their
home country. A temporary change to Emergency Benefit eligibility was made to also allow Emergency
Benefit and WFF payments to migrants on temporary visas who are in financial hardship, while they make
arrangements to return to their home country. This change applies from 1 December 2020 until 31 August
2021.
4.1.5. Wage Subsidy,Wage Subsidy Extension, Resurgence Wage Subsidy and Wage
Subsidy August 2021
The original wage subsidy was implemented to support firms that might otherwise be unable to keep their
workforce employed. The goal was to maintain workforce attachment throughout the COVID-19 pandemic
and was paid at a flat rate of:
NZD 585.80 for people working 20 hours or more per week (full-time rate);
NZD 350.00 for people working less than 20 hours per week (part-time rate).
The subsidy was paid as a lump sum and covered 12 weeks per employee from the date of application.
Businesses were eligible to apply for the Wage Subsidy provided that they:
experienced a minimum 30% decline in actual or predicted revenue, which was related to
COVID- 19;
took active steps to mitigate the effects of COVID-19;
retained the employees named in the application for the period of the subsidy. This included a best
endeavours clause to continue to pay at least 80%
of each employees’ usual wage;
applied between 17 March and 9 June 2020.
The Wage Subsidy was extended for the period 10 June to 1 September 2020. The extension provided an
additional 8 weeks subsidy provided that employers:
experienced a minimum 40% decline in revenue for a continuous 30-day period within the 40 days
before the date of application, which was related to COVID-19;
took active steps to mitigate the effects of COVID-19;
retained the employees named in the application for the period of the subsidy. This included a best
endeavours clause to continue to pay at least 80% of each employees’ usual wage.
The Resurgence Wage Subsidy opened on 21 August when COVID-19 re-emerged in Auckland and
closed on 3 September 2020. The Resurgence Wage Subsidy criteria were:
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experienced or predicted revenue decline of at least 40% for any consecutive period of at least 14
days within 12 August and 10 September 2020 compared to 2019;
took active steps to mitigate the effects of COVID-19;
retained the employees named in the application for the period of the subsidy. This included a best
endeavours clause to continue to pay at least 80% of each employees’ usual wage.were
not
receiving the Wage Subsidy Extension for the same employee at the same time.
The Wage Subsidy August 2021 opened on 20 August 2021 when COVID-19 re-emerged in Auckland and
New Zealand went into a new nationwide lockdown. At the time of writing there have been three rounds of
the Wage Subsidy August 2021. Each round is a two-week lump-sum at the rate of NZD 600 a week for
each full-time employee and NZD 359 a week for each part-time employee. Further rounds may be
announced if parts of New Zealand remain at Alert Levels 3 or 4. The Wage Subsidy August 2021 criteria
were:
round #1 was open for applications for two weeks from 9am, Friday 20 August until, 11.59pm
Thursday 2 September;
round #2 was open for applications for two weeks from 9am, Friday 3 September until, 11.59pm
Thursday 16 September;
round #3 opened for applications for two weeks from 9am, Friday 17 September until 11:59pm
Thursday 30 September;
applications are accepted only two weeks after a business’s previous application. Applications
can
be made for Round #2 even if they did not make an application for Round #1;
the revenue test is a decrease of at least 40%. This means businesses need to have had (or predict
to have) a minimum 40% decline in revenue in the 14 days:
o
o
o
between 17
–
31 August for the initial Wage Subsidy payment.
between 31 August
–
13 September for Wage Subsidy #2.
between 14
–
27 September for Wage Subsidy #3.
when compared with their revenue during a typical 14-day period in the six weeks immediately
before the initial Alert Level escalation on 17 August 2021.
o
Businesses with highly seasonal revenue can compare their revenue to the same period in
2020 or 2019, if they can show that the seasonal nature of their business makes it harder for
them to meet the revenue test using the default comparison period.
The decline in revenue must be caused by the effect the continuation of Alert Levels 3 or 4
from 17 August 2021 has had on their businesses.
The criteria changed when all of New Zealand outside of Auckland moved down to Alert Level
2 on 7 September: Businesses that experience the 40% revenue drop due to a combination of
Alert Levels 3, 4 and 2 effects (but not the effect of Alert Level 2 alone) were eligible to apply
for the second payment. However, for the third round of the wage subsidy, businesses in Alert
Level 2 regions will only be eligible if they can attribute their 40% revenue decline solely to the
ongoing Alert Level 3 or 4 restrictions elsewhere.
o
o
businesses must have active steps to mitigate the effects of COVID-19;
retained the employees named in the application for the period of the subsidy. This included a best
endeavours clause to continue to pay at least 80% of each employees’ usual wage; and
at the time of application, businesses must not be receiving a payment under a COVID-19 Wage
Subsidy 2021 scheme, the COVID-19 Short-term Absence Payment, COVID-19 Leave Support
schemes or COVID-19 Essential Workers Support Scheme in respect of any of the named
employees.
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4.1.6.
Goods and Services Tax
(GST) on COVID-19 related social assistance payments
Legislation was passed that ensures that COVID-19 Leave Payments and the COVID-19 Wage Subsidy
are not subject to GST. The relevant legislation is the Goods and Services Tax (Grants and Subsidies)
Amendment Order 2020 and section 89 of the Goods and Services Tax Act 1985.
4.1.7.
The COVID-19 Income Relief Payment
The COVID-19 Income Relief Payment (CIRP) was a non-taxable temporary payment made to those who
had lost their job between 1 March and 30 October 2020. It was available for 12 weeks and paid NZD 490
per week to those who lost full-time work and NZD 250 per week for those who lost part-time work. First
applications opened 8 June. It was available while a person was out of paid work and not receiving a main
benefit payment, had not received a redundancy payment of NZD 30 000 or more, and who did not have
a partner who earned more than NZD 2 000 a week in wages or salary. People who qualified and who
were already receiving a main benefit could transfer to the CIRP.
4.1.8.
The Leave Support Scheme
The Leave Support Scheme was originally announced on 17 March 2020. It provided employers NZD
585.80 per week for full time and NZD 350 per week for part time workers, who were unable to work due
to self-isolation or COVID-19 infection. Employers are required to pass on the payment to the affected
employee(s). This scheme was folded into the Wage Subsidy on 27 March 2020, to prevent double
payments, and then alternative leave schemes were created (such as for Essential Workers in businesses
that did not qualify for a wage subsidy). Eventually a Leave Support Scheme was created that was
available for all employers to pay employees who were required to stay home due to COVID-19 infection
or otherwise required to self-isolate, and could not work from home. An employer could not receive a wage
subsidy at the same time as a Leave Support payment for the same employee.
On 22 September 2020 the Leave Support Scheme was expanded to cover:
People who have COVID-19 like symptoms and meet the Ministry of
Health’s criteria, and need to
self-isolate while awaiting the results of a COVID-19 test.
People who are directed to self-isolate by a Medical Officer of Health or their delegate or on advice
of their Health Practitioner, even if they do not have symptoms or have returned a negative test.
Some healthcare and social workers who work in high-risk areas such as retirement villages while
they are at home awaiting the results of a COVID-19 test (subsequently replaced by the STAP
payment from 9 February 2021).
The parent or caregiver of a dependant who is directed to self-isolate and needs support to do so
safely.
The period of the Scheme was matched to the two-week self-isolation requirement. Employers are able to
apply for a further two week payment if a longer period of self-isolation is required.
4.1.9.
The Short-Term Absence Payment
The Short-Term Absence Payment (STAP) applied from 9 February 2021. It provides a one-off payment
of NZD 350 for employers whose employees cannot work from home while awaiting a COVID-19 test
result. It also covers household contacts (or secondary contacts) who are staying at home in line with
public health guidance, while waiting for a close contact to get a test result.
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4.2. General changes to the tax/benefit system in 2021
4.2.1. A number of changes have been made to the tax and benefit system in 2021 that
are unrelated to the COVID-19 pandemic. New top tax rate
A new top tax rate of 39 percent on income earned over NZD 180 000 has applied since 1 April 2021. Prior
to this change the top tax rate was 33 percent on income earned over NZD 70 000.
5. Memorandum Items
5.1.
Method used to identify AW and to calculate the AW’s gross earnings
The Annual Earnings figure is derived from the Quarterly Employment Survey (QES) for those employees
in the B-N industry groups. The annual earnings figure for the average worker is the sum of the four
quarterly earnings figures, with each quarterly figure calculated by taking the average total weekly earnings
and multiplying it by 13 weeks per quarter. In 2021 the QES has been redesigned, which means that the
average wage data for 2021 may not be directly comparable to previous years.
2
5.2.
Employer’s contributions to private pension, health schemes, etc.
No information available.
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523
2021 Parameter values
Ave_earn
Income tax schedule
Tax_sch
66 077
0.105
0.175
0.3
0.33
0.39
5 878
4 745
42 700
0.25
3 770
780
30 966
1
520
24 000
44 000
0.13
Country estimate
14 000
48 000
70 000
180 000
Family tax credit
In-work tax credit
Minimum Family Tax Credit
Independent Earner Tax Credit
Fam_sup_eld
Fam_sup_oth
Fam_sup_thrsh
Fam_sup_rate
In_work_children123
In_work_children4plus
Min_inc
IETC
IETC_thrsh1
IETC_thrsh2
IETC_rate
1. The Minimum Family tax credit is NZD 30 576 from 1 April 2021 to 30 June 2021, then rate increases to NZD 31 096 from 1 July 2021 to 31
March 2022.
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524
2021 Tax equations
The equations for the New Zealand system in 2021 are mostly repeated for each individual of a couple.
But the cash transfer is calculated only once. This is shown by the Range indicator in the table below. The
functions which are used in the equations (Taper, MIN, Tax etc) are described in the technical note about
tax equations. Variable names are defined in the table of parameters above, within the equations table, or
are the standard variables “married” and “children”. A reference to a variable with the affix “_total” indicates
the sum of the relevant variable values for the principal and spouse. And the affixes “_princ” and “_spouse”
indicate the value for the principal and spouse, respectively. Equations for a single person are as shown
for the principal, with “_spouse” values taken as 0.
Line in country table and
intermediate steps
1.
2.
3.
4.
5.
6.
Earnings
Allowances
Credits in taxable income
CG taxable income
CG tax before credits
Tax credits :
Guaranteed minimum income
Independent Earner Tax Credit
Tax credits:
CG tax
Local tax
Employees' soc security
Cash transfers:
Family tax credit (unabated)
In-work tax credit (unabated)
Tax credits abated
Minimum Family tax credit
Cash transfers
Employer's soc security
Variable name
earn
tax_al
taxbl_cr
tax_inc
CG_tax_excl
GMI
IETC_rebate
tax_cr
CG_tax
local_tax
SSC
fam_tax_cr
in_work_tax_cr
tax_cr_ab
min_fam_tax_cr
cash_trans
SSC_empr
Range
Equation
B
B
B
B
J
B
B
B
B
B
J
J
J
J
J
B
0
0
earn
Tax(tax_inc, Tax_sch)
(Children>0)*Min_inc
=AND(cash_trans=0,earn>IETC_thrsh1)*Taper(IETC,earn,IE
TC_thrsh2,IETC_rate)
IETC_rebate
CG_tax_excl-tax_cr
0
0
Fam_sup_eld*(Children>0)+
Fam_sup_oth*Positive(Children-1)
(Children>0)*(In_work_children123+Positive(Children-
3)*In_work_children4plus)
Taper(fam_tax_cr+in_work_tax_cr, earn_total,
Fam_sup_thrsh1, Fam_sup_rate1)
Positive(GMI-(earn_total-CG_tax_excl_totall))
tax_cr_ab + min_fam_tax_cr
0
6.
7.
8.
9.
11.
13.
Key to range of equation B calculated separately for both principal earner and spouse P calculated for principal only (value taken as 0 for spouse
calculation) J calculated once only on a joint basis.
Notes
1
2
In the year to March 2021.
https://www.stats.govt.nz/methods/effects-of-the-qes-redesign-on-the-march-2021-quarter-statistics.
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525
Norway
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in the
tax/benefit system. The methodology also includes the parameter values and
tax equations underlying the data.
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526
Norway 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable (ordinary) income (1 - 2 + 3)
Central government income tax liability (ordinary + personal)
Tax credits (applicable against local tax)
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes (net of tax credits)
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
34.2%
n.a.
41.8%
n.a.
43.4%
n.a.
49.9%
n.a.
46.4%
n.a.
52.6%
n.a.
34.2%
n.a.
41.8%
n.a.
16.0%
8.2%
24.2%
32.9%
19.4%
8.2%
27.6%
36.0%
26.0%
8.2%
34.2%
41.7%
13.4%
8.2%
13.1%
23.1%
0
0
335 072
57 477
0
0
477 568
85 787
0
0
725 401
143 265
37 944
37 944
384 413
57 477
36 255
107 062
54 112
182 335
90 367
376 636
36 255
95 665
36 255
54 112
90 367
36 255
0
28 791
42 016
0
53 868
74 354
0
146 257
140 011
0
25 087
34 323
0
0
0
0
159 200
0
282 935
28 791
159 200
0
500 702
53 868
159 200
0
942 837
146 257
211 004
0
231 131
25 087
67
none
442 135
100
none
659 902
167
none
1 102 037
67
2
442 135
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527
Norway 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable (ordinary) income (1 - 2 + 3)
Central government income tax liability (ordinary + personal)
Tax credits (applicable against local tax)
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes (net of tax credits)
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
43.4%
24.2%
49.9%
32.9%
43.4%
34.2%
49.9%
41.8%
43.4%
43.4%
49.9%
49.9%
43.4%
34.2%
49.9%
41.8%
19.4%
8.2%
23.8%
32.6%
18.1%
8.2%
24.0%
32.7%
19.4%
8.2%
25.7%
34.3%
18.1%
8.2%
26.3%
34.7%
25 296
25 296
502 864
85 787
25 296
25 296
837 936
143 265
25 296
25 296
980 431
171 575
0
0
812 640
143 265
54 112
182 335
90 367
289 397
108 224
364 669
90 367
289 397
54 112
90 367
108 224
90 367
0
53 868
74 354
0
82 660
116 370
0
107 737
148 709
0
82 660
116 370
0
0
0
0
159 200
0
500 702
53 868
318 400
0
783 637
82 660
318 400
0
1 001 405
107 737
318 400
0
783 637
82 660
100-0
2
659 902
100-67
2
1 102 037
100-100
2
1 319 805
100-67
none
1 102 037
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528
The national currency is the Kroner (NOK). In 2021, NOK 8.54 were equal to 1 USD. In that year the
average worker earned NOK 659 902 (Secretariat estimate).
1. Personal Income Tax System
The personal income tax has two tax bases: personal income and ordinary income. Personal income is
defined as income from labour and pensions. Personal income is a gross income base from which no
deductions are made. Ordinary income includes all types of taxable income from labour, pensions,
business and capital. Certain costs and expenses, including interest paid on debt, are deductible in the
computation of ordinary income.
1.1. Central government income tax
1.1.1. Tax unit
The tax unit is in most cases the individual. Children aged below 17 are generally taxed together with their
parents, but they may be taxed individually. All other income earners are taxed on an individual basis.
1.1.2. Tax allowances applicable to an AW
There are no tax allowances applicable to an AW under the central government income bracket tax. The
tax base is personal income from which no deductions are allowed. As part of the overall tax rate of 22%
on ordinary income, 7.15% is considered to be the central government income tax.
1.1.3. Rate schedule of the bracket tax
Rate (%)
0
1.7
4.0
13.2
16.2
NOK
0–184 800
184 800–260 100
260 100–651 250
651 250–1 021 550
1 021 550 and over
1.2. Local government income tax
The overall tax rate on ordinary income is 22%. The local government (municipal and county) income tax
is 14.85% points of the overall rate. Tax on ordinary income is levied after taking into account a standard
allowance of NOK 52 450. Single parents are eligible to an additional special tax allowance of NOK 51 804.
The deductions in the computation of ordinary income are:
1.2.1. Standard reliefs
Basic allowance: each individual receives a minimum allowance equal to 46% of personal income,
with a minimum of NOK 4 000 and a maximum of NOK 106 750. For wage income each individual
can choose a separate allowance of NOK 31 800 instead of the basic allowance. Hence, wage
earners would opt to choose this separate allowance as long as it exceeds the basic allowance to
which they are entitled.
1.2.2. Non-standard reliefs
The main non-standard allowances deductible from ordinary income are:
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Parent allowance: Documented expenses for child care limited to:
‒
‒
maximum NOK 25 000 for one child;
plus NOK 15 000 for each subsequent child.
The allowance applies in general to the spouse who has the highest income. Unused parent allowance
may be transferred to the other spouse. The allowance is also applicable to single parents.
Travel expenses related to work exceeding NOK 23 900;
Labour union fees up to NOK 3 850;
Donations to voluntary organisations up to NOK 50 000;
Contributions to individual pension agreement schemes, maximum NOK 40 000;
Premiums and contributions to occupational pension schemes in the private and public sector,
unlimited;
Unlimited deduction for interest payments.
The main non-standard tax credits are:
Home savings scheme (BSU): The BSU scheme aims to encourage young people (under 34 years
old) to save for a future home purchase. A wastable tax credit of 20% of annual savings up to
NOK 27500 in special accounts is granted. Total savings may not exceed NOK 300 000.
2. Social Security Contributions
2.1. Contributions to the national insurance scheme
2.1.1.
Employees’ contributions
Employees’
contributions to the National Insurance Scheme generally amount to 8.2% of personal wage
income. Employees do not make contributions if their wage income is less than NOK 59 650. Once wage
income exceeds this floor, an alternative calculation is made where the contributions equal 25% of the
wage income in excess of the floor. The actual contributions made would represent the minimum between
the alternative calculation and 8.2% of the total wage income.
Contributions from the self-employed are 11.4% of personal income attributable to labour.
2.1.2.
Employers’ contributions
Employer’s social security contributions are due for all employees in both the private and the public sector.
The contribution is geographically differentiated according to the municipality where the work-place is. The
standard rates are 14.1%, 10.6%, 7.9%, 6.4%, 5.1% or 0% of gross wages. The highest rate applies to
central parts of southern Norway. Lower rates may apply under certain circumstances. The weighted
average rate is approximately 13%.
3. Universal Cash Transfers
3.1. Transfers related to marital status
None.
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3.2. Transfers for dependent children (child support)
The following transfers are available:
NOK 16 248 per child aged 0–5 years (NOK 1 354 per month).
NOK 12 648 per child aged 6–18 years (NOK 1 054 per month).
Single parents receive transfers for one more child (NOK 12 648) than their actual number of children.
4. Main Changes in Tax/Benefit Systems Since 2002
Most important changes related to wage taxation in 2021:
‒
‒
Rates in bracket 1 and 2 in the central government bracket tax were reduced from 1.9% and
4.2% to 1.7% and 4.0%, respectively.
The minimum allowance rate for personal income was increased from 45% to 46%.
The standard allowance was reduced from NOK 56 550 to NOK 51 300 to accompany the
NRK financing reform. Until 2019, the public broadcaster NRK was financed by a fee levied
on households owning a TV. From 2020, direct transfers from the central government replace
the broadcasting fee. The tax increase implied by the standard allowance reduction intends
to pay for the NRK transfers. If the broadcasting fee is regarded as a tax, the overall effect of
the NRK financing reform is reduced taxation for households with two or less tax paying
members.
The general tax rate on ordinary income was reduced from 23% to 22%.
The progressive bracket tax increased in all four brackets, less than the reduction in the rate
of ordinary income so as the marginal tax was reduced for all income levels.
Employers are required
to report, withhold taxes and pay employer’s social security
contributions on wages in the form of tax-exempted employee discounts with a market value
exceeding NOK 8 000. Gifts received from the employer are tax free when the value exceeds
NOK 2 000.
Employers are required
to report, withhold taxes and pay employer’s social security
contributions on tip/gratuities received from customers (previously tip was to be reported by
the employers).
A withholding tax on the gross income for foreign employees at 25% was introduced.
The general tax rate on ordinary income was reduced from 24% to 23%.
The progressive bracket tax increased in all four brackets, less than the reduction in the rate
of ordinary income so as the marginal tax was reduced at all income levels.
The upper limit of the basic allowance for wage income/social security benefits was increased
by NOK 2 860 and the rate was increased to 44%.
The standard allowance for class 2 was abolished, tax exemptions for employees on hire in
shipping vessels was abolished, and the rules for commuters expenses were tighten.
The general tax rate on ordinary income was reduced from 25% to 24%.
The rates under the bracket tax was increased with 0.71-0.82 percentage points, which is less
than the reduction in the rate of ordinary income.
Most important changes related to wage taxation in 2020:
‒
Most important changes related to wage taxation in 2019:
‒
‒
‒
‒
‒
Most important changes related to wage taxation in 2018:
‒
‒
‒
‒
Most important changes related to wage taxation in 2017:
‒
‒
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531
‒
‒
The upper limit of the basic allowance for wage income/social security benefits was increased
by NOK 3 300 and the rate was increased to 44%.
The lower threshold for the payment of employee’s social security contributions was increased
from NOK 49 650 to NOK 54 650.
The general tax rate on ordinary income was reduced from 27% to 25%.
A bracket tax with on personal income with 4 tax brackets was introduced and replaced the
former surtax on personal income.
The threshold in surtax bracket 1 was increased by NOK 5 750.
The upper limit of the basic allowance for wage income/social security benefits was increased
by NOK 2 100.
The lower threshold for the payment of employee’s
social security contributions was increased
from NOK 39 600 to NOK 49 650.
The general tax rate on ordinary income was reduced from 28% to 27%.
The employee’s social security contributions were increased
by 0.4 percentage points.
The rate in the basic allowance against wage income was increased to 43%.
Tax class 2 for married couples was reduced.
The personal allowance for labour income was increased for low income earners (below NOK
213 950) by 2 percentage points from 38% to 40% of their labour income.
The taxable value of second homes and commercial property for the purposes of net wealth
tax was increased from 40% to 50% of estimated market value.
The basic allowance in the net wealth tax was increased from NOK 750 000 to NOK 870 000.
Married couples will thus have a total basic allowance of NOK 1 740 000.
The current class 2 for sole providers was replaced by a special allowance for ordinary income
which provides an equivalent tax benefit.
The ma ximum deduction for labour union fees was increased from NOK 3 750 to NOK 3 850.
The personal allowance for labour income was increased for low income earners (below
NOK 217 000) by 2 percentage points from 36% to 38% of their labour income.
For self-employed the wage allowance was abolished to eliminate residual discrimination
between sole proprietorships with employees and limited companies.
In the deduction for travel expenses for travels between home and work the deduction rate
per kilometre was increased for tax payers travelling between 35 000 km and 50 000 km per
year.
The maximum deduction for labour union fees was increased by NOK 90 to NOK 3 750.
Most important changes related to wage taxation in 2016:
‒
‒
Most important changes related to wage taxation in 2015:
‒
‒
‒
Most important changes related to wage taxation in 2014:
‒
‒
‒
‒
Most important changes in 2013:
‒
‒
‒
‒
‒
Most important changes in 2012:
‒
‒
‒
‒
In 2011 changes to the tax system was made to provide better incentives for people to work when
drawing a pension. The tax limitation rule for early-retirement and old-age pensioners was replaced
by a new tax allowance for pension income. The allowance ensures that people who only receive
the minimum pension will continue not to pay income tax. The allowance is scaled down against
pension income, so that the marginal tax on earned income is reduced to the same level as for
wage earners. The marginal tax on capital for low-income pensioners is also reduced to the same
level as for other taxpayers. The new tax allowance is determined regardless of the spouse’s
income and married early-retirement and old-age pensioners will each have their own allowance.
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532
In addition, the pension income social security contribution is increased and the special allowance
for age is discontinued.
In 2010 a new formula-based system for determining the tax-assessed value of homes was
introduced. The new tax-assessed value will be determined by multiplying the floor space of the
dwelling by a square metre price based on the geographical location (neighbourhood, municipality,
sparsely populated vs. densely populated area), size, age and type (detached, semi-detached,
terraced, flat) of the property. For primary homes (owner-occupied), the per square metre rate will
be set at 25% of the estimated sale price per square metre, whereas the rate for second homes,
i.e. any other dwellings in addition to the primary home that are not defined as business or
recreational properties, will be set at 40% of the estimated sale price per square metre. The current
“safety valve” system is being continued so that taxpayers can appeal and have the tax-assessed
value reduced to 30% of the documented fair market value (60% for second homes). In addition,
the tax-assessed values of recreational properties are increased by 10%.
Most important changes in 2009 were the abolition of the 80% rule, which primarily reduced the
wealth tax of the richest. The wealth tax on equities for those who fall within the scope of the 80%
rule has been more than doubled since 2005.
The home savings scheme (BSU) was expanded in 2009 by increasing the annual savings amount
to NOK 20 000 and the maximum aggregate savings amount to NOK 150 000.
The rates of the inheritance tax were reduced and the exempted amount was increased in 2009.
The instalment scheme for family businesses was expanded through the abolition of the upper
limit, and the payment period was increased from 7 to 12 years.
Other changes in the personal tax base in 2009:
‒
‒
‒
‒
The fishermen's allowance was increased from NOK 115 000 to NOK 150 000.
The reindeer husbandry allowance was increased to the same level as the agriculture
allowance.
The allowance for labour union fees was increased by NOK 450 to NOK 3 600.
The rate of the travel allowance was increased from NOK 1.40 per km to NOK 1.50 per km.
The tax-free net income thresholds under the tax limitation rule were increased such as to ensure
that singles and couples who receive the minimum state pension will still not be paying tax following
the favourable social security settlement they benefited from in 2008.
A tax favoured contributions to individual pension agreement schemes was reintroduced as of
2008.
From 1 January, 2008 the employees’ SSC rate for self-employed
was increased from 10.7% to
11.0%.
The upper threshold in the surtax schedule was substantially reduced from 2006 to 2007.
The surtax rates were reduced in 2005 and 2006, as part of a reform of the dual income tax system.
The basic allowance has been substantially increased.
From 1 January, 2006 the supplementary employer’s social security contribution at 12.5% for gross
wage income that exceeds 16 times “G” (average “G” is estimated to be NOK
74 721 in 2010) was
removed.
From 1 January, 2006 the class 2 in the surtax was removed.
From 1 January, 2005 the ceiling in the parent allowance for two and more children was removed,
and the maximum allowance was increased with NOK 5 000 for each child after the first. From
2008 the maximum allowance will be increased with NOK 15 000 for each child after the first.
The additional child support of NOK 7 884 for children aged 1 and 2 years was abolished as of 1
August 2003.
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533
An allowance of maximum NOK 6 000 for donations to voluntary organisations was introduced as
of 1 January, 2003. Previously this allowance was coordinated with the allowance for labour union
fees (with a combined maximum allowance). The allowance was increased to NOK 12 000 as of 1
January, 2005.
As of 1 July, 2002 the employer’s social security contribution rates for employees aged 62 years
or older were reduced by 4 percentage points, although not below 0%. From 2007 the reduction
was abolished.
4.1. Changes to labour taxation due to the COVID pandemic in 2020 and 2021
Payment of the second and third instalments (there are 6 instalments annually)
employer’s social
security contribution in 2020 was postponed from May 15
th
and July 15
th
to August 15
th
and October
15
th
, respectively.
For the third instalment of the employer’s
social security contribution
in 2020, the rate was reduced
by 4 percentage points. In municipalities were the employer’s
social security
contribution rate is
0%, a subsidy equating to 4% of gross wages is paid to employers.
Payment of the first and second instalment (there are 4 instalments annually) of the advance tax
of self-employed in 2020 was postponed from March 15
th
and May 15
th
to May 1
st
and July 15
th
,
respectively.
5. Memorandum Items
5.1. Identification of an AW and calculation of earnings
The wage series used refers to full time employees in the B-N industry group (ISIC rev.4).
The calculation of annual wage earnings is as follows:
Weighted average monthly wage plus overtime times 12.
The average monthly wage is agreed payment for a wage earner working a normal agreed working-year.
It includes bonus payments and other allowances, but not payments for overtime, sick leave, and an
establishment’s indirect wage costs. The sum is weighted with the number of persons employed in the
different industry groups.
5.2.
Employers’ contributions to private health and pension schemes
No information available.
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534
2021 Parameter values
Average earnings/yr
Central rate (pers)
Ave_earn
Tax_sch
659 902
0
0.017
0.04
0.132
0.162
0.0715
0.1485
52 450
51 804
4 000
106 750
0.46
31 800
0.082
0.13
59 650
0.25
104 716
16
0
12 648
Secretariat estimate
184 800
260 100
651 250
1 021 550
Central rate (ord)
Local rate (ord)
Allowances
Basic relief
Soc security contribs
Employer
Trygd. low.lim
pct.rate
Ref. Income "G"
"G" Multiple
Supplemental Rate
Child cash transfer
Cent_rate_ord
Local_rate
Class_al
Special_al
Basic_min
Basic_max
Basic_rel_rate
Basic_min_wage
SSC_rate
SSC_empr
SSC_low_lim
SSC_low_rate
SSC_G
SSC_Gmult
SSC_rate_sup
Child_sup
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535
2021 Tax equations
The equations for the system for Norway in 2021 may be calculated on an individual or joint basis for
married couples. Social security contributions are calculated on an individual basis. The calculation for
Class 2 is chosen for married couples whenever this gives a lower value of tax than the corresponding
Class 1 calculations. The functions which are used in the equations (Taper, MIN, Tax etc) are described
in the technical note about tax equations. Variable names are defined in the table of parameters above,
within the equations table, or are the standard variables “married” and “children”. A reference to a variable
with the affix “_total” indicates the sum of
the relevant variable values for the principal and spouse. And
the affixes “_princ” and “_spouse” indicate the value for the principal and spouse, respectively. Equations
for a single person are as shown for the principal, with “_spouse” values taken as
0.
Line in country table and
intermediate steps
1.
2.
Earnings
Allowances:
tax allowance (ordinary)
Variable name
earn
tax_al_princ
P
Range
Equation
tax allowance (ordinary)
tax_al_spouse
S
MIN(MAX(Basic_min_wage, MIN(earn_princ*Basic_rel_rate,
Basic_max))
+Class_al+IF(AND(Married='0,Children>0),Special_al,o),'
earn_princ)
MIN(MAX(Basic_min_wage, MIN(earn_spouse*Basic_rel_rate,
Basic_max)) +Class_al, earn_spouse)
0
Positive(earn-tax_al)
3.
4.
Credits in taxable income
CG taxable income (ordinary)
taxbl_cr
tax_inc
J
B
5.
CG tax
(personal+ordinary)
CG_tax
B
Tax(earn, Tax_sch)+Cent_rate_ord*tax1_inc
6.
7.
8.
Tax credits :
CG tax
State and local taxes
tax_cr
CG_tax
local_tax
P
B
B
0
CG_tax
(Local_rate*(tax_inc_princ+tax_inc_spouse))-tax_cr
9.
11.
13.
Employees' soc security
Cash transfers
Employer's soc security
SSC
cash_trans
SSC_empr
B
J
B
MIN(earn*SSC_rate, Positive(SSC_low_rate*(earn-SSC_low_lim)))
(children>0)*Child_sup
earn*SSC_empr
Key to range of equation B calculated separately for both principal earner and spouse P calculated for principal only (value taken as 0 for spouse
calculation) J calculated once only on a joint basis.
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536
Poland
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in the
tax/benefit system. The methodology also includes the parameter values and
tax equations underlying the data.
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537
Poland 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other (health insurance)
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's wage dependent contributions and taxes
Employer's compulsory social security contributions
payroll taxes
Total
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
25.8%
n.a.
36.2%
n.a.
25.8%
n.a.
36.2%
n.a.
39.8%
n.a.
48.3%
n.a.
96.3%
n.a.
96.9%
n.a.
5.6%
17.8%
23.4%
34.2%
6.4%
17.8%
24.2%
34.9%
7.6%
17.8%
25.4%
35.9%
-0.8%
17.8%
-14.7%
1.5%
5 930
1 095
7 025
8 851
1 634
10 485
14 781
2 729
17 511
5 930
1 095
7 025
0
0
32 895
0
0
48 587
0
0
79 824
13 595
13 595
49 239
4 320
3 335
7 655
10 047
6 448
4 978
11 425
15 506
10 767
8 312
19 080
27 212
4 320
3 335
7 655
7 298
0
2 872
3 397
2 392
0
0
4 286
4 811
4 081
0
0
7 158
7 635
8 132
0
2 224
2 872
6 146
- 357
0
525
525
477
1 050
8 887
0
34 055
5 789
11 787
0
52 306
8 892
17 675
0
89 361
15 766
8 887
0
34 055
5 789
5 887
3 000
8 787
3 000
14 675
3 000
5 887
3 000
67
none
42 942
100
none
64 093
167
none
107 035
67
2
42 942
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538
Poland 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other (health insurance)
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's wage dependent contributions and taxes
Employer's compulsory social security contributions
payroll taxes
Total
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
25.8%
24.6%
36.2%
35.2%
25.8%
25.8%
36.2%
36.2%
25.8%
25.8%
36.2%
36.2%
25.8%
25.8%
36.2%
36.2%
2.1%
17.8%
0.2%
14.3%
4.0%
17.8%
10.0%
22.7%
4.6%
17.8%
12.6%
24.9%
6.0%
17.8%
23.9%
34.6%
8 851
1 634
10 485
14 781
2 729
17 511
17 702
3 269
20 971
14 781
2 729
17 511
12 600
12 600
63 936
12 600
12 600
96 306
12 600
12 600
111 998
0
0
81 482
6 448
4 978
11 425
12 757
10 767
8 312
19 080
23 329
12 895
9 955
22 850
28 788
10 767
8 312
19 080
25 553
2 224
4 286
7 561
1 331
0
2 224
7 158
10 432
4 249
0
2 224
8 572
11 847
5 937
0
0
7 158
8 208
6 473
0
1 050
1 050
1 050
1 050
11 787
0
52 306
8 892
20 675
0
86 361
14 681
23 574
0
104 612
17 784
20 675
0
86 361
14 681
8 787
3 000
14 675
6 000
17 574
6 000
14 675
6 000
100-0
2
64 093
100-67
2
107 035
100-100
2
128 186
100-67
none
107 035
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539
The national currency is the Zloty (PLN). In 2021, PLN 3.84 were equal to USD 1. In that year, the average
worker earned PLN 64 093 (Secretariat Estimate).
1. Personal income tax system
An individual being a tax resident in Poland is liable to tax on the basis of world-wide income, irrespective
of the source and origin of that income. (The term “residency” is understood similarly to Article 4 paragraph
2 point a) of the OECD Model Tax Convention on Income and Capital).
1.1. Central government income tax
1.1.1. Tax unit
Individuals are taxed on their own income, but couples married during the whole calendar year
1
can opt to
be taxed on their joint income. In the latter case, the ‘splitting’ system applies: the tax bill for a couple is
twice the income tax due on half of joint income, provided the joint income does not include capital income
taxed at the flat 19% rate. Single individuals with dependent children are also entitled to use the splitting
system (their family quotient is two). For the purpose of this report, it is assumed that married couples are
taxed on joint income.
1.1.1.1. Tax base
1.1.1.1.1. Gross employment income
For taxation purposes, taxable gross employment income in Poland includes both cash income and the
value of benefits in kind. More specifically, gross employment income includes base salary, overtime
payments, bonuses, awards, compensation for unused holidays, and costs that are paid in full or in part
by the employer on behalf of the employee.
1.1.2. Tax allowances and tax credits
1.1.2.1. Standard reliefs
Basic relief (since 1st October 2019): A non-refundable tax credit of:
2
‒
‒
PLN 1 360
–
for the tax base not higher than PLN 8 000;
PLN 1 360 minus the amount resulting from the following formula: PLN 834.88 × (tax base
PLN 8 000) ÷ PLN 5 000, for the tax base higher than PLN 8 000 and not higher than
PLN 13 000;
PLN 525.12 - for the tax base higher than PLN 13 000 and not higher than PLN 85 528;
PLN 525.12 minus the amount resulting from the following formula: PLN 525.12 × (tax base–
PLN 85 528) ÷ PLN 41 472, for the tax base higher than PLN 85 528 and not higher than
PLN 127 000.
‒
‒
Marital status relief: None.
Relief for children: Yes.
3
A taxpayer can deduct from the due tax decreased by the amount of health contributions specified in the
PIT Act, the amount, which is equal for each month of raising a child:
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540
PLN 92.67 (annually PLN 1 112.04) for the first child, if the income received by parents (married
or single parent, who meets special requirements) does not exceed in the tax year the amount of
PLN 112 000. For other parent the threshold of income is PLN 56 000;
PLN 92.67 (annually PLN 1 112.04) for the second child;
PLN 166.67 (annually PLN 2 000.04) for the third child;
PLN 225.00 (annually PLN 2 700.00) for the fourth and every next child.
Since 1
st
of January 2015 taxpayers whose due tax is lower than the amount of relief for children, may
claim for cash refund for amount of relief which has not been utilized. However, such cash refund cannot
exceed the amount of deductible social security and health insurance contributions paid by taxpayer (with
some exceptions).
Relief for health insurance contributions: A tax credit is almost equal to health insurance
contribution paid to the National Health Fund. The contribution is 9% of the calculation basis
whereas the tax credit is 7.75% of this basis.
Relief for other social security contributions: An allowance is provided for all social insurance
contributions paid by the taxpayer.
Relief for selected work-related expenses: Standard deductions depend on the number of
workplaces and on whether place of residence and workplace are within the same town/city or not.
The annual amounts in PLN (deductible from income) are:
One workplace
Workplace in the same town/city as place of residence
Workplace in different town/city as place of residence
3 000 since October 2019
3 600 since 1
st
October 2019
1
st
4
Two/more workplaces
(4 500 since 1
st
October 2019
5 400 since 1
st
October 2019
Note: If the actual commuting expenses exceed standard deduction, relief can be determined by the actual expenses incurred solely on personal
season tickets.
1.1.2.2. Main non-standard tax reliefs
Allowances:
Expenses for the purpose of rehabilitation incurred by a taxpayer who is a disabled person, or a
taxpayer, who supports the disabled;
Equivalent of blood donations, donations made for the purposes of public benefit activity and of
religious practice
–
in the amount of donation, no more than 6% of income;
Donations made for charity church care - in the amount of the donation;
Expenses incurred for the use of the Internet
–
a taxpayer is entitled to deduct the Internet tax
allowance within the next two years, providing that during the phase preceded this period he did
not deduct expenses for the use of the Internet (up to PLN 760);
Expenses incurred during undertaking of thermo-modernization project for single-family residential
building up to PLN 53 000;
Abolished allowance (since 2007 continued on the acquired right basis) for interests payments on
mortgage loans raised no later than in 2006 on acquisition of housing property on the primary
market
–
up to the amount of interests related to the part of loan not exceeding PLN 325 990 for
investments finished in 2017.
Tax credits:
Donation made to public benefit organizations
–
up to 1% of due tax.
5
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541
Abolished tax credits (continued on the acquired rights basis), i.e. expenses for saving with the aim
of buying a house or flat, the amount of social contributions paid on income of an unemployed
person hired by a taxpayer in order to take care of their children and/or house.
Exemptions:
Gross wages up to PLN 85 528 for people under 26 years old are exempted from PIT.
1.1.3. Tax schedule
The tax schedule is as follows:
Tax base (in PLN)
Over
Below
0
85 528
85 528
Tax amount
less a basic tax credit
17% since October 2019
PLN 14 539.76+ 32% of surplus over PLN 85 528 (since 1
st
October
2019)
1
st
1.2. State and local income tax
There are no regional or local income taxes.
1.3. Wealth tax
There is no wealth tax.
1.4. Solidarity surcharge
The act on the Solidarity Support Fund for Disabled Persons entered into force on 1 January 2019. The
purpose of a legislative proposal was to introduce a new institution in a form of fund, managed by the
Minister of Family, Labour and Social Policy, which would be focused on social support for people with
disabilities. In 2020 the Fund was renamed to Solidarity Fund. The source of the Fund's revenues are
primarily a compulsory contribution to the Fund representing 0.15% in 2019, 0.45% in 2020 and since 2021
1.45% of the base of the contribution rate to the Labour Fund (the compulsory contribution to the Labour
Fund has decreased from 2.3% of the basis for the calculation of contributions to pension and disability
insurance to 2% in 2020 and to 1% since 2021), as well as the solidarity contribution on the income of
individuals - in the amount of 4% from a surplus of income (gross income minus SSC of employee) over
PLN 1 million for a tax year.
2. Social Security Contributions
2.1.
Employees’ contributions
Employees pay 13.71% of the gross wage. This contribution includes:
Pension insurance contribution
–
9.76% of the gross wage.
6
3.65 percentage points of the pension
contribution are treated as non-tax compulsory payments because these payments are either made
to the OPF (1.46%) and to personal sub-account in ZUS (2.19%) or only to sub-account in ZUS
(3.65%),
Disability insurance contribution
–
1.5% of the gross wage,
Sickness/maternity insurance contribution
–
2.45% of the gross wage,
In case of pension and disability insurance, contributions are not paid on the part of the wage that
exceeds PLN 157 770.
7
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2.2.
Employers’ contributions
In respect of income paid under an employment contract with a Polish entity, employers have an obligation
to pay social security contributions and payroll taxes equal to 20.01% of gross wage. This value consists
of:
A) Social security contributions:
9.76 % are aimed for pension insurance.
8
3.65 % of the pension contribution are treated as non-
tax compulsory payments because these payments are either made to the OPF (1.46%) and to
personal sub-account in ZUS (2.19%) or only to sub-account in ZUS (3.65%),
6.5 % are aimed for disability insurance,
1.20 % (on average) accident insurance,
In case of pension and disability insurance, contributions are not paid on the part of the wage that
exceeds PLN 157 770.
B) Payroll taxes:
1 % for Labour Found,
1,45% for Solidarity Fund,
and 0.1% for the Guaranteed Employee Benefit Fund.
3. Universal Cash Transfers
3.1. Transfers related to marital status
None.
3.2. Transfers for dependent children
From 1st of November 2012 families where the average monthly income per household member for the
previous period is no greater than PLN 539 or PLN 623 when there are one or more disabled children in
the household) are entitled to family allowances. From 1st of November 2015 the income criteria will be as
high as PLN 674 and PLN 764. Families receive PLN 89 (from 1st of November 2016
–
PLN 95) monthly
for a child no older than 5 years, PLN 118 (from 1st of November 2016
–
PLN 124) monthly for a child of
5 up to 18 years old, and PLN 129 (from 1st of November 2016
–
PLN 135) monthly for a child of 18 up to
24 years old. The calculations in this Report are based on the assumption that the children are aged
between 6 and 11 years inclusive.
Single parents are entitled to a supplement of PLN 185 (from 1st of November 2016
–
PLN 193) for each
child up to a maximum of PLN 370 (from 1st of November 2016
–
PLN 386) for all children (and PLN 265
(from 1st of November 2016
–
PLN 273) for a disabled child up to a maximum of PLN 530 (from 1st of
November 2016
–
PLN 546) for all children).
There are several supplements to family allowances:
for large families
–
PLN 90 (from 1st of November 2016
–
PLN 95) monthly for the 3rd and next
children in the family;
for education of disabled children
–
PLN 80 (from 1st of November 2016
–
PLN 90) monthly for
children not older than 5 years and PLN 100 (from 1st of November 2016
–
PLN 110) for children
older than 5 years.
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543
3.2.1. Parental benefit
On 1 January 2016 a parental benefit was introduced, aside from the already existing family and care
benefits. The parental benefit is provided to families to which a child is born but whose members had not
been eligible to a parental or maternity leave: students, the unemployed (regardless of registration with a
labour office), people employed on the basis of civil law contracts, employees and people pursuing non-
agricultural economic activity if they are not collecting maternity benefit. The parental benefit is granted
regardless of income in the amount of PLN 1 000 a month for 52 weeks (after giving birth to one child in
one labour), 65 weeks (after giving birth to two children in one labour), 67 weeks (after giving birth to three
or four children in one labour) and for 71 weeks (after giving birth to five or more children in one labour).
3.2.2. Family 500 Plus Programme
Financial support for families with children
1 April 2016 (Act on state support for upbringing children entered into force 1 April 2016)
The Act on state support for upbringing children introduced new benefits- in amount of PLN 500 monthly
per child until the child turns 18, which would be means-tested for the first child and available for all families
for every additional child. The new benefit of PLN 500 a month (untaxed) is available for parents, actual
guardian or legal guardian of a child until the child turns 18. The benefit will also be paid for the second
child and any subsequent child without application of any income criteria. It will be paid for the first child if
income of the family per one member does not exceed PLN 800 a month (PLN 1 200 if there is a disabled
child in the family)
9
. Eligibility to this benefit is established for a year (from 1 October to 30 September).
Since 1st July 2019 the extension of 500+ programme came into force: there is no income testing hence
every child is eligible for the benefit so the transfer has become universal.
3.2.3. Good Start Programme
Since 2019 a new benefit of PLN 300 was introduced. Every child that is attending school until it turns 20
is eligible for this benefit which is paid once a year at the start of the school year. There is no income test.
4. Main Changes in Tax/benefit Systems Since 2012
Since January 2017, the tax schedule has been changed by introduction of degressive basic tax credit.
The work-related expenses, tax allowances, relieves are the same as in previous years.
Since 2012, there were also changes in Social Security Contribution. Since February 2014, 14.96% of the
old-age insurance contribution (2.92 percentage points) are transferred by ZUS to a privately-managed
fund (OPF) but since July 2014 this part of contribution will be transferred only if insured persons decides
to
–
otherwise all 7.3 percentage points of the contributions will be passed to subaccount in ZUS.
On 1
st
January 2019 as the solidarity contribution on the income of individuals - in the amount of 4% from
a surplus of income (gross income minus SSC of employee) over PLN 1 million for a tax year was
introduced.
Since August 2019 gross wages up to PLN 85 528 for people under 26 years old are exempted from PIT.
Since October 2019 the first marginal tax rate has been lowered from 18% to 17%.and work-related
expenses were more than doubled.
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544
4.1. Changes to labour taxation due to the COVID pandemic in 2020 and 2021
Exemption from social security contributions (employee’s and employer’s part) for up to 3 months period
for enterprises registered before February 2020:
exemption of 50% from SSC in enterprises that have reported to Social Security Fund from 10 to
49 people
exemption of 100% from SSC in enterprises that have reported to Social Security Fund from 1 to
9 people,
Since less than half of the full-time workers within sectors B to N are affected by the temporary exemption
of social security contributions, the measure is not considered in the Taxing Wages calculations.
Subsidies for employee remuneration costs and social security contributions up to three months period:
a subsidy to downtime pay in the amount of 50% of minimum wage plus social security
contributions
a subsidy up to half of the salary of employees, but no more than 40% of the average monthly
salary from the previous quarter plus social security contributions
The subsidy can be granted if the decline in sales revenues amounted to:
not less than 15% - calculated as the ratio of total sales revenues in the following two months
period after Jan 2020, to the total sales revenues from the corresponding 2 months of the previous
year (i.e. 2019); or
not less than 25% - calculated as the ratio of total sales revenues in any given month in the period
after Jan 2020 compared to the turnover from the previous month.
Subsidies for employee remuneration costs and social security contributions for micro, small and medium-
sized enterprises for up to 3 month period in the amount of:
50% of minimum wage plus social security contributions per employee, if the decline in sales
revenues amounted to 30%,
70% of minimum wage plus social security contributions per employee, if the decline in sales
revenues amounted to 50%,
90% of minimum wage plus social security contributions per employee, if the decline in sales
revenues amounted to 80%.
A decline in total sales revenues is calculated based on the following two months of 2020 compared to the
total sales revenues from the corresponding 2 months of 2019.
5. Memorandum Items
5.1. Identification of AW and valuation of earnings
The Polish Central Statistical Office calculates average monthly wages and salaries for employees on the
basis of reports of enterprises. The figures include overtime and bonus payments and also include
information for part-time employees converted to full-time equivalents. Male and female workers are
included. The information, which includes estimates for different sectors, is published in the monthly
Statistical Bulletin.
5.2.
Employers’ contributions to private pension, health and related schemes
No information provided.
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545
2021 Parameter values
Average earnings/yr
Work expenses
Income tax schedule
Ave_earn
work_exp
tax_sch
64 093
3 000
0.17
0.32
10
Secretariat Estimate
85 528
Tax credits
Basic credit
Health insurance
Children
Social security contributions
Employers
old-age pension and disability pension insurance
basic_cr1
basic_cr2
basic_cr_lim1
basic_cr_lim2
basic_cr_lim3
basic_cr_lim4
red_rate_1
red_rate_2
health_ins
health_ins_credit
Child_cr
Child_cr_lim
SSC_empr
SSC_old
SSC_old_ZUS
SSC_old_ZUSII
SSC_old_OPF
SSC_dis
SSC_a
Payroll_tax
SSC
SSC_old_e
SSC_old_e_ZUS
SSC_old_e_ZUSII
SSC_old_e_OPF
SSC_dis_e
SSC_s
SSC_c
fam_ben
fam_ben_Spsup
fam_ben_Spsup_lim
fam_ben_lim
fam_ben_lim_sp
plus_ben
gs_ben
solid_sur_rate
solid _thr
1 360
525.12
8 000
13 000
85 528
127 000
0.166976
0.012662037
0.09
0.0775
1 112.04
112 000
0.2008
0,0976
0.0611
0.0365
0
0.065
0.012
0.0255
0.1371
0.0976
0.0611
0.0365
0
0.015
0.0245
157770
1 588
2 316
4 632
8 088
8 088
6 000
300
0.04
1 000 000
other insurances
Payroll_tax
Employees
old-age pension and disability pension insurance
sickness insurance
Contribution ceiling
Family benefit
single parent additional family benefit
single parent additional family benefit ceiling
income limit
income limit for single parent
Family 500 Plus Programme
“Good start” benefit
Solidarity surcharge rate
Solidarity surcharge threshold
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546
2021 Tax equations
The equations for the Polish system are mostly calculated on a family basis.
The standard functions which are used in the equations (Taper, MIN, Tax etc) are described in the technical
note about tax equations. Two additional functions (Tax93 and ftax) have been incorporated to carry out
an iterative calculation for central government tax. These allow for the fact that the church tax is calculated
as 9% of Central Government tax and is also allowed as a deduction when calculating taxable income.
Variable names are defined in the table of parameters above, within the equations table, or are the
standard variables “married” and “children”. A reference to a variable with the affix “_total” indicates the
sum of the relevant variable values for the principal and spouse. And the affixes “_princ” and “_spouse”
indicate the value for the principal and spouse, respectively. Equations for a single person are as shown
for the principal, with “_spouse” values taken as 0.
Line in country table and
intermediate steps
Variable name
Range
Equation
1.
2.
3.
4.
5.
6.
Earnings
Quotient for tax calculation
Allowances:
Credits in taxable income
CG taxable income
CG tax before credits
Tax credits :
Basic credit
earn
quotient
tax_al
taxbl_cr
tax_inc
CG_tax_excl
basic_cr
J
J
J
J
J
J
1+MAX(Married,(Children>0))
work_exp+MIN(earn_spouse,work_exp)+SSC+SSC_old_e_OPF*MIN(ear
n, SSC_c)
0
Positive(earn-tax_al)
quotient*Tax(tax_inc/quotient,tax_sch)
=IF(quotient=1,Positive(IF(TAX_INC>basic_cr_lim1,basic_cr1-
(Positive(MIN(TAX_INC,basic_cr_lim2)-basic_cr_lim1)*red_rate_1)-
(Positive(TAX_INC-
basic_cr_lim3)*red_rate_2),basic_cr1))*quotient,Positive(IF((TAX_INC/2)
>basic_cr_lim1,basic_cr1-(Positive(MIN((TAX_INC/2),basic_cr_lim2)-
basic_cr_lim1)*red_rate_1)-(Positive((TAX_INC/2)-
basic_cr_lim3)*red_rate_2),basic_cr1))*quotient)
health_ins_credit*(earn-SSC-SSC_old_e_OPF*MIN(earn, SSC_c))
If(earn_total<Child_cr_lim,children*child_cr,0)
basic_cr+health_ins_cr+child_cr
MAX(0,Positive(CG_tax_excl-basic_cr-health_ins)-child_cr)-
(child_cr>Positive(CG_tax_excl-basic_cr-
health_ins))*MIN(SSC_al+health_ins,child_cr-Positive(CG_tax_excl-
basic_cr-health_ins))
0
(earn-(MIN(earn,
SSC_c)*(SSC_old_e+SSC_dis_e)+earn*SSC_s))*health_ins
(SSC_old_e_ZUS+SSC_dis_e)*MIN(earn,SSC_c)+SSC_s*earn
='MAX(0,(fam_net_inc<fam_ben_lim*(1+Married+Children)-
240+(Children*fam_ben+(1-
Married)*(Children>0)*MIN(fam_ben_Spsup*Children,fam_ben_Spsup_li
m)))*(Children*fam_ben+(1-
Married)*(Children>0)*MIN(fam_ben_Spsup*Children,fam_ben_Spsup_li
m))-IF(fam_net_inc>fam_ben_lim*(1+Married+Children),fam_net_inc-
fam_ben_lim*(1+Married+Children),0))+(Children*plus_ben)+
(gs_ben*Children)
=Positive(earn-SSC_al-health_ins-CG_tax-work_exp)
(SSC_old_ZUS+SSC_dis)*MIN(earn,SSC_c)+SSC_a*earn
Earn*Payroll_tax
7.
Health insurance
Child credit
Total tax credits
CG tax
health_ins_cr
child_cr
tax_cr
CG_tax
B
J
J
J
8.
9.
.
11.
State and local taxes
Employees' soc security
local_tax
health_ins
SSC
cash_tran
J
B
B
J
Cash transfers
13.
Employer's soc security
fam_net_inc
SSC_empr
Payroll tax
J
B
B
Key to range of equation:
B calculated separately for both principal earner and spouse,
P calculated for principal only (value taken as 0 for spouse calculation),
J calculated once only on a joint basis.
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547
Notes
1
2
3
However, a widowed spouse is entitled to apply the joint income taxation.
Applicable only in a tax return.
It concerns a child of 18 years old or younger or a child up to 25 years old provided they are students or
a disabled child irrespective of their age. The actual description in section 4.
4
For the purpose of the calculations in this publication, it is assumed that the worker has the same town/city
as place of residence.
5
6
This relief is distinct from an allowance for donations deducted from income.
Since July 2014 out of total 19.52% of social contributions 7.3% goes to subaccount in ZUS either
–
if
voluntarily stated by insured person
–
2.92% goes to account in open ended funds and 4.38% to
subaccount in ZUS.
7
The contribution ceiling of pension and disability insurance funds for a given calendar year may not
exceed thirty times the amount of the projected average monthly remuneration in the national economy for
that year, as set forth in the Budgetary Act.
8
Since July 2014 out of total 19.52% of social contributions 7.3% goes to subaccount in ZUS either
–
if
voluntarily stated by insured person
–
2.92% goes to account in open ended funds and 4.38% to
subaccount in ZUS.
9
Some of the features (namely, joint taxation and child tax credit) of the Polish tax system are optional
and therefore can influence eligibility to “500+” family, and in a consequence tax wedge, in a non-linear
way. As they
both determine “net income for income test” and because of no tapering of “500+” sometimes
it may be preferable not to use joint taxation or child tax credit (or to use it partially) in order to get the most
appropriate net income to maximize the family benefit payments. As for now model treats both joint taxation
and child tax credit as obligatory. With the parameters in the excel file (average wage etc.) it does not alter
the results. However, if any of the parameters change, the previous statement may not hold.
10
Lump-sum annual work expenses for an employee having one workplace and living in the place (town,
city) where the workplace is; employees living outside the city (town) where their workplace is may deduct
3 600 PLN annually.
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548
Portugal
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in the
tax/benefit system. The methodology also includes the parameter values and
tax equations underlying the data.
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549
Portugal 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
34.0%
n.a.
46.7%
n.a.
39.5%
n.a.
51.1%
n.a.
48.0%
n.a.
58.0%
n.a.
34.0%
n.a.
46.7%
n.a.
11.8%
11.0%
22.8%
37.6%
17.0%
11.0%
28.0%
41.8%
23.8%
11.0%
34.8%
47.3%
3.1%
11.0%
6.8%
24.7%
0
0
10 658
3 278
0
0
14 828
4 893
0
0
22 426
8 171
1 002
1 002
12 861
3 278
1 518
3 145
2 266
5 773
3 785
11 979
1 518
1 945
1 518
2 266
3 785
1 518
0
1 626
0
0
3 507
0
0
8 194
0
1 200
426
0
0
0
0
1 200
0
0
0
0
4 104
0
9 699
1 626
4 104
0
16 498
3 507
4 104
0
30 301
8 194
4 104
0
9 699
1 626
0
0
0
0
4 104
4 104
4 104
4 104
67
none
13 803
100
none
20 602
167
none
34 405
67
2
13 803
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550
Portugal 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
34.0%
33.9%
46.7%
46.6%
39.5%
39.5%
51.1%
51.1%
39.5%
39.5%
51.1%
51.1%
39.5%
39.5%
51.1%
51.1%
6.7%
11.0%
14.5%
30.9%
11.3%
11.0%
22.3%
37.2%
14.1%
11.0%
25.1%
39.5%
14.8%
11.0%
25.8%
40.0%
672
672
17 622
4 893
0
0
26 744
8 171
0
0
30 857
9 786
0
0
25 544
8 171
2 266
3 652
3 785
7 661
4 532
10 346
3 785
8 861
2 266
3 785
4 532
3 785
1 200
1 385
0
1 200
3 876
0
1 200
5 814
0
0
5 076
0
1 200
1 200
1 200
0
0
0
0
0
4 104
0
16 498
2 585
8 208
0
26 197
5 076
8 208
0
32 995
7 014
8 208
0
26 197
5 076
0
0
0
0
4 104
8 208
8 208
8 208
100-0
2
20 602
100-67
2
34 405
100-100
2
41 203
100-67
none
34 405
The national currency is the Euro (EUR). In 2021, EUR 0.84 equalled USD 1. The Secretariat has
estimated that in that same year the average worker earned EUR 20 602 (Secretariat estimate).
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551
1. Personal income tax system
1.1. Taxes levied by central government
1.1.1. Tax unit
The standard rule is separate taxation. However, families may opt for joint taxation. Income includes the
income of any dependent children. Tax is computed on aggregate net income in the various categories of
income, i.e. after the deductions specific to each category and standard and non-standard reliefs.
1.1.2. Standard and non-standard reliefs and tax credits
1.1.2.1. Standard reliefs
Standard deduction of EUR 4 104. If compulsory contributions to social protection schemes and statutory
sub-schemes for health care exceed that limit, the deduction will equal the amount of those contributions.
1.1.2.2. Non-standard reliefs
For income received from 1 January 1999 onwards, the majority of the standard reliefs have been replaced
by tax credits (see Section 1.1.4.).
Non-standard reliefs still in effect:
A deduction is provided for the portion of trade union dues not constituting consideration for benefits in the
realm of health care, education, assistance for the elderly, housing, insurance or social security, up to 1%
of the taxpayer’s gross income, increased by 50%. These
dues are not taken into account in the
calculations underlying this Report.
1.1.3. Social security contributions
Social security contributions are totally deductible if they exceed EUR 4 104.00 per taxpayer, in which case
the deduction for the contributions replaces the standard earned income deduction (see Section 1.1.2.1.).
1.1.4. Tax credits
Basic credits
EUR 600 for each dependent child. This tax credit is increased by EUR 126 for dependent children
whose age does not exceed 3 years old. The value is increased to EUR 300 and EUR 150 for the
second and third dependent whose age does not exceed 3 years old.
EUR 525 for each ascendant whose income does not exceed the minimum pension benefit. When
there is only one ascendant, the tax credit increases by EUR 110.
Other tax credits
35% of household general expenses up to a limit of EUR 250, per taxpayer; this limit is increased
to 45% and EUR 335, respectively, for single parents.
Non-reimbursed health care costs, not covered by Social Security: 15% of health care costs, with
a limit of EUR 1 000.
Expenditures for educating the taxpayer or the taxpayer’s dependants: 30% of outlays, up to
EUR 800.
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Costs for sanatoria or retirement homes for taxpayers, their ascendants and collaterals up to the
third degree whose income does not exceed the national minimum wage: 25% of expenses up to
EUR 403.75.
15% of the amount spent (up to EUR 296.00) on interest regarding the acquisition, construction or
improvement of the taxpayer’s primary residence, or leasing contracts (applicable
to contracts up
to 31/12/2011); 30% of the amount spent (up to EUR 300) on rents paid by students under 25 years
old, studying more than 50km away from home; and 15% of the amount spent (up to EUR 502,00)
on rents paid by a tenant for his permanent residence under an agreement typified by the law.
These limits are also increased for taxpayers in the first tax rate bracket and for taxpayers with
income above the first rate bracket upper limit and below EUR 30.000, according to the formula
below.
30000 − ������������������������ ������������������������
296 + [(450 − 296) ∗ (
)]
30000 − 7112
20% of alimony payments compulsory under court order or court-approved agreement.
30% of education expenditures and 25% of life insurance premiums, up to a limit of 15% of the tax
liability, for handicapped taxpayers or dependents.
15% of VAT paid for certain services (restaurants, lodging, hairdressers, and auto-repair), 22.5%
of VAT paid for veterinarian medicines an 100% of VAT paid for public transport use up to a limit
of EUR 250. This benefit is not included on the limits referred to on the next page.
Tax credits from tax benefits
Individual Retirement Savings Plans (PPRs): 20% of amounts invested, for unmarried taxpayers
or for each spouse, up to:
‒
‒
‒
EUR 400 for taxpayers under 35;
EUR 350 for taxpayers over 35 and under 50;
EUR 300 for taxpayers over 50.
Social Security Individual Accounts: 20% of amounts invested, for unmarried taxpayers or for each
spouse, up to a limit of EUR 350.
Donations granted on the conditions stated in the statutes governing charities (grants to central, regional
or local government, special “social solidarity institutions”, museums, libraries, schools, institutes,
educational or research associations, public administrative bodies, etc.): 25% of donations, limited in
certain cases to 15%
of the donor’s tax liability. However the total of tax credits related to health care costs,
education and training, alimony, retirement homes, VAT paid, house expenses and tax benefits cannot
exceed the values of the following amounts:
Taxable income (EUR) (R)
Up to 7 112
Between 7 112 and 80 882
Limit
Without limit
80882 − ������������������������ ������������������������
1000 + [(2500 − 1000) ∗ (
)]
80882 − 7112
EUR 1 000
Over 80 882
Limits are increased in 5% for each dependent.
1.1.5. Family status- determination of taxable income
The default status is individual taxation. Couples can opt for joint taxation based on the income-splitting
system as it is described below. In the Taxing Wages calculations, the most favourable system is chosen.
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1.1.6. Tax rate schedule (applicable to 2021 income)
Taxable income (EUR) (R)
Up to 7 112
Over 7 112 up to 10 732
Over 10 732 up to 20322
Over 20 322 up to 25 075
Over 25 075 up to 36 967
Over 36 967 up to 80 882
Over 80 882
14.50
23.00
28.50
35.00
37.00
45.00
48.00
Marginal tax rate (%) (T)
---
604.52
1194.79
2515.66
3017.27
5974.61
8401.21
Amount to deduct (EUR) (K)
In the case of taxpayers whose income stems primarily from dependent employment (earned income),
disposable income after application of the tax rates to taxable income may not be less than, EUR 9 215.01
that was 1.5 times the annual value of the Social Benefits Index per taxpayer in 2021.
For residents in the Autonomous Regions of the Azores, reduced tax rates are applicable. Tax calculation
formula (I = Income tax due):
Unmarried taxpayers: I = R x T - K - C
Married taxpayers can opt for joint taxation based on the income splitting method (with one or two earned
incomes/see Section 1.1.5):
Where:
R=
T=
K=
C=
Surtax:
An additional surtax, solidarity tax rate, was introduced by the 2012 State Budget and is applicable on
highest income bracket. The surtax tax rate is now 2.5% applicable to taxable income between EUR 80 882
and EUR 250 000 and 5% for taxable income above EUR 250 000.
Taxable income, after deduction of standard and non-standard reliefs (see Sections 1.1.2)
Tax rate corresponding to the taxable income bracket
Amount to be deducted from each bracket
Tax credits (see Section 1.1.4)
I ={[ (R : 2) x T - K] x 2 }
–
C
1.1.7. Special family situations
1.1.7.1. Handicapped taxpayer/spouse, with a disability rating of 60% or more:
A tax credit corresponding to 4 times the 2010 minimum wage (EUR 1 900) is granted for each taxpayer
or spouse.
1.1.7.2. Handicapped dependent children, with a disability rating of 60% or more:
A tax credit corresponding to 2.5 times the social benefits index
1
(EUR 1 187.50) is granted for each
dependent child.
1.1.7.3. Handicapped taxpayer/spouse or dependent children, with a disability rating of
90% or more:
An additional tax credit corresponding to 4 times the 2010 minimum wage (EUR 1 900) is granted for each
taxpayer or spouse or dependent child.
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1.1.8. Non liable income
Lawfully granted family allowances;
Living expenses per diem, up to the limits established for national civil servants;
Meal allowances, up to the amount established for national civil servants, increased by 20% or
60% in the event of a meal allowance in the form of meal vouchers.
2. Compulsory social security contributions to schemes operated within the
government sector
Rates and ceilings: social security contributions are levied on gross pay and are not subject to any ceiling.
2.1. Employee contributions
As a rule, the rate of employee contributions is 11% of gross pay, with no ceiling.
2.2. Employer contributions
The employer’s rate of social security contributions
is 23.75% of gross pay, with no ceiling.
2.3. Areas of social protection
Health (sickness, disability, work accidents, work-related illness);
Old age, survival;
Maternity;
Family (family allowances);
Unemployment.
3. Universal cash benefits
3.1. Benefits for dependent children
The basic principle is to grant higher monthly social benefits to lower-income households.
There are six different levels of monthly allowances for dependent children, depending on the family’s
reference income. This reference income is determined
by dividing the family’s annual gross income,
including vacation and Christmas allowances, by the number of dependent children plus one:
Level 1: Families whose reference income is under 50% of 14 times the reference value (i.e. under
EUR 3 071.67);
Level 2: Families whose reference income is over 50% and under 100% of 14 times the reference
value( i.e. over EUR 3 071.67 and under EUR 6 143.34);
Level 3: Families whose reference income is over 100% and under 150% of 14 times the reference
value (i.e. over EUR 6 143.34 and under EUR 9 215.01);
Level 4: Families whose reference income is over 150% (i.e. over EUR 9 215.01).
Each level is also divided according to the age of the dependent child. Benefits are higher during the first
12 months of a child’s
life.
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Monthly social benefits per child are as follows:
Child under
36 months
Benefit per child
under 36 months
in a family with 2
children
187.31
154.62
125.31
72.99
Benefit per child
under 36 months
in a family with 3
or more children
224.77
185.55
153.31
87.59
Child over
36 months
and under
72 months
old
49.95
41.23
32.44
19.46
Child over
72 months
old
Level 1
Level 2
Level 3
Level 4
149.85
123.69
97.31
48.35
37.46
30.93
28.00
-
Monthly social benefits per child in a single-parent family are increased by 35%.
In September, families with dependent school children aged between 6 and 16 years receiving child
benefits in level 1 receive an additional amount equal to the regular monthly benefit.
An amount equal to the cash benefits for dependent children under 12 months is attributed for each unborn
child after the first month following that of the 13th week of gestation.
3.2. Benefits for handicapped dependent children
There is also a special family allowance scheme for handicapped children.
The above cash benefits (in Sections 3.1 and 3.2) are not taxable.
4. Main changes in the tax/benefit system since 2006
The relief for disabled taxpayers was restructured. Former partial exemptions and allowances were
replaced by tax credits.
Tax credits for higher income households were limited or abolished.
The fiscal autonomy of local authorities (municipalities) increased. They may set the level of their
share in the revenue from personal income tax, up to 5% of their resident taxpayers’ tax liability. If
this rate
is set below 5%, the difference will be credited against the taxpayers’ tax liability.
Tax credits for handicapped taxpayers and dependants were increased.
Social benefits for dependent children were increased for low income families, single-parent
families and families with 2 or more children.
Introduction of social benefits for unborn children.
A family coefficient was introduced in 2015 and abolished in 2016.
From 2016, the tax unit is the individual. However, couples can opt for joint taxation.
4.1. Changes to labour taxation due to the COVID pandemic in 2020 and 2021
2/3 of remuneration, min. EUR 635 and max. EUR 1 905, supported equally by the Social Security
(a group of seven institutions under the Ministry of Labour, Solidarity and Social
2
) and the employer,
for employees that have to quarantine at home with their dependent children, under 12 years old,
during the school period. For self-employed it is 1/3 of contributions, with a min. of EUR 438.81
and a max. of EUR 1 097.03.
Several measures for loss of activity, depending on employment status.
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5. Memorandum items
5.1. Method used to identify and compute gross wages of the average worker
The operative concept of monthly compensation is that of amounts paid to full time staff before deductions
for tax and compulsory contributions. It therefore includes wages and basic salaries of staff paid by the
hour, by the job, or by tasks; benefits in kind or housing, if they are considered an integral part of
compensation; cash subsidies for meals, housing or transport; bonuses for regular night shifts and
seniority, as well as incentive pay and rewards for diligence and productivity; family allowances,
compensation for overtime and work on holidays. Benefits, subsidies and bonuses are taken into account
only if paid regularly at each pay period.
Payments in kind are incorporated into the concept of compensation. The statistics record such
advantages in kind at their taxable value.
All managerial and supervisory workers are included in the computations.
Average annual pay is based on the average of monthly earnings for April and October multiplied by an
adjustment coefficient representing the share of annual bonuses and allowances (including vacation
subsidies and the Christmas allowance), which is provided by the labour cost survey.
The following formula is applied:
Average annual pay = Average monthly pay adjusted by the coefficient x 12.
5.2.
Description of the employer’s main contributions to private retirement, health
insurance schemes, etc.
Outside the social security system, employers are required to insure their employees against work-related
accidents (with private insurance companies). They may also provide their employees with life insurance,
although this is optional.
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2021 Parameter values
Average earnings/yr
Tax allowances
Tax credits
Married (basic)
Single (basic)
Single parent
Each child credit
Tax schedule
Ave_earn
perc
max_al
married_cred
single_cred
singlepar_cred
child_cred
tax_sch
20 602
1
4 104
0
0
0
600
0.145
0.23
0.285
0.35
0.37
0.45
0.48
na
0.025
0.05
250 000
0.11
0.2375
0
3071.67
6143.34
9215.09
0.35
9310
9215.01
Secretariat estimate
7 112
10 732
20 322
25 075
36 967
80 882
Surtax
Social security contributions
ceiling
Child benefit - Schedule
tax_floor
surtax_rate
surtax_rate2
surtax_thrs
SSC_rate
SSC_empr
ch_ben_sch
449.52
371.16
336.00
0
1st echelon
2nd echelon
3rd echelon
4th echelon
Extra child benefit for lone parents
Minimum Wage
Minimum Disposable Income
ch_ben_lone
MW
MinDispY
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2021 Tax equations
The equations for the Portuguese system in 2020 are calculated on individual basis. Couples can opt for
joint taxation based on the income-splitting system. In the Taxing Wages calculations, the two systems are
modelled and the most favourable system is chosen.
The functions which are used in the equations (Taper, MIN, Tax etc) are described in the technical note
about tax equations. Variable names are defined in the table of parameters above, within the equations
table, or are the standard variables “married” and “children”. A reference to a variable with the affix “_total”
indicates the sum of the relevant variable values for the principal and spouse. And the affixes “_princ” and
“_spouse” indicate the value for the principal and spouse, respectively. Equations
for a single person are
as shown for the principal, with “_spouse” values taken as 0.
Line in country table and
intermediate steps
1.
2.
Earnings
Allowances:
Variable name
earn
tax_al
Range
Equation
B
J
3.
4.
5.
Credits in taxable income
CG taxable income
Adjusted taxable income
CG tax before credits
taxbl_cr
tax_inc
tax_inc_adj
CG_tax_excl
B
J
B
J
MAX(MIN(perc*earn, max_al), SSC)
MAX((MIN(perc*earn_princ, max_al)+MIN(perc* earn_spouse,
max_al)), SSC_princ+SSC_spouse)
0
earn-tax_al
tax_inc/(1+Married)
IF(tax_inc>tax_floor,Tax(tax_inc,tax_sch),0)
IF(tax_inc_adj>tax_floor,Tax(tax_inc_adj,tax_sch)*(1+Married),
0)
0
IF(AND(Married>0,earn_spouse>0),Children*child_cred/2,Child
ren*child_cred)
Children*child_cred
basic_cr+child_cr
IF(tax_inc>surtax_thrs,(surtax_rate*(surtax_thrs-
TopIncBracket)+surtax_rate2*(tax_inc-
surtax_thrs)),surtax_rate*Positive(tax_inc-TopIncBracket))
IF(tax_inc_adj>surtax_thrs,(surtax_rate*(surtax_thrs-
TopIncBracket)+surtax_rate2*(tax_inc_adj-
surtax_thrs))*(1+Married),surtax_rate*Positive(tax_inc_adj-
TopIncBracket)*(1+Married))
IF(earn-CG-tax-excl> MinDispY,Positive(CG_tax_excl-
tax_cr),0)+surtax
IF(earn-CG-tax-excl>
MinDispY*(1+(Married*earn_spouse>0)),Positive(CG_tax_excl-
tax_cr),0)+surtax
0
earn*SSC_rt
=IF(Married='0,'
VLOOKUP(earn/(Children+1),ch_ben_sch,2,1)*Children*(1+ch_
ben_lone),
VLOOKUP(earn/(Children+1),ch_ben_sch,2,1)*Children)
+IF(earn/(Children+1)<inc_level1,IF(married>0,(ben_level1/12)*
children,( ben_level1/12)*(children*(1+ch_ben_lone)),0)
earn*SSC_empr
6.
Tax credits :
Basic credit
Child credit
basic_cr
child_cr
B/J
B
J
B/J
B
Total
Surtax
tax_cr
surtax
J
7.
CG tax
CG_tax
B
8.
9.
11.
State and local taxes
Employees' soc security
Cash transfers
local_tax
SSC
cash_trans
B/J
B
J
13.
13. Employer's soc security
SSC_empr
B
Key to range of equation B calculated separately for both principal earner and spouse P calculated for principal only (value taken as 0 for spouse
calculation) J calculated once only on a joint basis.
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559
Notes
1
2
The 2010 minimum wage (EUR 475) until de SBI reaches that value.
Direção Geral da Segurança Social, Instituto de Gestão de fundos de capitalização da Segurança Social,
Instituto de Gestão Financeira da Segurança Social, Instituto de Informática, Instituto de Segurança Social,
Instituto de Segurança Social da Madeira and Instituto de Segurança Social dos Açores.
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Slovak Republic
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in the
tax/benefit system. The methodology also includes the parameter values and
tax equations underlying the data.
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Slovak Republic 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other (ETC)
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employers' compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
29.9%
n.a.
46.0%
n.a.
29.9%
n.a.
46.0%
n.a.
34.0%
n.a.
49.2%
n.a.
29.9%
n.a.
46.0%
n.a.
7.4%
13.4%
20.8%
39.0%
10.4%
13.4%
23.8%
41.3%
12.9%
13.4%
26.3%
43.3%
-0.6%
13.4%
6.3%
27.9%
0
0
7 472
2 824
0
0
10 730
4 215
0
0
17 325
7 040
612
612
8 836
2 824
1 264
1 958
1 886
3 345
3 150
6 180
1 264
1 206
1 264
1 886
3 150
1 264
0
0
0
0
0
694
0
0
0
0
0
0
1 459
0
0
0
0
0
0
3 030
0
0
0
752
0
752
- 58
0
5 775
0
3 655
694
6 397
0
7 677
1 459
7 556
0
15 948
3 030
5 775
0
3 655
694
4 511
0
0
1 264
4 511
0
0
1 886
4 407
0
0
3 150
4 511
0
0
1 264
67
none
9 430
100
none
14 075
167
none
23 505
67
2
9 430
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Slovak Republic 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other (ETC)
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employers' compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
29.9%
29.1%
46.0%
45.4%
29.9%
29.9%
46.0%
46.0%
29.9%
29.9%
46.0%
46.0%
29.9%
29.9%
46.0%
46.0%
-0.5%
13.4%
8.5%
29.6%
6.0%
13.4%
16.8%
35.9%
7.7%
13.4%
18.9%
37.6%
9.2%
13.4%
22.6%
40.4%
612
612
12 878
4 215
612
612
19 566
7 040
612
612
22 824
8 431
0
0
18 202
7 040
1 886
1 809
3 150
4 550
3 772
5 937
3 150
5 303
1 886
3 150
3 772
3 150
0
0
752
0
752
- 77
0
0
0
752
0
752
1 401
0
0
0
752
0
752
2 165
0
0
0
0
0
0
2 153
0
10 522
0
3 553
675
12 173
0
11 332
2 153
12 795
0
15 355
2 917
12 173
0
11 332
2 153
4 511
4 125
0
1 886
9 023
0
0
3 150
9 023
0
0
3 772
9 023
0
0
3 150
100-0
2
14 075
100-67
2
23 505
100-100
2
28 149
100-67
none
23 505
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On 1 January 2009 Slovakia joined the Euro zone; the national currency became the Euro (EUR). In 2021,
EUR 0.84 was equal to USD 1. In that year, the average worker earned EUR 14 075 (Secretariat estimate).
1. Personal Income Tax System
1.1. Central government income taxes
1.1.1. Tax unit
The tax unit is the individual.
1.1.2. Tax allowances and tax credits
1.1.2.1. Standard reliefs
Basic relief: An allowance for all taxpayers is set at 21 times the minimum living standard (MLS)
for a basic adult as of January 1 2021 (EUR 4 511.43). In 2021, the basic personal allowance for
taxpayers with gross earnings net of employee social security contributions in excess of the
threshold of EUR 19 936.22 per year (19 936.22 = 92.8 x MLS, which is approximately equal to an
employee’s monthly gross wage of EUR
1 918) is gradually withdrawn. If gross earnings net of
employee social security contributions exceed EUR 19 936.22, the personal allowance is
calculated as 44.2 times the minimum living standard minus 0.25 times gross earnings net of
employee social security contributions. The basic personal allowance reaches 0 if the gross
earnings net of employee social security contributions amount to EUR 37 981.94 per year
(employee’s monthly gross wage of approximately EUR
3 655). The value of the basic tax
allowance cannot become negative.
The regressive tax allowance is taken into account only once a year (when the tax return is filed or
when the annual clearing is performed). Monthly tax prepayments during the year are therefore not
affected.
Marital status relief: An additional allowance is given to the principal earner in respect of a spouse
living in a common household if the spouse earns no more than EUR 4 124.74. As from January
1, 2008 the value of the spouse allowance depends on the gross earnings net of employee social
security contributions of both the principal and the spouse. As of 2013, to be entitled to the spouse
allowance one of the following conditions should be met:
‒
‒
‒
‒
spouse is taking care of (not necessarily personally) children up to 3 years (or up to 6
years if the child is disabled) or
spouse is unemployed or
spouse is receiving nursing allowance or
spouse is disabled.
If the principal’s gross earnings net of employee social security contributions in 2021 are lower or equal to
EUR 37
981.94 (= 176.8 times MLS) and the spouse’s gross earnings net of employee social security
contributions are lower than EUR 4 124.74, the spouse allowance is calculated as the difference between
19.2 times MLS and the spouse’s gross earnings net of employee social security contributions. If the gross
earnings net of employee social security contributions of the spouse exceed EUR 4 124.74, the spouse
allowance is 0. If the principal’s gross earnings net of employee social security contributions exceed
EUR 37 981.94 (= 176.8 times MLS), the spouse allowance is calculated as 63.4 times MLS minus 0.25
times the principal’s
gross earnings net of employee social security contributions. This amount is reduced
by the spouse’s gross earnings net of employee social security contributions. The value of the spouse
allowance cannot become negative.
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The digressive tax allowance is taken into account only once a year (when the tax return is filed or when
the annual clearing is performed). Monthly tax prepayments during the year are therefore not affected.
For the purposes of this Report,
only families with an unemployed spouse are entitled to the spouse
allowance (spouse income does not influence any equations of the spouse allowance as of 2013). Child
care up to 3 years does not affect the calculation of tax wedges as according to the
Taxing wages
methodology any children in the household are assumed to be aged between six and eleven inclusive.
Relief for children: The prior allowance for children has been replaced by a non-wastable tax credit
as from January 2004. As from July 2007, the monthly tax credit is automatically indexed by MLS
growth as of 1st July when also the new amount of MLS comes into force. Since 2015 the monthly
tax credit is automatically indexed on January 1 by the MLS growth from the previous year. Monthly
tax credit in 2021 is EUR 23.22 per child for the whole year. The annual amount will be
EUR 278.64. The tax credit for each dependent child is deducted from the tax liability; if the credit
exceeds the tax liability, the excess will be paid to the taxpayer. In order to receive this credit, the
parent must annually earn at least 6 times the minimum monthly wage, which for 2021 is set at
EUR 623.0 (the total annual earnings must therefore be at least EUR 3 738.0). The credit can be
taken only by one partner. It can be taken by one partner for a part of the tax period (year) and by
the other partner for the rest of the tax period (year); this choice will have to hold for all dependent
children. (For the purposes of this Report, it is assumed that the credit is claimed by the principal
wage earner). Since 2019, the tax credit on dependent children is doubled for each child below the
age of 6 years. Since July 2021, 1.7-times the basic value of the tax credit is provided for children
aged 6 to 15 years (1.7*23.22 = EUR 39.47 in 2021). As per the
Taxing Wages
methodology, the
amount used in the model in 2021 reflects the average tax credit over the year (6*23.22 + 6*39.47
= EUR 376.14).
Relief for social and health security contributions: Employee’s social security contributions (see
Section 2.1.) are deductible for income tax purposes.
1.1.2.2. Main non-standard tax reliefs applicable to an average wage worker
Supplementary pension insurance, special-purpose savings and life insurances was repealed as from
January 2011. As of 2014 an allowance for supplementary pension insurance has been reintroduced.
Supplementary pension contributions are tax-deductible up to the maximum limit of EUR 180 per year.
In 2018, a tax allowance for spa treatment was introduced. Each taxpayer can deduct up to EUR 50 per
year per each member of the family (the principal earner, the spouse and their children) for expenses on
domestic spa services. The allowance was abolished in 2021.
1.1.2.3. Non-wastable tax credit: employee tax credit (ETC / zamestnanecká prémia)
Prior to 2015 low-income workers were eligible for employee tax credit. The employee tax credit was
effective since 2009 and depended on the employee’s earnings and the number of months worked. In
order to receive the employee tax credit, earnings should be at least 6 times of the minimum wage. The
credit was then calculated as 19% of the difference between the basic allowance and the tax base (gross
earnings net of employee SSC) calculated from 12 times the minimum wage or from the actual income
(whichever is higher). In 2021 the tax base at the level of the minimum wage (EUR 6 474.22) is higher than
the basic allowance (EUR 4 511.43). The tax credit is therefore automatically zero (so effectively nobody
can be eligible).
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1.1.3. Tax schedule
As from 2013 the previous flat tax rate of 19% was replaced by a new tax schedule with two tax brackets.
The ceiling for the first bracket is set out as 176.8 times MLS (equal to EUR 37 981.94), which secures its
automatic indexation. The tax schedule is as follows:
Annual taxable income (EUR)*
0–37 981.94
37 981.94 and over
Rate (%)
19
25
* Employee’s social security contributions (see 1.12.) are deductible for income tax purposes.
1.2. State and local income tax
Personal income tax (PIT) is redirected solely to the local governments. The share of PIT yield which is
transferred to municipalities is 70%. The share of PIT yield transferred to self-governing regions is 30%.
2. Compulsory Social Security Contributions to Schemes Operated within the
Government Sector
2.1.
Employees’ contributions
Compulsory contributions of 13.4% of gross wages and salaries are paid by all employees into government
operated schemes. The total is made up as follows:
-- Health Insurance
-- Social Insurance
of which:
-- Sickness
-- Retirement
-- Disability
-- Unemployment
4.0%
9.4%
1.4%
4.0%
3.0%
1.0%
There are maximum assessment bases MSSAB (maximum threshold for contributions to apply) that apply
to social security contributions. From 2004 these MSSAB are no longer fixed values but depend upon the
average wages (AW). As of 2013 formulae for calculation of all maximum assessment bases has been
unified. Since 2017, the MSSAB for health insurance contributions are abolished. As of 2017, the monthly
MSSAB for social insurance contributions are calculated as: 7 x AW(t-2), where AW(t-2) is the average
wage two years ago (previous equation for calculating the MSSAB was 5 x AW(t-2)). The average wage
(AW) is determined by the Statistical Office of the Slovak Republic
–
for 2019 it was EUR 1092 per month.
In 2015, the health insurance contribution (HIC) allowance was introduced. The allowance decreases the
employee’s and employer’s assessment base for the health insurance. It amounts to EUR
380 per month
(EUR 4 560 annually) and decreases with rising income up to EUR 570 (EUR 6 840 annually) when it
reaches zero. With EUR 1 rise in the monthly income the monthly allowance is reduced by EUR 2. The
HIC allowance is applicable only on standard employment income (not self-employed income or income
based on temporary contracts). However, to determine the amount of allowance all types of incomes are
assessed, to target only low income workers. In 2018, the HIC allowance for employers was abolished.
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2.2.
Employers’ contributions
The total contribution for employers is 35.2% of gross wages and salaries. The contribution comprises the
health insurance contribution (10% of gross wages and salaries) and the social insurance contribution
(25.2%). The social insurance rate reflects contributions to sickness insurance (1.4%), disability insurance
(3%), retirement insurance (14%), the Guaranteed Fund (0.25%), accident insurance (0.8%), for
unemployment (1%) and to the Reserve Fund (4.75%). All contributions are rounded down to two decimal
places.
Since January 2005, Slovakia has introduced the privately managed fully funded pillar. This means that a
given proportion (9 percentage points) of social contributions paid by the employer for retirement insurance
flew directly to the private pension funds and not to the Social Insurance Agency as in the previous years.
As from September 2012
pension sharing scheme has been changed. Employer’s retirement contribution
rate to the fully funded pillar has been reduced from 9% to 4% (for more see pension contribution sharing
scheme table below). As from 2017 contribution rate to the II. pillar automatically increases by 0.25 p.p.
per year (i.e. contribution rate to the I. pillar decreases in the same volume), stopping at 6% to the II. pillar
and 8% to the I. pillar in 2024. Private pension funds are treated outside of the general government; these
contributions are therefore not taken into account in the calculations of average and marginal tax rates.
For the purposes of this Report, the total contribution rate for employers in 2021 is 29.95% with
contributions to the second pension pillar not included in the rate.
In 2015 the health insurance contribution (HIC) allowance was introduced and in 2018 it was abolished for
employers, while for employees it remains unchanged (for more see 2.1).
The MSSAB also applies to the employer’s SSC. The next table
presents the annual values of MSSAB:
Formula for MSSAB
Health insurance
Social insurance
of which
-- sickness, retirement, unemployment, disability, Guarantee fund, Reserve fund
-- accident
Value of MSSAB
No limit
7.0 x AW (t-2)
91 728. 00
No limit
Social security contributions: Pension
–
contribution sharing in case of II. Pillar participation
Period
System up to September 2012
System up to December 2016
System up to December 2017
System up to December 2018
System up to December 2019
System up to December 2020
Current system from January 2021
I Pillar
Percentage of gross earnings
II Pillar
9% (employer contribution)
4% (employer contribution)
4.25% (employer contribution)
4.5% (employer contribution)
4.75% (employer contribution)
5% (employer contribution)
5.25% (employer contribution)
Total
18%
18%
18%
18%
18%
18%
18%
9% (5% employer + 4% employee
contribution)
14% (10% employer + 4% employee
contribution)
13.75% (9.75% employer + 4% employee
contribution)
13.5% (9.5% employer + 4% employee
contribution)
13.25% (9.25% employer + 4% employee
contribution)
13% (9% employer + 4% employee
contribution)
12.75% (8.75% employer + 4% employee
contribution)
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3. Universal Cash Transfers
3.1. Transfers related to marital status
None.
3.2. Transfers for dependent children
The central government pays a benefit for each dependent child in the amount of EUR 25.50 per month in
2021. In January 2008 allowance surcharge for dependent children whose parents are not eligible for the
non-wastable child tax credit was introduced. The monthly amount of this benefit is EUR 11.96 in 2021.
For the purpose of the tax wedge calculations this benefit is not relevant, as only non-workers and
taxpayers with annual earnings lower than six times the minimum monthly wage (which is the condition for
eligibility for the non-wastable child tax credit) are entitled to the surcharge.
The non-wastable tax credit mentioned in Section 1.1.2.1 is part of the social support for families with
dependent children. However, it is not considered as a transfer for the purposes of this Report.
3.3. Transfers related to social status
To determine the claim to state social benefits (for example the allowance for housing costs), the minimum
living standard amounts are relevant as they form the basis of the income test. The MLS amounts are
indexed on 1 July. For 2021, these amounts are:
MLS monthly (1.7.2020 – 30.06.2021)
First adult
Second adult
Child
214.83
149.87
98.08
MLS monthly (1.7.2021 – 30.06.2022)
218.06
152.12
99.56
A family is entitled to a social allowance if the total combined monthly disposable income of the family is
less than the calculated MLS for this family. In the calculation of the benefit eligibility, only 75% of net
income from employment is taken into account. The allowance varies with the family type.
The benefits available to a family in material need (valid for 2021) are:
EUR 67.80 per month for an individual.
EUR 129.00 per month for an individual with between one and four children.
EUR 117.80 per month for a couple without children.
EUR 176.40 per month for a couple with between one and four children.
EUR 188.40 per month for an individual with more than four children.
EUR 237.70 per month for a couple with more than four children.
activation allowance: EUR 69.40 per month
–
for people who become active either by accepting
qualifying employment opportunities or participating in retraining courses.
housing allowance: EUR 58.50 per month for individual in material need, EUR 93.40 for a
household in material need (if household has more than 1 person).
protection allowance: EUR 69.40 per month for an individual in material need where employment
is not possible due to such circumstances as a disability or old age, EUR 38.10 per month for
individual on sick leave for at least 30 consecutive days and EUR 14.90 for a pregnant woman
from 4th month of the pregnancy and lasts until the child’s age of 1 year (for the purpose of this
Report, protection allowance is assumed to be EUR 69.40 for each individual).
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568
specific allowance: EUR 69.40 per month - entitlement arise for long-term unemployed individuals
who move into work for 6 months (does not affect the calculations in this Report).
dependent child allowance: EUR 19.00 per month for a child who properly fulfils compulsory school
attendance.
The amounts are indexed on January 1 in line with the growth of the MLS on July 1 in the previous year.
4. Main Changes in Tax/Benefit Systems since 2017
Automatic growth of the contribution rate to the II. pension pillar by 0.25 p.p. per year was introduced in
2017. The contribution rate to the I. pillar decreases by the same amount. In 2021 the contribution rate to
the II. pillar is 5.25 % and contribution to the I. Pillar is 8.75% (see Section 2.2). Moreover, the MLS value
was revised up in July 2017 after 4 years of no change, which led to changes in the tax system allowances,
credits and brackets from January 2018. Since 2018 the HIC allowance for employers was abolished.
In 2018, there were also legislative changes which do not directly affect calculations of the tax wedge used
in this Report. The first is a new spa tax allowance for the PIT. Each taxpayer is allowed to reduce their
tax base by up to EUR 50 each for themselves, their spouse and children if they spent money on domestic
spa services. The allowance was abolished in 2021.
The second change is related to support for housing mortgage interest payments for young people. Since
2018 taxpayers are allowed to deduct mortgage interest payment (maximum amount is EUR 400 per year)
from their own tax liability. Previously, support for housing was in the form of a public subsidy.
Third, pensioners who earn income from special short term labour contracts (dohoda
o vykonaní práce)
benefit from an SIC allowance of EUR 200 per month from July 2018.
New exemptions of the 13th and 14th salaries were introduced in 2018. This measure has a negative
impact on revenues, which is increasing with gradual phasing of exemptions from health insurance
contributions, the PIT, and from 2019 onwards also from social insurance contributions. Maximum
exemption is EUR 500 per additional salary. Since 2021, the exemptions of the 13th and 14th salary are
abolished.
Overview and timing of PIT and SSC exemptions of 13th and 14th salary (Y = exemption)
2018
2019
SIC
HIC
PIT
SIC
HIC
PIT
SIC
13
th
salary (June)
Y
Y
Y
Y
Y
Y
Y
Y
Y
14
th
salary (December)
2020
HIC
Y
Y
PIT
Y
Y
Since 2019, the tax credit on dependent children is doubled for each child below the age of 6 years (Section
1.1.2.1). In addition, an exemption for recreational vouchers was introduced. Employers can provide
maximum EUR 275 per year as a cash benefit exempted from social security contributions and the PIT to
employees who spent at least EUR 500 on recreation in the Slovak Republic. Provision of this benefit is
compulsory for employers who have at least 50 employees.
The amount of the basic allowance was increased in 2020 from 19.2 times the MLS to 21 times the MLS.
The threshold when the basic allowance is gradually withdrawn was adjusted accordingly from 100 times
the MLS to 92.8 times the MLS.
Since July 2021, the child tax credit has been increased to 1.7-times the basic value for children aged 6 to
15 years. The multiple is set to increase to 1.85-times the basic value from January 2022.
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4.1. Changes to labour taxation due to the COVID pandemic in 2020 and 2021
The deadline for the annual tax clearing and filing of tax returns for the year 2019 was moved from the end
of March 2020 to the end of October 2020. Any outstanding tax liability is payable by the new deadline as
well. In addition, payment of employer contributions for certain months was deferred if the business
suffered at least 40% loss of revenue in that month. Moreover, businesses that were compulsorily closed
by the order of the government do not have to pay employer social insurance contributions (including the
II. Pillar contributions if applicable) for April 2020. This one-off abatement is not modelled for the purpose
of this Report because it affected only about 15% of the workforce.
5. Memorandum items
5.1. Identification of AW and valuation of earnings
The average earnings of the AW are estimated by the Ministry of Finance of the Slovak Republic based
on the data provided by the Statistical Office of the Slovak Republic. The source of the information is the
quarterly survey of employers which covers:
all financial corporations and public sector organizations,
around 50% of firms with at least 20 employees or firms with annual revenue at least EUR 5 mil.
regardless of the number of employees, and
around 7% of firms with less than 20 employees
The average earnings are calculated as the mean of the monthly average wages in industry sectors B-N
according to the SK NACE Rev. 2 classification, weighted by the number of employed in the given sector.
The earnings data are not adjusted to full-time equivalents, but part-time workers are included only if they
have a standard employment contract. Workers with non-standard temporary contracts
1
are excluded
completely. Managerial workers are also included only if they have a standard employment contract. The
self-employed are not included in the earnings data, but they are included in the sectoral employment
figures.
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2021 Parameter values
Average earnings/yr
Minimum living standard (MLS)
basic_adult
basic_adult1
basic_child
ave_basic_adult
ave_basic_adult1
ave_basic_child
basic_al_mult
basic_al
basic_al_mult1
basic_al_mult2
basic_al_redn
spouse_al_limit
spouse_al_mult
spouse_al_mult1
spouse_al_mult2
spouse_al_redn
tax_sch/tax_rate
tax_cr
min_wage
minwage_mult
etc_thresh
SSC_rate
SSC_sick
SSC_ret
SSC_dis
SSC_unemp
SSC_health
SSC_empr
SSC_empsick
SSC_empret
SSC_empdis
SSC_empunemp
SSC_emphealth
SSC_gua
SSC_acc
SSC_fund
HIC_treshold
HIC_rate
MSSAB
transf_1
transf_indiv
transf_indiv_child
transf_couple
transf_couple_child
transf_hous_indiv
transf_hous_couple
transf_dep
Ave_earn
14 075
214.83
149.87
98.08
216.445
150.995
98.82
21.0
4511.43
92.8
44.2
0.25
4124.74
19.2
176.8
63.4
0.25
0.19
0.25
376.14
623
6
6474.22
0.094
0.014
0.04
0.03
0.01
0.04
0.1915
0.014
0.0875
0.03
0.01
0.1
0.0025
0.008
0.0475
4560
2
91728
306.00
813.6
1548
1413.6
2116.8
702
1120.8
228
Secretariat estimate
Basic allowance
Spouse allowance
Income tax rate
Tax credits - nonwastable
37981.94
Employee
social
contributions
security
Employer
social
contributions
security
Health Insurance Contribution
allowance
Maximum assessment base
Cash transfers
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2021 Tax equations
The functions which are used in the equations (Taper, MIN, Tax etc) are described in the technical note
about tax equations. Variable names are defined in the table of parameters above, within the equations
table, or are the standard variables “married” and “children”. A reference to a variable with the affix “_total”
indicates
the sum of the relevant variable values for the principal and spouse. And the affixes “_princ” and
“_sp” indicate the value for the principal and spouse, respectively. Equations for a single person are as
shown for the principal, with “_sp” values taken
as 0.
Line in country table and
intermediate steps
1.
2.
Earnings
Allowances:
Basic
Variable name
earn
basic_allce
Range
Equation
B
IF(earn-SSC<=basic_al_mult1*basic_adult,
basic_al,MAXA(basic_al_mult2*basic_adult-basic_al_redn*(earn-
SSC),0))
IF(earn_spouse=0,1,0)*Married*Positive(IF(earn_princ-
SSC_princ<=spouse_al_mult1*basic_adult,
spouse_al_mult*basic_adult,spouse_al_mult2*basic_adult-
spouse_al_redn*(earn_princ-SSC_princ)))
SSC
basic_allce+spouse_allce+SSC_al
0
Positive(earn-tax_al)
Tax(tax_inc,tax_sch)
IF(earn>=min_wage*minwage_mult, tax_rate*Positive(basic_al-
MAX(etc_thresh, earn-SSC)), 0)
(earn>=min_wage*minwage_mult)*Children*tax_cr
etc_cr+child_cr
CG_tax_excl-tax_cr
0
MINA(earn,MSSAB)*SSC_rate+ MAX(0;(earn-MAX(0;HIC_treshold-
MAX(0;(earn-HIC_treshold)*HIC_rate))))*SSC_health
Children*transf_1+Positive(IF(0,75*((earn-SSC-CG_tax_excl)/12)<(
ave_basic_adult+Married*ave_basic_adult1+
Children*ave_basic_child); ((1-Married)*
(IF(Children>0;transf_indiv_child;transf_indiv))+
Married*(IF(Children>0;transf_couple_child;transf_couple))+IF((Marrie
d+Children)>0;transf_hous_couple;transf_hous_indiv)+(Children*trans
f_dep)-0,75*(earn-SSC-CG_tax_excl));0))
MINA(earn,MSSAB)*SSC_empr+earn*SSC_acc+earn*SSC_emphealt
h
Spouse
spouse_allce
P
3.
4.
5.
6.
Social security contributions
Total
Credits in taxable income
CG taxable income
CG tax before credits
Tax credits:
Employee tax credit
Children
Total
CG tax
State and local taxes
Employees' soc security
Cash transfers
SSC_al
tax_al
taxbl_cr
tax_inc
CG_tax_excl
etc_cr
child_cr
tax_cr
CG_tax
local_tax
SSC
cash_trans
B
B
B
B
B
B
P
B
B
B
B
J
7.
8.
9.
11.
13.
Employer's soc security
SSC_empr
B
Key to range of equation B calculated separately for both principal earner and spouse P calculated for principal only (value taken as 0 for spouse
calculation) J calculated once only on a joint basis.
Notes
1
Agreements on work performed outside employment relationship -
Dohody o prácach vykonávan�½ch
mimo pracovného pomeru
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572
Slovenia
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in the
tax/benefit system. The methodology also includes the parameter values and
tax equations underlying the data.
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Slovenia 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's wage dependent contributions and taxes
Employer's compulsory social security contributions
Payroll taxes
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
34.6%
n.a.
43.6%
n.a.
42.4%
n.a.
50.3%
n.a.
47.8%
n.a.
55.0%
n.a.
34.6%
n.a.
43.6%
n.a.
8.7%
22.1%
30.8%
40.4%
12.4%
22.1%
34.5%
43.6%
15.7%
22.1%
37.8%
46.4%
3.3%
22.1%
3.6%
17.0%
0
0
10 418
2 426
2 426
0
0
0
14 722
3 620
3 620
0
0
0
23 354
6 046
6 046
0
3 287
3 287
14 519
2 426
2 426
0
3 329
4 647
4 969
7 763
8 299
14 197
3 329
3 833
3 329
4 969
8 299
3 329
0
1 318
0
0
2 794
0
0
5 898
0
0
504
0
0
0
0
0
6 829
0
8 236
1 318
8 469
0
14 016
2 794
11 799
0
25 752
5 898
11 916
0
3 150
504
3 329
0
4 969
0
8 299
0
5 086
3 329
0
3 500
3 500
3 500
3 500
67
none
15 065
100
none
22 485
167
none
37 551
67
2
15 065
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Slovenia 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Other dependent family member
Deduction for social security contributions and income taxes
Work-related expenses
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's wage dependent contributions and taxes
Employer's compulsory social security contributions
Payroll taxes
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
34.6%
38.1%
43.6%
46.7%
42.4%
34.6%
50.3%
43.6%
42.4%
42.4%
50.3%
50.3%
42.4%
34.6%
50.3%
43.6%
4.6%
22.1%
18.1%
29.5%
7.4%
22.1%
26.1%
36.4%
9.5%
22.1%
29.7%
39.5%
11.0%
22.1%
33.1%
42.3%
1 938
1 938
18 416
3 620
3 620
0
1 279
1 279
27 742
6 046
6 046
0
842
842
31 609
7 240
7 240
0
0
0
25 140
6 046
6 046
0
4 969
6 008
8 299
11 088
9 939
14 205
8 299
12 411
4 969
8 299
9 939
8 299
0
1 039
0
0
2 790
0
0
4 266
0
0
4 112
0
0
0
0
0
5 086
2 437
4 969
0
15 992
0
6 493
1 039
8 299
0
20 385
0
17 166
2 790
9 939
0
22 025
0
22 946
4 266
8 299
0
15 299
0
22 252
4 112
5 086
5 086
3 500
7 000
7 000
7 000
100-0
2
22 485
100-67
2
37 551
100-100
2
44 971
100-67
none
37 551
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The Slovenian currency is the euro (EUR). In 2021, EUR 0.84 was equal to USD 1. In that year, the average
worker in Slovenia earned EUR 22 485 (Secretariat estimate).
1. Personal income tax system
1.1. Central government income tax
1.1.1. Tax unit
The tax unit is the individual.
1.1.2. Tax allowances
1.1.2.1. Standard tax reliefs
A general (basic) allowance of EUR 3 500.00 is deductible from income in 2021. For lower income
groups whose taxable income equals up to EUR 13 316.83 an additional general allowance is
determined linearly by the following equation: 18 700.38
–
1.40427×total income.
Family allowances are also deductible from the tax base in the same way as for the general
allowance. The allowances for 2021 are as follows:
‒
‒
‒
‒
‒
‒
EUR 2 436.92 for the first dependent child;
EUR 2 649.24 for the second child;
EUR 4 418.54 for the third child;
EUR 6 187.85 for the fourth child;
EUR 7 957.14 for the fifth child;
for the sixth and all additional dependent children the allowance is higher by
EUR 1 769.30 relating to the amount of allowance for the preceding maintained
children;
EUR 8 830.00 for a dependent child who requires special care;
EUR 2 436.92 for any other dependent family member.
‒
‒
Relief for social security contributions: Employee’s compulsory contributions
for the social
insurance system are deductible for income tax purposes.
Tax credits: None for employees.
1.1.2.2. Non-standard tax reliefs applicable to income from employment
Additional voluntary pension insurance premiums: Premiums paid by a resident to the provider of
a pension plan based in Slovenia or in another EU Member State according to a pension plan that
is approved and entered into a special register in accordance with the pension legislation are
deductible from taxable income. In 2021 such deductions are subject to an annual limit of
EUR 2
819.09 or a sum equal to 24% of the employee’s contribution for compulsory pension and
disability insurance if that is a lower figure.
Reimbursement of expenses associated with work, such as in-work meals, transport to and from
work, in-the-field supplements (per diem when an employee works outside his or her working place)
and compensation for being away from home are exempt subject to statutory conditions and upper
limits.
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576
Reimbursement of expenses associated with business travel such as: per diem allowances,
transport costs (including the use of the employee’s private vehicle for work purposes), and the
costs of overnight accommodation, are exempt subject to statutory conditions and upper limits.
The cost of purchasing and maintaining uniforms and personal protection work equipment defined
in special regulations is exempt from income tax.
Compensation for the use of an employee’s own tools and other equipment (except private
vehicles) necessary for the performance of work at the work place, is exempt up to a level of 2%
of the monthly wage or salary of the employee, subject to an upper limit of 2% of the average gross
monthly wage (AGMW).
Long service bonuses, severance pay upon retirement and payments related to accidents, long
term sickness and other unexpected events are exempt subject to statutory conditions and upper
limits.
Severance pay on redundancy is exempt subject to an upper limit of ten times the AGMW.
Compensation for the use of an employee’s own possessions and property when working at home
in accordance with statutory regulations is exempt up to a level of 5% of the monthly wage or salary
of the employee, subject to an upper limit of 5% of the AGMW.
The reduction of PIT on the part of a salary paid on the basis of business performance. The income
paid on the basis of business performance is exempt from the taxable base of employment income
(but not from social security contributions) up to amount corresponding to 100% of the last
published average monthly salary in the Republic of Slovenia. ‘The part of a salary paid on the
basis of business performance’ is defined as income which should be paid once in a calendar year
to all eligible employees at the same time, and under the condition that the right to receive such
income is provided:
‒
‒
in the employer’s general legal acts, with the same eligibility conditions for all
employees; or
in the collective labour agreement including or serving as basis for eligibility criteria for
receiving such income.
The exemption of PIT on the payment for holiday leave up to 100% of the latest known average
monthly wage in the Republic of Slovenia.
1.1.3. Tax schedule
The tax schedule for 2021 is as follows:
Taxable income (EUR)
Up to 8 500.00
8 500.00–25 000.00
25 000.00–50 000.00
50 000.00–72 000.00
Above 72.000.00
Tax rate (in %)
16
26
33
39
50
1.2. Regional and local income tax
There are no regional or local income taxes.
2. Compulsory social security insurance system
The compulsory social security insurance system consists of four schemes as follows:
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577
pension and disability insurance;
health insurance;
unemployment insurance;
parental leave insurance.
2.1.
Employees’ contributions
The taxable base for social security insurance contributions paid by employees is the total amount of the
gross wage or salary including vacation payments, fringe benefits and remuneration of expenses related
to work above a certain threshold. The assessment period is the calendar month. Employees contribute
an amount as a percentage of their remuneration as follows:
Scheme name
Pension insurance
Health insurance
Unemployment insurance
Parental leave insurance
Total
Rate of contribution (%)
15.50
6.36
0.14
0.10
22.10
2.2.
Employers’ contributions
Social security insurance contributions are also paid by employers on behalf of their employees. The
taxable base and the assessment period are the same as for employees’ contributions. The employers’
contribution rates are as follows:
Scheme name
Pension insurance
Health insurance
Unemployment insurance
Parental leave insurance
Total
Rate of contribution (%)
8.85
7.09
0.06
0.1
16.1
The only change to these rates since 1996 has been the 0.2 percentage points increase in the employers’
contribution rates for health insurance in 2002.
Slovenia implements a minimum SSC base for workers earning less than a minimum income threshold.
For gross earnings below the minimum income threshold, SSCs are calculated on the basis of the minimum
SSC base and not on actual gross wage earnings. Employees are liable to pay employee SSCs on their
actual gross earnings, however, the employers are liable to pay (in addition to the employer SSC on gross
earnings) the employee
and
employer SSC rate on the gross wage earnings below the minimum income
threshold.
3. Payroll tax
None.
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4. Universal cash transfers
4.1. Transfers related to marital status
None.
4.2. Transfers for dependent children
On 1 January 2012 the Exercise of Rights to Public Funds Act (ZUPJS-A) entered into force. Regarding to
a new act child allowance is a supplementary benefit for maintenance, care and education of children when
the family income per family member does not exceed statutorily defined percentage of the average net
wage in the previous year.
The new legislation changed relevant family income which is the basis for the income classes from gross
family income to net family income. Income includes taxable income and non-taxable income defined by
the Personal Income Tax Act as for instance social benefits. Income is defined as gross income plus social
benefits received but excluding the normalized cost and actual cost recognized under the law governing
income tax, taxes and mandatory social security contributions levied on such income.
The new legislation also reduced the age of a child’s entitlement.
The right to a child benefit is held only
until the child reaches 18 years. Besides, the child benefit is higher for eligible students included in higher
secondary education (aged less than 18 years and with an income per family member below the average
net wage).
Applications for the benefit are made on an annual basis and the payments are not taxable.
The amount of the benefit is calculated for each child separately according to the level of net family
income per family member and the ranking of the child in the family. Each family is assigned to one
of 8 income brackets. From 1 January 2018 the thresholds between brackets are defined in nominal
terms whereas before that date the brackets were defined according to some percentage of the
previous year average net wage.
Each child is allocated in one of three ranking levels (the level of payments increases with the
ranking level - the lowest for the first child, higher for the second child and the highest for the third
and any subsequent child). When a child lives in a one-parent family, the amount of the allowance
is increased by 30%. When a pre-school child does not attend kindergarten, the amount of the
allowance is increased by 20%.
The details for the calculation of the net income per family member have been prescribed by the
Minister, as follows:
o
All income and receipts, namely net disposable income (after deduction of the normalized cost
and actual cost recognized under the law governing income tax, taxes and mandatory social
security contributions levied on such income) are taken into account, except those that are
designed to cover the specific needs (such as allowance and attendance allowance, a large
family, etc.). Property is also taken into account like immovable property, cars and other
vehicles, watercraft, etc. Property is assigned a value and then it is calculated the amount of
interest that would be received within one year from the value of assets deposited in a bank
account in the form of time deposits.
The monthly amounts of transfers for a child from birth to the end of primary school in a two-parent
family according to the Exercise of Rights to Public Funds Act and Public Finance Balance Act for
the year 2021 are as follows:
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579
Number of
income
bracket
1
2
3
4
5
6
7
8
Net family income per family member
(above – to)
Up to 2 296.80
2 296.00 – 3 828.12
3 828.12 – 4 593.84
4 593.84 – 5 359.44
5 359.44 – 6 763.20
6 763.20 – 8 166.72
8 166.72 – 10 463.76
10 463.76 – 12 633.00
1st Child
Monthly (EUR)
117.05
100.08
76.27
60.16
49.19
31.17
23.38
20.36
2nd Child
Monthly (EUR)
128.75
110.63
85.25
68.64
57.41
39.01
31.17
28.16
3rd and subsequent
Child
Monthly (EUR)
140.47
121.12
94.19
77.28
65.57
46.81
39.01
35.95
The monthly amounts of child benefit for a child included in the secondary school (but only for the
child younger than 18) in the income brackets 7 and 8 are different than those in the table above
and are as follows:
Net family income per family member
(above – to)
8 166.72 – 10 463.76
10 463.76 – 12 633.00
Number of
income
bracket
7
8
Monthly (EUR)
Monthly (EUR)
Monthly (EUR)
29.52
23.43
37.31
31.23
50.84
40.85
In 2021, the maximum annual benefit levels for children in a two-parent family till the end of primary school
are set by:
EUR 1 404.60 for the first child;
EUR 1 545.00 for the second child;
EUR 1 685.64 for the third or subsequent child.
The amounts decline as the level of income per family member increases.
5. Main changes in tax/benefit system since 2005
In 2006 the taxation of income of individuals changed from global tax to a kind of a dual income
tax system. Active income (from employment, business, basic agriculture and forestry, rents,
royalties and other income) is taxed aggregated at progressive rates and taking into account the
allowances and deductions; capital income (interest, dividends and capital gains) is taxed at
proportionate rates on a scheduler basis.
In 2007 the number of income tax brackets was reduced from five to three. At the same time, some
non-standard tax reliefs for certain expenses and for interest paid on loans for housing were
abolished.
In 2008 additional general allowances were introduced for people on low incomes.
The payroll tax was phased out at the start of 2009.
The Exercise of Rights to Public Funds Act entered into force on 1 January 2012 changes family
income which is the basis for the income classes from gross family income to net family income,
which also includes social benefits received.
Regarding to the Public Finance Balance Act which entered into force on 1 June 2012, the amounts
of transfers for children in fifth and sixth income classes are reduced for 10%. Transfers for children
in the seventh and eighth income classes are abolished.
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In 2013 the second bracket in the PIT schedule was broadened according to the Public Finance
Balance Act. For the years 2013 and 2014 also the threshold for the third bracket (with the rate
41%) was increased and a new, top bracket with a rate of 50% was introduced for incomes above
EUR 70 907.20.
For the year 2013 the special relief for students was reduced by 25% compared to the tax relief in
2012 (the tax relief for 2014 amounts to EUR 2 477.03).
Concerning rental income deriving renting of immovable and movable property a new scheduler
principle of taxation was introduced in the year 2013 with proportional rate of 25%. The
standardised costs were reduced from 40% to 10% of the rental income.
The main and most important substantive change for the year 2014 and beyond eliminates the
automatic adjustment of tax credits and net annual tax basis in the scale for assessing personal
income tax with the growth in consumer prices.
For the year 2014 another amendments were also introduced to the personal income tax, that is
the abolishment of the tax benefits to certain groups of taxpayers (special relief for daily migrants,
relief for the residents over 65 years of age).
In 2014, the amendments to the Law on Parenthood and Family Incomes increased child benefit
for each child who lives in a single-parent family. Namely, the uplift of child benefit was increased
from 10 to 30%. In this year were also introduced the different amounts of transfers for children
included in the secondary school in the sixth income bracket.
The scale of assessment for income tax as a temporary measure that applies to 2013 and 2014,
with the addition of a fourth class tax rate of 50% was extended for the year 2015.
In 2015 the annual threshold between 2nd and 3rd tax bracket (above which the income tax is paid
at the rate of 41%) was increased to EUR 20 400 (from EUR 18 960) for the years 2016 and 2017.
The corresponding tax rate remained unchanged (i.e. 27%). The validity of the tax rate of 50% for
the fourth tax bracket (for incomes above EUR 70 907) is extended also for tax years 2016 and
2017.
In 2016 for the year 2017 the additional tax bracket between previous second and third tax brackets
with the rate of 34% has been introduced, and the second highest tax rate has been lowered from
41% to 39%. The highest rate of 50 %, which used to be a temporary measure, has been
maintained. The threshold for the additional basic allowance has been increased from EUR 10 866
to EUR 11 166.
In 2016 and valid from 2017 the reduced taxation on performance bonuses (13th salary) was
introduced meaning that salary paid on the basis of business performance is exempt from the
income tax up to 70% of the average wage.
From 2018 the additional general tax allowance for incomes between EUR 11 166.67 and EUR 13
316.83 is determined linearly.
From 2018 the PIT exemption for the income paid as a reward for the business performance was
increased from 70% to 100% of the latest known average monthly wage in the Republic of Slovenia.
From 2018 the thresholds of the income brackets used for the calculation of child benefits are
defined nominally; before that the thresholds were defined as percentage of the previous year
average net wage. In addition, child benefits have been re-introduced also for income brackets 7
and 8.
From 2019 the payment for holiday leave is tax and SSCs free up to 100% of the latest known
average monthly wage in the Republic of Slovenia. Before 2019 it was burdened only by PIT while
the SSCs exemption was only up to 70 % of the latest average monthly wage.
The amendments to the personal income tax legislation valid from 1 January 2020 include increase
of tax brackets thresholds (in first bracket to EUR 8 500, in second to EUR 25 000, in third to
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581
EUR 50 000 and in fourth bracket to EUR 72 000), reduction of tax rates in second (from 27% to
26%) and third (from 34% to 33%) tax bracket, increase of the general tax allowance (to
EUR 3 500) and introduction of additional linear general tax allowance for the whole income interval
up to EUR 13 316.83. The linear function was updated accordingly.
5.1. Changes to labour taxation due to the COVID pandemic in 2020 and 2021
The following measures were implemented to lowering the burden on labour for the time of Covid-19
pandemic.
For temporarily "inactive" but still employed workers and for the workers who were unable to work
due to force majeure (i.e. caring for children, their own inability to come to work and due to other
epidemic-related reasons) the state budget financed social security contributions, i.e. contributions
for pension and disability insurance as well as health insurance. The measure was valid only in
2020.
Also in 2020, the state budget covered the contributions for pension and disability insurance of the
insured persons and the employer's contributions for all employees receiving wages. According to
the data published by the Statistical Office of the Republic of Slovenia, in 2018 there were app.
200,000 natural or legal persons in Slovenia that reported some revenue or employees. Among
them app. 147,000 worked within sectors B to N. The data from the Financial Administration of the
Republic of Slovenia show that app. 49 000 firms used the benefit of State budget coverage of the
employee's and employer's pension and disability insurance contributions from 3 April 2020 till
31 May 2020. Among those 49 000 firms there were 45 000 (90%) firms from sectors B to N but
overall, only little more than 30 % of all firms benefited from the measure. Taking into account the
data, this measure was not considered in the Taxing Wages model for 2020.
In 2021 no such measure that would affect the Taxing Wages model has been implemented.
6. Memorandum items
6.1. Average gross annual wage earnings calculation
In Slovenia the gross earnings figures cover wages and salaries paid to individuals in formal employment
including payment for overtime. They also include bonus payments and other payments such as pay for
annual leave, paid leave up to seven days, public holidays, absences due to sickness for up to 30 days,
job training, and slowdown through no fault of the person in formal employment.
The average gross wage earnings figures of all adult workers covering industry sectors B–N are provided
by the Statistical Office of the Republic of Slovenia.
6.2. Employer contributions to private pension and health schemes
Some employer contributions are made to private health and pension schemes but there is no relevant
information available on the amounts that are paid.
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582
2021 Parameter values
Ave_earn
Ave_earn_1
Ave_net_earnfam
Ave_gross_earnSSC
Basic_al1
Basic_al2
Income_lim
Add_al
Red_rate
Child_al1
Child_al2
Child_al3
Child_al4
Child_al5
Depend_al
Tax_sch
22 485
21 054
22 274.40
3 500
Secretariat estimate
18 700,38
1.40427
2 436.92
5 086.16
9 504.70
15 692.55
23 649.69
2 436.92
0.16
0.26
0.33
0.39
0.50
0.221
13 364.64
0.161
8 500
25 000
50 000
72 000
SSC_rate1
SSC_minbase
SSC_rate2
Fam_allow_mc
0
2 296.80
3 828.12
4 593.84
5359.44
6 763.20
8 166.72
10 463.76
12 633.00
0.3
Ist child
monthly
117.05
100.08
76.27
60.16
49.19
31.17
23.38
20.36
0.00
Ist child
monthly
152.17
130.10
99.15
78.21
63.95
40.52
30.39
26.47
0.00
2nd child
monthly
128.75
110.63
85.25
68.64
57.41
39.01
31.17
28.16
0.00
2nd child
monthly
167.38
143.82
110.83
89.23
74.63
50.71
40.52
36.61
0.00
3rd child
monthly
140.47
121.12
94.19
77.28
65.57
46.81
39.01
35.95
0.00
3rd child
monthly
182.61
157.46
122.45
100.46
85.24
60.85
50.71
46.74
0.00
1 child-total
annual
1404.60
1200.96
915.24
721.92
590.28
374.04
280.56
244.32
0.00
1 child-total
annual
1825.98
1561.25
1189.81
938.50
767.36
486.25
364.73
317.62
0.00
2 children-total
annual
2949.60
2528.52
1938.24
1545.60
1279.20
842.16
654.60
582.24
0.00
2 children-total
annual
3834.48
3287.08
2519.71
2009.28
1662.96
1094.81
850.98
756.91
0.00
3 children-total
annual
4635.24
3981.96
3068.52
2472.96
2066.04
1403.88
1122.72
1013.64
0.00
3 children-total
annual
6025.81
5176.55
3989.08
3214.85
2685.85
1825.04
1459.54
1317.73
0.00
Fam_allow_spup
Fam_allow_sp
0
2 296.8
3 828.12
4 593.84
5 359.44
6 763.2
8 166.72
10 463.76
12 633.0
365
numdays
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583
2021 Tax equations
The functions which are used in the equations (Taper, MIN, Tax etc) are described in the technical note
about tax equations. Variable names are defined in the table of parameters above, within the equations
table, or are the standard variables “married” and “children”. A reference to a variable with the affix “_total”
indicates the sum of the relevant variable values for the principal and spouse. And the affixes “_princ” and
“_sp” indicate the value for the principal and spouse, respectively. Equations for a single person are as
shown for the
principal, with “_sp” values taken as 0.
Line in country table and
intermediate steps
1.
Earnings
Current year
Net earnings Year-1
Allowances:
Principal
Variable name
Range
Equation
earn
net_earn_1
tax_al_princ
P
Basic_al1+Positive(add_al-
red_rate*earn)+SSC+IF(children=0,0,IF(children=1,child_al1,IF(children
=2,child_al2,child_al3)+IF(Married=0,0,IF(S_earn=0,Depend_al,0))
MINA(Basic_al1+Positive(add_al-red_rate*AD7)+SSC, earn)
0
Positive(earn-tax_al)
Tax(tax_inc, tax_sch)
0
CG_tax_excl
0
earn* SSC_rate1
IF(Children='0,0;VLOOKUP((net_earn_1)'/(1+married+children),IF(Marri
ed=0;Fam_allow_sp,Fam_allow_mc),IF(Children=1,5,IF(Children=2,6,7
))))
2.
3.
4.
5.
6.
7.
8.
9.
11.
Spouse
Credits in taxable income
CG taxable income
CG tax before credits
Tax credits (nonwastable)
CG tax
State and local taxes
Employees' soc security
Cash transfers
Tax_al_ spouse
taxbl_cr
tax_inc
CG_tax_excl
Tax_cr
CG_tax
local_tax
SSC
cash_trans
S
B
B
B
B
B
B
B
J
13.
Employer's wage
dependent
contributions and taxes
Employer's soc security
SSC_empr
B
earn*SSC_rate2++IF(earn<SSC_minbase,(SSC_rate2*(SSC_minbase-
earn))+(SSC_rate1*(SSC_minbase-earn)),0)
Key to range of equation B calculated separately for both principal earner and spouse P calculated for principal only (value taken as 0 for spouse
calculation) J calculated once only on a joint basis.
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584
Spain
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in the
tax/benefit system. The methodology also includes the parameter values and
tax equations underlying the data.
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585
Spain 2021
The tax/benefit position of a single persons
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances:
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central and state government taxable income (1 - 2 + 3)
Central and state government income tax liability (exclusive of tax credits)
Central and state government tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
28.1%
n.a.
44.6%
n.a.
32.9%
n.a.
48.3%
n.a.
40.4%
n.a.
54.1%
n.a.
28.1%
n.a.
44.6%
n.a.
10.2%
6.35%
16.5%
35.7%
14.7%
6.35%
21.1%
39.3%
20.5%
6.35%
26.9%
43.7%
-4.5%
6.35%
1.8%
24.4%
0
0
15 006
5 375
0
0
21 173
8 023
0
0
32 757
13 398
0
0
17 648
5 375
1 142
2 972
1 704
5 659
2 845
12 052
1 142
329
1 142
1 704
2 845
1 142
1 027
942
888
1 027
2 025
1 931
1 027
4 717
4 490
3 170
- 1 001
188
1 027
1 027
1 027
3 170
3 142
0
14 836
2 857
3 704
0
23 128
4 982
4 845
0
39 964
10 234
5 292
0
12 686
2 358
1 142
2 000
1 704
2 000
2 845
2 000
1 142
2 000
0
0
0
2 150
67
none
17 978
100
none
26 832
167
none
44 810
67
2
17 978
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586
Spain 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central and state government taxable income (1 - 2 + 3)
Central and state government income tax liability (exclusive of tax credits)
Central and state government tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
30.0%
21.8%
46.1%
39.8%
32.9%
28.1%
48.3%
44.6%
32.9%
32.9%
48.3%
48.3%
32.9%
28.1%
48.3%
44.6%
7.7%
6.35%
14.0%
33.8%
10.8%
6.35%
17.2%
36.2%
13.0%
6.35%
19.3%
37.9%
12.9%
6.35%
19.3%
37.8%
0
0
23 064
8 023
0
0
37 122
13 398
0
0
43 289
16 046
0
0
36 179
13 398
1 704
3 768
2 845
7 688
3 408
10 375
2 845
8 631
1 704
2 845
3 408
2 845
1 970
1 044
1 020
2 997
2 482
2 360
2 997
3 565
3 403
2 054
2 967
2 819
1 970
2 997
2 997
2 054
7 104
0
19 728
4 034
6 845
0
37 964
7 839
7 408
0
46 257
9 965
6 845
0
37 964
7 839
1 704
2 000
2 845
4 000
3 408
4 000
2 845
4 000
3 400
0
0
0
100-0
2
26 832
100-67
2
44 810
100-100
2
53 665
100-67
none
44 810
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587
The national currency is the Euro (EUR). In 2021, EUR 0.84 was equal to USD 1. In that year the average
worker earned EUR 26 832 (Secretariat estimate).
1. Personal Income Tax System
1.1. Central government income tax
1.1.1. Tax unit
As a general rule, the tax unit is the individual. Nevertheless, families have the options of being taxed:
As married couples filing jointly on the combined income of both spouses and dependents.
As heads of households (only unmarried or separated individuals with dependents).
1.1.2. Tax allowances and tax credits
1.1.2.1. Standard reliefs
Basic reliefs: Married couples filing jointly may claim an allowance of EUR 3 400. This figure
amounts to EUR 2 150 for heads of single-parent households.
Maternity tax credit: a non-wastable tax credit addressed to working females with children under
3 years of age up to EUR 1 200, which may be increased up to EUR 1 000 where the taxpayer has
incurred qualifying expenses related to nursery schools/kindergartens
Large families (3 or more children) or dependent family members with disabilities tax credits: this
additional non-wastable tax credit (up to EUR 1 200, in general, or EUR 2 400 for special large
families, with 5 or more children) has been raised by EUR 600 for each child exceeding the
minimum number of children required for both large family types listed above. It also may be
claimed (within the Taxing Wages framework) by single-parent households with two children.
Relief for social security contributions: All social security payments are fully deductible.
Other expenses allowance: up to EUR 2 000, which may be increased by the same amount in case
of an unemployed accepting a job in a different location implying a change of residence.
Employment related allowance: Net employment income (gross income - employee social security
contributions) may be reduced according to the following rules:
‒
‒
Taxpayers with net employment income equal or less than EUR 13 115: EUR 5 565.
Taxpayers with a net employment income between EUR 13 115 and EUR 16 825: EUR 5 565
less the result of multiplying by 1.5 the difference between net employment income and
EUR 13 115.
Disabled workers allowance: an additional allowance of EUR 3 500 for disabled salary earners.
Those with reduced mobility may claim an augmented allowance of EUR 7 750.
As a result of the application of the above rules, net income cannot become negative.
1.1.2.2. Main non-standard reliefs applicable to an average wage
Contributions to Pension Plans. Contributions made by each member of the household may reduce
taxable income up to the lower of the following amounts:
‒
‒
30% of the sum of labour and economic activities net incomes;
EUR 2 000.
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588
Moreover, those households whose second earner has net labour income below EUR 8 000 may reduce
taxable income up to a maximum of EUR 1 000 on a yearly basis if the principal earner contributes to a
Pension Fund for the spouse.
Relief for subscriptions paid in respect of membership of a trade union and business or professional
associations (last item is limited to mandatory membership) up to EUR 500.
Relief for expenses made for the legal defence of the taxpayer for labour-related conflicts up to a
maximum limit of EUR 300.
Other non-standard reliefs provided as deductions are:
Investment in the acquisition and rehabilitation of own-housing: With effect from 1 January 2013,
the tax credit has been abolished. Nevertheless, grandfathering rules apply for those taxpayers
who before 1 January 2013 had acquired their main residence; had made some payments for it to
be built; had made some payments for restoration/enlargement of their main residence or had
made some payments to carry out the adaptation of the main residence of disabled people.
However, in the latter two cases the works performed should be completed before 1 January 2017.
‒
Gifts: 80% of the amounts (below EUR 150) donated to non-profit entities, public administration,
public universities and other qualifying institutions. For larger gifts, 35% on the excess, which
may be increased to 40% when meeting certain conditions (for fidelity cases) and 10% of the
amount donated non-qualifying foundations or associations.
Investments and expenses in goods of cultural interest: 15% of the amounts granted to the
importation, restoration, exhibition, etc., of certain goods listed in the General Register of Goods of
Cultural Interest.
Each of these last two amounts cannot exceed 10% of taxable income.
1.1.2.3. Exempt Income
The base amount is EUR 5 550 per taxpayer. The same amount is granted for family units filing
jointly. Taxpayers aged over 65 years may add EUR 1 150 to the former amount. Those aged over
75 years may claim additionally EUR 1 400.
Dependent children (under 25 years, in general; for each age, in case of disability): EUR 2 400 for
the first dependent child; EUR 2 700 for the second one; EUR 4 000 for the third, and EUR 4 500
for any additional child.
Childcare allowance: an additional allowance of EUR 2 800 for each of the above dependent
children under 3 years of age.
In case of disabled workers and additional amount of EUR 3 000 also applies. In case of great
disability prior amount reaches EUR 9 000.
Child allowances have to be shared equally between spouses when they file separately.
1.1.3. Tax schedule
General rates of tax
–
resident individuals:
Taxable income (EUR)
0–12 450
12 450–20 200
20 200–35 200
35 200–60 000
60 000-300 000
Over 300 000
Tax at the lower limit (EUR)
0
1 182.75
2 112.75
4 362.75
8 950.75
62 950.75
Tax rate on taxable income in excess of the
lower limit (%)
9.50
12.00
15.00
18.50
22.50
24.50
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589
1.2. State and local income taxes
The Autonomous Communities (Regional Governments) are liable to set up their own personal income tax
schedule to tax the general income tax base. For 2021, those tax rate schedules vary from five to ten
brackets and their marginal rates from 9.0 to 29.5%. Up to 2009, the tax autonomous share (regional share
of the tax) on the general tax base was determined by applying a progressive tax ladder with default values
laid down by the Law regulating this tax, and fixed by Government. However, the Autonomous
Communities (Regional Governments) were competent to modify these values under certain limitations.
The complementary tax scale, fixed by the Central Government and applied in default as explained, was
removed in 2010, which leaves a State-level ladder and each Autonomous Community determining their
own tax scale, subject only to the progressivity requirement. From that moment on, by exercising their
legislative competences, the Autonomous Community have been approving their tax scales that, although
identical to the State-level tax scale in the beginning, as time elapsed they became increasingly different.
These differences have grown since 2015, coinciding with the entry into force of the reform of this tax, up
to the point that in 2016 and 2017 each Autonomous Community applies a different tax scale, with currently
only one matching the Central Government tax scale.
Therefore, instead of taking into account a tax rate determined by an Autonomous Community equal to
that applied by the Central Government, as past years, the new criteria followed since 2017 is to consider
that of the Autonomous Community of Madrid (Madrid Region), which is thought as the most representative
tax scale on different grounds, among which it is worth mentioning that this Autonomous Community
comprises the Spain capital city and its relative significance as regards this tax, both in terms of number
of taxpayers, income level and income tax roughly amounting to one quarter of the total revenues. All these
make of it a potential stable criteria over time.
Madrid Schedule for general tax base in 2021
Taxable income (EUR)
0–12 450
12 450–17 707.20
17 707.20–33 007.20
33 007.20-53 407.20
Over 53 407.20
Tax at the lower limit (EUR)
0
1 120.50
1 709.31
3 744.21
7 395.81
Tax rate on taxable income in excess of the
lower limit (%)
9.00
11.20
13.30
17.90
21.00
Now, there is not any local tax rate or schedule in the Spanish PIT. However, some Local Governments
(the bigger and province capital cities) receive a fixed percentage of the PIT revenues.
2. Compulsory Social Security Contributions to Schemes Operated within the
Government Sector
Social Security contributions are assessed on the basis of employees’ gross earnings taking into account
certain ceilings of gross employment income. In 2021, these ceilings are:
Lower ceiling: EUR 12 600.00
Upper Ceiling: EUR 48 841.20
These ceilings are based on a full-time job. For part-time workers, ceilings are proportional to the real
hours worked (the tax equations used for this Report do not take into account the lower ceiling).
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590
2.1.
Employees’ contributions
Old age pension/sickness and disability: 4.7%
Unemployment: 1.55%
Professional Training: 0.1%
2.2.
Employers’ contributions
Old age pension/sickness and disability: 23.6%
Unemployment/Work injuries: 5.50%
Wages fund: 0.2%
Professional Training: 0.6%
3. Universal Cash Transfers
3.1. Transfers related to marital status
None.
3.2. Transfers for dependent children
As of the 1
st
of June 2020, the means-tested allowance (prestaciones
familiars por hijo a cargo)
has been
subsumed in the new national Minimum Income Benefit Scheme (Ingreso
Mínimo Vital).
However,
grandfathering rules apply in 2021. EUR 341 for 1-child families with annual gross earnings below
EUR 12 424.00; the child transfer decreases with income between EUR 12 424.00 and EUR 12 765.00;
the value is 0 for gross earnings exceeding EUR 12 765.00. EUR 682 for families with 2 children with
annual gross earnings below EUR 14 287.60; the child transfer decreases with income between
EUR 14 287.60 and EUR 14 969.60; the value is 0 for gross earnings exceeding EUR 14 969.60.
4. Main Changes in Tax/Benefit Systems in 2017
None
4.1. Changes to labour taxation due to the COVID pandemic in 2020 and 2021
--
5. Memorandum Items
5.1. Identification of an AW and calculation of earnings
Refer to the information provided in the Annex of this Report.
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591
2021 Parameter values
Average earnings/yr
Work related allowance
Ave_earn
wr_rate
wr_lim_max
wr_lim_min
wr_allow_max
oth_ded_exp
Per_fam_exempt_inc
Joint_tax_allow_fam1
Joint_tax_allow_fam2
dep_child
dep_child2
dep_child3
dep_child4
SP_tax_credit
tax_sch_sg
26 832
1.5
16 825
13 115
5 565
2 000
5 550
3 400
2 150
2 400
2 700
4 000
4 500
1 200
0
12 450
20 200
35 200
60 000
300 000
Secretariat estimate
Other deductible expenses
Personal & family exempt income
Joint taxation allowance
Dependent children
Single parent tax credit (chld>=2)
Tax Schedule
0
1 182.75
2 112.75
4 362.75
8 950.75
62 950.75
9.50%
12.00%
15.00%
18.50%
22.50%
24.50%
tax_sch_sa (Madrid)
0
12 450
17 707.20
33 007.20
53 407.20
0
1 120.50
1 709.31
3 744.21
7 395.81
9.00%
11.20%
13.30%
17.90%
21.00%
Social security contributions
Employee:
Pension
Unemployment
Other
Employer
Pension
Unemployment
Other
Ceiling and Floor
Child benefit
pension_rate
unemp_rate
oth_rate
pension_empr
unemp_empr
oth_empr
min_lim
top_lim
SS_child_benefit
SS_child_table
0.047
0.0155
0.001
0.236
0.055
0.008
0
48 841.2
341
1
2
3
4
5
12 600
12 424.00
14 287.60
18 699.00
21 728.00
24 757.00
12 765.00
14 969.60
19 722.00
23 092.00
26 462.00
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592
2021 Tax equations
The functions which are used in the equations (Taper, MIN, Tax etc) are described in the technical note
about tax equations. Variable names are defined in the table of parameters above, within the equations
table, or are the standard variables “married” and “children”. A reference to a variable with the affix “_total”
indicates the sum of the relevant variable values for the principal and spouse.
And the affixes “_princ” and
“_sp” indicate the value for the principal and spouse, respectively. Equations for a single person are as
shown for the principal, with “_sp” values taken as 0.
Line in country table
and intermediate
steps
1.
2.
Earnings
Allowances:
Work related, individual
Variable
name
earn
B
Range
Equation
for individual taxation: earn=earn_princ, or earn='earn_sp' for joint
(family) taxation: earn=earn_princ+earn_sp
IF(earn-SSC<=wr_lim_min,wr_allow_max+oth_ded_exp,IF(earn-
SSC<=wr_lim_max,wr_allow_max-wr_rate*((earn-SSC)-
(wr_lim_min))+oth_ded_exp,oth_ded_exp))
IF(AND(earn_sp=0,married=0,children=0),0,IF(earn_total-
SSC_fam<=wr_lim_min,wr_allow_max+oth_ded_exp,IF(earn_total-
SSC_fam=wr_lim_max,wr_allow_max-wr_rate*((earn_total-SSC_fam)-
(wr_lim_min))+oth_ded_exp,oth_ded_exp)))
IF(AND(Married=0,Children=0),0,IF(AND(Married=0,Children>0),joint_tax
_allow_fam2,joint_tax_allow_fam1))
per_fam_exempt_inc
work_ind
B
Work related, family
work_fam
J
Joint taxation allowance
Personal and family
exempt income,
individual
Personal and family
exempt income, family
Children exempt
income, individual
joint_allow_fa
m
ex_inc_ind
J
B
ex_inc_fam
child_ex_inc_i
nd
J
P
IF(AND(Married=0,Children=0),0,per_fam_exempt_inc)
IF(earn_sp='0,'
(children>0)*(dep_child+(children>1)*dep_child2+(children>2)*dep_child3
+(children>3)*(children-3)*dep_child4),
(children>0)*(dep_child+(children>1)*dep_child2+(children>2)*dep_child3
+(children>3)*(children-3)*dep_child4)/2)
IF(earn_sp='0,' 0,
(children>0)*(dep_child+(children>1)*dep_child2+(children>2)*dep_child3
+(children>3)*(children-3)*dep_child4)/2)
(children>0)*(dep_child+(children>1)*dep_child2+(children>2)*dep_child3
+(children>3)*(children-3)*dep_child4)
0
IF(AND(Married='0,' Children='0),' tax_inc_princ,
MINA(tax_inc_princ+tax_inc_sp, tax_inc_fam))
Positive(earn-(work_ind+SSC))
IF(AND(Married='0,' Children), 0, Positive(earn-
(work_fam+joint_allow_fam+SSC_princ+SSC_sp)))
MAXA(0, VLOOKUP(tax_inc_ind, tax_sch_sg, 2)+(tax_inc_ind-
VLOOKUP(tax_inc_ind, tax_sch_sg, 1))*VLOOKUP(tax_inc_ind,
tax_sch_sg, 3))
MAXA(0, VLOOKUP(tax_inc_fam, tax_sch_sg, 2)+(tax_inc_fam-
VLOOKUP(tax_inc_fam, tax_sch_sg, 1))*VLOOKUP(tax_inc_fam,
tax_sch_sg, 3))
MAXA(0,VLOOKUP(ex_inc_ind+child_ex_inc_ind,tax_sch_sg,2)+
((ex_inc_ind+child_ex_inc_ind)-
VLOOKUP(ex_inc_ind+child_ex_inc_ind,tax_sch_sg,1))*
VLOOKUP(ex_inc_ind+child_ex_inc_ind,tax_sch_sg,3)+IF(AND(earn>0,m
arried=0,children>=2),MIN(SP_tax_credit,(SSC+SSC_empr)),0)
MAXA(0,VLOOKUP(ex_inc_fam+child_ex_inc_fam,tax_sch_sg,2)+
((ex_inc_fam+child_ex_inc_fam)-
VLOOKUP(ex_inc_fam+child_ex_inc_fam,tax_sch_sg,1))*
TAXING WAGES 2022 © OECD 2022
S
3.
4.
Children exempt
income, family
Credits in taxable
income
CG taxable income
child_ex_inc_f
am
taxbl_cr
tax_inc
tax_inc_ind
tax_inc_fam
J
B, J
B, J
B
J
B
5.
CG tax before credits
CG_tax_ind_e
xcl
CG_tax_fam_
excl
J
6.
CG tax credits :
CG_tax_cr_in
d
B
CG_tax_cr_fa
m
J
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593
Line in country table
and intermediate
steps
Variable
name
Range
Equation
7.
8.
CG tax
State and local tax
before credits
CG_tax_ind
CG_tax_fam
local_tax_ind_
excl
local_tax_fam
_excl
B
J
B
J
local tax credits
local_tax_cr_i
nd
B
local_tax_cr_f
am
J
State and local tax
9.
Employees' soc
security
local_tax_ind
local_tax_fam
SSC
B
J
B
11.
Cash transfers
SSC_fam
Child_transf
J
13.
Employer’s SSC
SSC_empr
VLOOKUP(ex_inc_fam+child_ex_inc_fam,tax_sch_sg,3)+IF(AND(earn_to
tal>0,married=0,children>=2),MIN(SP_tax_credit,(SSC_fam+SSC_empr_f
am)),0)
CG_tax_ind_excl-CG_tax_cr_ind
CG_tax_fam_excl-CG_tax_cr_fam
MAXA(0, VLOOKUP(tax_inc_ind, tax_sch_sa, 2)+(tax_inc_ind-
VLOOKUP(tax_inc_ind, tax_sch_sa, 1))*VLOOKUP(tax_inc_ind,
tax_sch_sa, 3))
MAXA(0, VLOOKUP(tax_inc_fam, tax_sch_sa, 2)+(tax_inc_fam-
VLOOKUP(tax_inc_fam, tax_sch_sa, 1))*VLOOKUP(tax_inc_fam,
tax_sch_sa, 3))
MAXA(0,VLOOKUP(ex_inc_ind+child_ex_inc_ind,tax_sch_sa,2)+
((ex_inc_ind+child_ex_inc_ind)-
VLOOKUP(ex_inc_ind+child_ex_inc_ind,tax_sch_sa,1))*
VLOOKUP(ex_inc_ind+child_ex_inc_ind,tax_sch_sa,3))
MAXA(0,VLOOKUP(ex_inc_fam+child_ex_inc_fam,tax_sch_sa,2)+
((ex_inc_fam+child_ex_inc_fam)-
VLOOKUP(ex_inc_fam+child_ex_inc_fam,tax_sch_sa,1))*
VLOOKUP(ex_inc_fam+child_ex_inc_fam,tax_sch_sa,3))
Positive(local_tax_ind_excl-local_tax_cr_ind)
Positive(local_tax_fam_excl-local_tax_cr_fam)
IF(AND(earn>0, earn<='min_lim),'
min_lim*(pension_rate+unemp_rate+oth_rate), IF(earn>='top_lim,'
top_lim*(pension_rate+unemp_rate+oth_rate), earn*
(pension_rate+unemp_rate+oth_rate)))
SSC_princ+SSC_sp
IF(Children=0,0,IF(earn<='VLOOKUP(Children,'
SS_child_table,2),SS_child_benefit*Children,
IF(earn<='VLOOKUP(Children,' SS_child_table, 3), VLOOKUP(Children,
SS_child_table, 3)-earn, 0)))
IF(AND(earn>0, earn<='min_lim),'
min_lim*(pension_empr+unemp_empr+ oth_umpr),
IF(earn>='top_lim,'
top_lim*(pension_empr+unemp_empr+oth_empr),
earn*(pension_empr+unemp_empr+oth_empr)))
Key to range of equation B calculated separately for both principal earner and spouse P calculated for principal only S calculated for spouse
only J calculated once only on a joint basis.
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594
Sweden
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in
the tax/benefit system. The methodology also includes the parameter
values and tax equations underlying the data.
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595
Sweden 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's wage dependent contributions and taxes
Employer's compulsory social security contributions
payroll taxes
Total
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
29.3%
n.a.
46.2%
n.a.
33.4%
n.a.
49.3%
n.a.
55.3%
n.a.
66.0%
n.a.
29.3%
n.a.
46.2%
n.a.
14.0%
7.0%
20.9%
39.8%
17.5%
7.0%
24.5%
42.6%
30.2%
4.8%
34.9%
50.5%
14.0%
7.0%
11.1%
32.4%
64 061
37 595
101 656
95 614
56 112
151 726
159 674
93 708
253 382
64 061
37 595
101 656
0
0
255 784
0
0
364 473
0
0
524 697
31 800
31 800
287 584
22 600
67 757
33 800
118 424
38 500
281 740
22 600
67 757
22 600
33 800
38 500
22 600
53 040
53 040
- 53 040
98 197
66 657
66 657
- 66 657
151 281
66 307
66 307
- 12 467
255 707
53 040
53 040
- 53 040
98 197
19 200
0
304 300
0
14 000
0
468 800
0
14 000
0
792 400
53 840
19 200
0
304 300
0
0
0
0
0
19 200
14 000
14 000
19 200
67
none
323 541
100
none
482 897
167
none
806 437
67
2
323 541
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596
Sweden 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances:
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's wage dependent contributions and taxes
Employer's compulsory social security contributions
payroll taxes
Total
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
33.4%
20.9%
49.3%
39.8%
33.4%
29.3%
49.3%
46.2%
33.4%
33.4%
49.3%
49.3%
33.4%
29.3%
49.3%
46.2%
17.5%
7.0%
17.9%
37.6%
16.1%
7.0%
19.1%
38.5%
17.5%
7.0%
21.2%
40.1%
16.1%
7.0%
23.1%
41.5%
95 614
56 112
151 726
159 675
93 707
253 382
191 228
112 224
303 452
159 675
93 707
253 382
31 800
31 800
396 273
31 800
31 800
652 056
31 800
31 800
760 745
0
0
620 256
33 800
118 424
56 400
186 181
67 600
236 848
56 400
186 181
33 800
56 400
67 600
56 400
66 657
66 657
- 66 657
151 281
119 697
119 697
- 119 697
249 478
133 314
133 314
- 133 314
302 562
119 697
119 697
- 119 697
249 478
14 000
0
468 800
0
33 200
0
773 100
0
28 000
0
937 600
0
33 200
0
773 100
0
0
0
0
0
14 000
33 200
28 000
33 200
100-0
2
482 897
100-67
2
806 437
100-100
2
965 793
100-67
none
806 437
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597
The national currency is the Swedish Kronor (SEK). In 2021, SEK 8.52 were equal to USD 1. In that year,
the average worker earned SEK 482 897 (Secretariat estimate).
1. Personal Income Tax Systems
1.1. Central government income taxes
1.1.1. Tax unit
Spouses are taxed separately.
1.1.2. Tax allowances and tax credits
1.1.2.1. Standard reliefs
Basic reliefs: A basic allowance is given for assessed earned income and varies between
SEK 14 000 and SEK 36 700, depending on income. When individuals pay central government
income tax, the basic allowance is at its lowest level, which equals SEK 14 000. The basic
allowance depends on the assessed earned income and the basic amount, which equals
SEK 47 600 in 2021.
Assessed-Earned- Income (SEK)
Relative to Basic Amount (BA)
—0.99
0.99—2.72
2.72—3.11
3.11—7.88
7.88—
Share of BA at lower bracket
0.423
0.423
0.77
0.77
0.293
For exceeding income
+0.2
-0.1
For taxpayers older than 65, the basic relief is calculated differently:
Assessed-Earned- Income (SEK)
Relative to Basic Amount (BA)
—1.11
1.11—2.72
2.72—3.21
3.21-8.08
8.08-11.28
11.28-12.53
12.53-13.54
13.54-35.36
35.36—
Share of BA
at lower bracket
1.11
1.11
1.526
1.699
2.322
2.322
1.546
1.546
0.293
For exceeding income
+0.257
+0.34
+0.128
-0,62
-0.0574
Standard marital status reliefs: None.
Relief(s) for children: None.
Work-related expenses: None.
Other: None.
1.1.2.2. Main non-standard tax reliefs applicable to an AW
Interest on qualifying loans: Interest payments are offset against capital income. The resulting net
capital income is the tax base. A tax credit is given in the case of negative capital income;
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598
Medical expenses: None. Other allowances are given for: the amount of commuting expenses
exceeding SEK 11 000;
other types of work-related expenses exceeding SEK 5 000; examples are the costs of tools, work-
related
phone calls using the taxpayer’s private telephone;
increased living expenses while on business trips, e.g. such as the use of a private car if these
costs are not reimbursed by the employer;
double housing expenses due to temporary work at other geographical locations (too far from home
for commuting), or if the family for some reason can't move, even if the job is of a permanent nature;
travelling expenses for travelling home if the taxpayer works in another place than his/her place of
residence.
1.1.3. Tax schedule
Taxable Income (SEK)
0—523 200
Over 523 200
Tax (SEK) at lower bracket
0
0
For exceeding income, %
0
20
1.1.4. Tax credits
A tax credit equal to 100% of the compulsory social security contributions paid by the employee is granted.
For a person aged 65 or less, an annual Earned Income Tax Credit (EITC) worth up to approximately
SEK 31 200 at the average local tax rate is granted on labour income. The EITC is connected to the basic
allowance (BAL), the basic amount (BA) and the local tax rate (LTR). The Basic Allowance is determined
in Section 1.121; the local tax rate is discussed in Section 1.2. The Basic Amount (BA) in 2021 is
SEK 47 600. For those older than 65 a simplified EITC (not connected to the local tax rate, the basic
allowance or the basic amount) worth up to SEK 30 000 is granted. The EITC is phased-out for those with
incomes above around SEK 600 000 a year.
The tax credits are wastable in the sense that they cannot reduce the individual’s tax payments to less
than zero. The EITC is deducted from the local government income tax, whereas the tax credit for the
social security contributions is deducted from other taxes as well. However, the central government covers
the expenses for the tax credits.
For taxpayers younger than 65, the EITC is calculated as follows:
Earned Income (EI)
—0.91 BA
0.91 BA—3.24 BA
3.24 BA—8.08 BA
8.08 BA—13.54 BA
13.54 BA-
EITC
(EI—BAL)*LTR
(0.91 BA + 0.3405 * (EI—0.91 BA)—BAL)*LTR
(1.703 BA + 0.128 * (EI—3.24 BA)—BAL)*LTR
(2.323 BA—BAL)*LTR
(2.323BA—BAL)*LTR—0.03*(EI—13.54 BA)
For taxpayers older than 65, the EITC is calculated differently:
Earned Income (EI)
– 100 000 SEK
100 001—300 000 SEK
300 001—600 000 SEK
600 001—1 600 000 SEK
1 600 001 SEK -
EITC
0.2*EI
15 000 SEK + 0.05*EI
30 000 SEK
30 000 –0,03*(EI-600 000)
0
During 2021 and 2022 there is also a temporary earned income tax credit. For earned income between
SEK 60 000 and SEK 240 000 per year the tax credit is 1.25 percent of the income exceeding SEK 60 000.
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599
For earned income between SEK 240 000 and SEK 300 000 the tax credit is SEK 2 250. For earned
income between SEK 300 000 and SEK 500 000 the tax credit is SEK 2 250 minus 1.125 percent of the
income exceeding SEK 300 000. This tax credit is non-refundable and it is a temporary measure due to
the pandemic.
Since 1st of January 2021 a wastable general tax credit applies to taxable income exceeding SEK 40 000
per year. The tax credit is 0.75 percent of exceeding income up to a maximum tax credit of SEK 1 500.
1.2. Local government income taxes
1.2.1. General description of the systems
Sweden has both a central government and a local government personal income tax. They are completely
coordinated in the assessment process and refer to the same period, i.e. the income year coincides with
the calendar year.
1.2.2. Tax base
The tax base is the same as for the central government income tax. The basic allowance for individuals
paying local government tax varies between SEK 14
000 and SEK 36 700; it depends on the taxpayer’s
income. For a taxpayer earning the AW, this basic allowance amounts to SEK 14 000.
1.2.3. Tax rates
The local government personal income tax is proportional and differs between municipalities. The average
rate amounts to 32.27% in 2021, with the maximum and minimum rates being 35.15% and 29.08%,
respectively.
2. Compulsory Social Security Contributions to Schemes Operated within the
Government Sector
2.1.
Employees’ contributions
A general pension contribution of 7% of personal income is paid by employees and the self-employed
when income is equal to or greater than 42.3% of the basic amount underlying the basic allowance (see
Section 1.121). The contribution cannot exceed SEK 38 500 since the general pension contributions are
not paid for income over SEK 550 400 (=8.07*68 200). The employees’
contribution is offset with a tax
credit.
2.2.
Employers’ contributions
The employers’ contributions are calculated as a percentage of the total sum of salaries and benefits in a
year. For the self-employed, the base is net business income. The rates for 2021 are listed below.
Program
Retirement pension
Survivor’s pension
Parental insurance
Health insurance
Labour market
Occupational health
General wage tax
Total
Employer (%)
10.21
0.60
2.60
3.55
2.64
0.20
11.62
31.42
Self-employed (%)
10.21
0.60
2.60
3.64
0.10
0.20
11.62
28.97
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600
In certain regions, a reduction of 10% of the base, maximum SEK 7 100 per month, is granted (SEK 18 000
per year for self-employed) (it is not included in the calculations underlying this Report). For employees
who are over 65 years old and born after 1937 only the retirement pension contribution (10.21%) is
applicable. For persons born in 1937 or earlier no employers’ social security contributions, is applied.
There is a reduction of the employers’ contributions for employees
between the ages of 15 and 17 (by the
beginning of the year). For salaries and benefits less than SEK 25
000 per month the employers’
contributions are reduced to the retirement pension fee.
On premiums for occupational pensions paid by the employer a special wage tax (24.26%) is applied.
For self-employed a general reduction of 7.5% on the SSC is applicable if the income exceeds SEK 40 000
per year. The maximal reduction is SEK 15 000 per year.
There is a temporary reduction of the
employers’
contributions for employees between the ages of 18 and
23 (by the beginning of the year) during the period 1
st
of January 2021 to 31
st
of March 2023. For salaries
and benefits less than SEK 25 000 per
month the employers’ contributions are reduced to the retirement
pension fee and 45 percent of other social security contributions. During the period 1
st
of June to 31
st
of
August 2021 the employers’ contributions are reduced to the retirement pension fee.
3. Universal Cash Transfers
3.1. Transfers related to marital status
None.
3.2. Transfers for dependent children
The transfers are tax exempt and independent of the parents’ income. The transfers for each child are as
follows:
2021
First child
Second child
Third child
Fourth child
Fifth and subsequent child
15 000
16 800
21 960
27 120
30 000
4. Main Changes in Tax/Benefit Systems Since 1998
A tax credit of SEK 1 320 was introduced for low- and average income earners in 1999. The credit is
reduced by 1.2% of taxable income above SEK 135 000. This reduction was abolished in 2003 and was
replaced by an increase in the basic allowance.
A tax credit of 25% of the social security contribution paid by employees and the self-employed was
introduced in 2000. The tax credit has been gradually increased to 100% in 2006.
In 2004, a special tax credit equal to SEK 200 was provided for the statutory minimum local income tax.
The special tax credit was abolished in 2005 as was the statutory minimum state income tax (a lump sum
tax) of SEK 200.
In 2021 a general tax credit was introduced. The tax credit is 0.75% of taxable income exceeding
SEK 40 000 per year up to a maximum tax credit of SEK 1 500.
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The central government income tax bracket is indexed with the consumer price index plus 2%. However,
some restrictions to the increases were applied in 2004, 2005, 2006, 2016 and 2017. Additional increases
were applied in 2009 and 2019. In 2020 the additional central government income tax over the upper
bracket was abolished.
The child allowance was increased in 2000, 2001, 2006, 2010, 2017 and 2018.
The basic allowance has been increased in 2001, 2002, 2003, 2005 and 2006. For persons 65 years or
older the basic allowance was increased in 2009, 2010, 2011, 2013, 2014, 2016, 2018, 2019, 2020 and
2021.
An earned income tax credit was introduced in 2007 with the purpose of making work economically more
rewarding relative to unemployment or inactivity. The earned income tax credit was increased in 2008,
2009, 2010, 2014 and 2019. In 2016 a phase-out of the EITC was introduced for persons with incomes
above around SEK 600 000.
In 2018 a tax credit for income from sickness and activity compensation (corresponding to disability
pension) was introduced.
In 2007, the social security contributions for 18-24-year-old employees and self-employed were reduced.
In 2009 the reduction was increased and expanded to include all aged under 26. From 1st August 2015
the reduction was reduced by half and the 1st of June 2016 the reduction was abolished. A reduction of
the SSC was reintroduced for 15-17-year-old employees from 1
st
August 2019.
A special wage tax for persons older than 65 was abolished in 2007 for persons born after 1937 and in
2008 for persons born in 1937 or earlier. In 2016 the special wage tax for older persons was reintroduced
at a rate of 6.15%. This was abolished as of 1
st
July 2019.
A general reduction on the SSC for self-employed was introduced in 2010 and increased in 2014.
The deduction for premiums paid to private pension arrangements was lowered in 2015 from SEK 12 000
to SEK 1 800 and abolished in 2016.
4.1. Changes to labour taxation due to the COVID pandemic in 2020 and 2021
A temporary reduction of the
employers’
social security contributions was in place between 1
st
of March to
the 30
th
of June 2020. For salaries and benefits less than SEK 25 000 per month, for up to 30 employees
per firm,
the employers’ contributions
were reduced to the retirement pension fee (10.21%). The temporary
measure did not affect the majority of full-time workers within sectors B to N in ISIC rev.4. Therefore, it was
not included in the Taxing Wages model for 2020.
For self-employed there was a temporary reduction of the social security contributions to only the
retirement pension fee for income below SEK 100 000 for 2020.
There is a temporary reduction of the employers’ contributions for employees between the ages of 18 and
23 (by the beginning of the year) during the period 1
st
of January 2021 to 31
st
of March 2023. For salaries
and benefits less than SEK 25 000 per month
the employers’ contributions are reduced to the retirement
pension fee and 45 percent of other social security contributions. During the period 1
st
of June to 31
st
of
August 2021 the employers’ contributions are reduced to the retirement pension fee.
During 2021 and 2022 there is a temporary earned income tax credit to compensate for increased costs
during the pandemic. For earned income between SEK 60 000 and SEK 240 000 per year the tax credit is
1.25 percent of the income exceeding SEK 60 000. For earned income between SEK 240 000 and
SEK 300 000 the tax credit is SEK 2 250. For earned income between SEK 300 000 and SEK 500 000 the
tax credit is SEK 2 250 minus 1.125 percent of the income exceeding SEK 300 000. Short-term layoffs
entered into force in April 2020 but could be applied for retroactively from 16
th
of March. The short-term
layoffs give employers with temporary economic difficulties the possibility to have their labour costs
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602
reduced by up to 52.5% while the central government covers a large share
of the employee’s wage bill.
Working hours can be reduced by up to 60% while employees keep 92.5% or more of their regular salary.
During May–July 2020 and January through September 2021 the program is temporarily reinforced and
employers’ labour costs can
be reduced by up to 72%. During these periods working hours can be reduced
by up to 80%, while employees keep 88% of their regular salary.
Companies can defer a maximum of seven
months payment of employers’ social security contributions,
preliminary tax on salaries and six months of value-added tax that are reported monthly or quarterly and a
year of value-added tax that are reported yearly. The deferral can last up to two years and can be
retroactively applied from 1
st
of January 2020.
5. Memorandum Items
5.1. Identification of an AW and calculation of earnings
Basic data for gross earnings are taken from the series Official Statistics of Sweden, published by Statistics
Sweden. The calculation is based upon total average monthly or hourly earnings, primarily in September
of the calendar year. To arrive at the annual earnings, data have been multiplied by the normal amount of
hours worked during the year or the stipulated monthly salary has been multiplied by a factor of 12.2. The
figures are representative for the country as a whole. The branch classification is NACE Rev.2 B-N
according to the OECD recommendation.
5.2. Employer contributions to private health, pension, etc. schemes
There are a handful of widespread private social security schemes. The employers’ contributions
to these
systems for the blue-collar workers in the private sector equalled to 6.3% of wage earnings in 2007. For
white-collar
workers in the private sector the employers’ contributions to private social security schemes
were 14% in 2007. These figures are based on the statistics of labour costs in the private sector, published
by Statistics Sweden.
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2021 Parameter values
Average earnings/yr
Central income tax
tax_rate
tax_thrsh
Basic Allowance
gr1
gr2
gr3
gr4
gp1
gp2
gp3
gp4
gp5
Local income tax
local_rate
min_taxl
Soc. security amount
basic_amt
basic_ant
Soc. security contributions
employee
employer
ceiling
Child benefit
SSC_rate
SSC_empr
SSCC
Child 1
Child 2
CB
Tax credits
TC1
TC1gr1
TC1gp1
TC2gp1
er_1
er_2
er_3
er_4
ep_1
ep_2
ep_3
ep_4
ep_5
teitc_1
teitc_2
teitc_lim_1
teitc_lim_2
teitc_max
gen_tax_cr_rate
gen_tax_cr_lim
gen_tax_cr_max
PRT
0
0
0
1
0.91
3.24
8.08
13.54
1.703
0.3405
0.128
2.323
0.03
47 600
68 200
0.07
0.3142
8.07
15 000
16 800
15 900
0.3227
0
0.99
2.72
3.11
7.88
0.423
0.2
0.1
0.293
0.77
0.2
523 200
Ave_earn
482 897
Secretariat estimate
EITC
Temporary EITC
0.0125
0.01125
60 000
300 000
2 250
0.0075
40000
1500
0.1162
General wastable tax credit
Employer payroll tax
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2021 Tax equations
The equations for the Swedish system are mostly repeated for each individual of a married couple. But the
cash transfer is calculated only once. This is shown by the Range indicator in the table below.
The functions which are used in the equations (Taper, MIN, Tax etc) are described in the technical note
about tax equations. Variable names are defined in the table of parameters above, within the equations
table, or are the standard variables “married” and “children”. A reference to a variable with the affix “_total”
indicates the sum of the relevant variable values for the principal and spouse. And the affixes “_princ” and
“_spouse” indicate the value for the principal and spouse, respectively. Equations for a single person are
as shown for the principal, with “_spouse” values taken as 0.
Line in country table and
intermediate steps
1.
2.
Earnings
Allowances:
Variable name
earn
truncearn
basic_al
Range
Equation
B
B
3.
4.
5.
6.
Total
Credits in taxable income
CG taxable income
CG tax before credits
Tax credits :
ssc_al
tax_al
taxbl_cr
tax_inc
CG_tax_excl
ssc_credit
localtax_credit
eitc
B
B
B
B
B
B
B
B
TRUNC(earn, -2)
IF(truncearn<=gr_2*basic_amt,
MINA(ROUNDUP(MAXA(gp_1*basic_amt,
(gp_1+gp_2*(gr_2-gr_1))*basic_amt-
gp_2*MAXA(gr_2*basic_amt-truncearn, 0)), -2),
truncearn),
MINA(ROUNDUP(MAXA(gp_4*basic_amt,
gp_5*basic_amt-gp_2*MAXA(gr_2*basic_amt-
truncearn, 0)-gp_3*MAXA(truncearn-
gr_3*basic_amt, 0)), -2), truncearn))
0
basic_al
0
Positive(earn-basic_al)
tax_rate*Positive(tax_inc-tax_thrsh)
Trunc(SSC, -2)
0
=TRUNC(MAX((((TRUNC(IF(earned_income>er_2*
basic_amt;
IF(earned_income>er_3*basic_amt;ep_4*basic_amt
;ep_1*basic_amt+ep_3*( earned_income-
er_2*basic_amt));MIN(earned_income;er_1*basic_a
mt+ep_2*(earned_income-er_1*basic_amt)));0))-
basic_allowance)*local_rate)-
(IF(earned_income>er_4*basic_amt;ep_5*(earned_i
ncome-er_4*basic_amt);0));0);0)
MIN(eitc, CG_tax_excl+ local_tax- ssc_credit)
Trunc(MAX(MIN(teitc_1*MAX(EI-
teitc_lim_1,0),teitc_max)-teitc_2*MAX(EI-
teitc_lim_2,0),0),0)
MIN(gen_tax_cr_rate*MAX(tax_inc-
gen_tax_cr_lim,0),gen_tax_cr_max)
ssc_credit+localtax_credit+final_eitc+gen_tax_cr+tei
tc
(CG_tax_excl-tax_cr
IF(tax_inc>0, TRUNC(local_rate*tax_inc,
0)+min_taxl, 0)
(truncearn>=gp_1*basic_amt)*MINA(ROUNDSSC(tr
uncearn*SSC_rate),
ROUNDSSC(SSCC*basic_ant*SSC_rate))
Children*CB
TRUNC(earn*SSC_empr)-Payroll_empr
Final_eitc
Temporary eitc
B
B
gen_tax_cr
tax_cr
7.
8.
9.
CG tax
State and local taxes
Employees' soc security
CG_tax
local_tax
SSC
B
B
B
B
B
11.
13.
Cash transfers
Employer's contributions
Employer's SSC
cash_trans
SSC_empr
J
B
B
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Employer's payroll tax
Total
Payroll_empr
Cont_empr
B
B
TRUNC(earn*PRT)
SSC_empr+Payroll_empr
Key to range of equation B calculated separately for both principal earner and spouse P calculated for principal only (value taken as 0 for spouse
calculation) J calculated once only on a joint basis.
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Switzerland
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in the
tax/benefit system. The methodology also includes the parameter values and
tax equations underlying the data.
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Switzerland 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
21.8%
n.a.
26.5%
n.a.
28.2%
n.a.
32.5%
n.a.
32.2%
n.a.
36.0%
n.a.
15.8%
n.a.
20.8%
n.a.
8.4%
6.4%
14.8%
19.9%
11.5%
6.4%
17.9%
22.8%
16.4%
6.4%
22.8%
27.4%
2.6%
6.4%
-0.5%
5.6%
0
0
53 923
4 052
0
0
77 616
6 047
0
0
121 857
10 041
6 000
6 000
63 614
4 052
4 052
9 384
6 047
16 873
10 041
35 940
4 052
5 694
4 052
6 047
10 041
4 052
0
508
4 824
0
1 448
9 377
0
5 549
20 349
502
0
1 642
0
0
0
502
0
0
7 149
2 000
1 700
10 849
0
52 400
508
0
0
11 657
2 653
1 700
16 011
0
78 400
1 448
0
0
20 754
4 000
1 700
26 454
0
131 300
5 549
0
13 000
7 149
2 000
3 100
25 249
6 000
44 000
157
67
none
63 308
100
none
94 489
167
none
157 797
67
2
63 308
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Switzerland 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
19.8%
21.4%
24.6%
26.1%
25.9%
26.5%
30.3%
30.9%
30.2%
30.2%
34.4%
34.4%
28.5%
29.2%
32.8%
33.5%
4.9%
6.4%
4.9%
10.6%
8.9%
6.4%
11.5%
16.8%
11.0%
6.4%
14.2%
19.3%
11.2%
6.4%
17.6%
22.5%
6 000
6 000
89 841
6 047
6 000
6 000
139 627
10 099
6 000
6 000
162 175
12 095
0
0
130 055
10 099
6 047
10 649
10 099
24 170
12 095
32 803
10 099
27 742
6 047
10 099
12 095
10 099
502
90
4 511
502
1 816
12 255
502
3 642
17 066
0
2 823
14 820
502
502
502
0
2 600
13 000
11 657
2 653
4 900
34 811
6 000
65 600
592
16 000
13 000
20 806
2 653
4 900
57 359
6 000
106 400
2 318
16 000
13 000
25 968
2 653
4 900
62 521
6 000
132 400
4 144
16 000
0
20 806
2 653
3 500
42 959
0
114 800
2 823
100-0
2
94 489
100-67
2
157 797
100-100
2
188 978
100-67
none
157 797
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609
The national currency is the Swiss franc (CHF). In 2021, CHF 0.91 equalled USD 1. The Secretariat has
estimated that in that same year the average worker earned CHF 94 489 (Secretariat estimate).
Cantonal and communal income taxes are very substantial in relation to direct federal tax. Here, the canton
and commune of Zurich have been selected as an example of the tax system of the 26 cantons. Local
income tax is not deductible when calculating federal income tax.
1. Personal income tax systems
1.1. Income tax collected by the federal government (Confederation)
1.1.1. Tax unit
The income of spouses living together is taxed jointly, regardless of the property regime under which they
were married. Income of children living under parental authority is added to the income of their custodian.
Children’s labour income is taxed separately and
in some cases, as in Zurich, is exempt from tax.
1.1.2. Tax reliefs and tax credits
1.1.2.1. Standard reliefs for “postnumerando” taxation [i.e. annual taxation on the basis
of actual earned income, assessed at the end of the year].
Basic deduction
There is a basic deduction of CHF 2 600 for married couples for direct federal tax.
Deduction for children
A CHF 6 500 deduction is allowed for each child under 18 years of age; the deduction is allowed for older
children if they are apprentices or still in school.
Tax credit for children
A CHF 251 deduction from the tax liability is allowed for each child under 18 years, the deduction is allowed
for older children if they are apprentices or still in school.
Deductions for social insurance contributions and other taxes
Premiums for old age and disability insurance (5.3% of gross earned income) and for unemployment
insurance (1.1% for income up to CHF 148 200, 0.5% for income over CHF 148 200) are deductible in full.
Compulsory contributions of approximately 8.06% to private pension funds are also fully deductible. Health
and life insurance premiums are deductible from federal income tax up to CHF 3 500 for married persons
and CHF 1 700 for taxpayers who are widow(er)s, divorced or single (such premiums are not considered
social contributions). These amounts are increased by CHF 700 for each dependent child.
Work-related expenses
Taxpayers are allowed a deduction corresponding to 3% of net income (i.e. gross income less contributions
for old age and disability insurance, unemployment insurance and work-related provident funds). This
deduction may be no less than CHF 2 000 and no more than CHF 4 000.
Deduction for two-income couples
50% of the smaller income can be deducted, but no less than CHF 8 100 and no more than CHF 13 400.
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1.1.2.2. Main non-standard reliefs available to the average worker
Interest payments on qualifying loans
This is the main non-standard relief available to the average worker. It is allowed for all sorts of loans.
Medical expenses
Expenses incurred as a result of illness, accidents or disability of the taxpayer or one of its dependants are
deductible if the taxpayer bears the expenses personally and they exceed 5% of his or her net income.
1.1.3. Tax base
Allowable deductions from gross income
Work-related
Personal deduction
Deduction for 2 dependent children
Social contributions
Old age insurance
Unemployment insurance
Pension fund
Maximum deductions for health insurance premiums and
loan interest
3
Deduction for two-income couples
4
expenses
1
Single taxpayer (CHF)
2 000-4 000
--
--
5.3%
1.1%
2
8.06%
1 700 plus 700 per child
Married taxpayer, 2 children (CHF)
2 000–4 000
2 600
13 000 (6 500*2)
5.3%
1.1%
2
8.06%
3 500 plus 700 per child
8 100–13 400
1. 3% of net income, minimum CHF 2 000, maximum CHF 4 000.
2. 1.1% of income up to CHF 148 200; 0.5% of income beyond CHF 148 200.
3. For the purposes of this publication, taxpayers are assumed to always receive the relevant maximum deduction.
4. 50% of smaller income, minimum the lower of CHF 8 100 or adjusted smaller income, maximum CHF 13 400.
In addition, for the married taxpayer with 2 children, there is a (non-refundable) tax credit for 2 dependent
children amounting to CHF 502, thus reducing the tax liability by CHF 502.
1.1.4. Tax schedules
1.1.4.1. Rates for persons living alone
Taxable income (CHF)
1
Up to 14 500
14 500 to 31 600
2
31 600 to 41 400
41 400 to 55 200
55 200 to 72 500
72 500 to 78 100
778 100 to 103 600
103 600 to 134 600
134 600 to 176 000
176 000 to 755 200
Over 755 200
3
Base amount (CHF)
--
131.65
217.90
582.20
1 096.00
1 428.60
3 111.60
5 839.60
10 393.60
--
Plus % of excess (CHF)
--
0.77
0.88
2.64
2.97
5.94
6.60
8.80
11.00
13.20
11.5 of total income
--
14 500
31 600
41 400
55 200
72 500
78 100
103 600
134 600
176 000
1. Fractions of less than CHF 100 are disregarded.
2. Tax y amounts of less than CHF 25 are not billed.
3. The calculation model disregards this part of the schedule.
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1.1.4.2. Rates for spouses living together and for widowed, separated, divorced
taxpayers or unmarried taxpayers living with their own children.
Taxable income (CHF)
1
Up to 28 300
28 300 to 50 900
50 900 to 58 400
2
58 400 to 75 300
75 300 to 90 300
90 300 to 103 400
103 400 to 114 700
114 700 to 124 200
124 200 to 131 700
131 700 to 137 300
137 300 to 141 200
141 200 to 143 100
143 100 to 145 000
145 000 to 895 800
For 895 900
Over 895 900
3
--
226
376
883
1 483
2 138
2 816
3 481
4 081
4 585
4 975
5 184
5 412
1 030 029
--
Base amount (CHF)
--
1
2
3
4
5
6
7
8
9
10
11
12
13
Plus % of the excess (CHF)
--
28 300
50 900
58 400
75 300
90 300
103 400
114 700
124 200
131 700
137 300
141 200
143 100
145 000
11.5 of total income
1. Fractions of less than CHF 100 are disregarded.
2. Tax amounts of less than CHF 25 are not billed.
3. The calculation model disregards this part of the schedule.
1.2. Taxes levied by decentralised authorities (Canton and commune of Zurich)
1.2.1. General description of the system
The system of cantonal and communal taxation has the same features as that of direct federal tax.
The tax base is comprised of income from all sources.
Once the basic amount of tax is set, cantons, communes and churches levy their taxes by applying a
multiple, which may change from year to year. In 2012, for example, the canton applied a multiple of 1.0,
the commune of Zurich 1.19 and the reformed church 0.10. The basic amount of tax is therefore multiplied
by a total of 2.29. However, following the decision no longer to include church tax in Revenue Statistics, it
is no longer included in the calculations for Taxing Wages. The basic amount of tax is therefore multiplied
by a total of 2.19.
1.2.2. Tax base
Allowable deductions from gross income
Work-related
Personal deduction
Deduction for 2 dependent children
Social contributions
-- Old age insurance
-- Unemployment insurance
-- Pension fund
Maximum deductions for health insurance premiums and
loan interest
3
Deduction for two-income couples
expenses
1
Single taxpayer (CHF)
2 000 – 4 000
--
--
5.3%
1.1%
2
8.06%
2 600 plus 1 300 per child
Married taxpayer, 2 children (CHF)
2 000–4 000
--
18 000 (9 000*2)
5.3%
1.1%
2
8.06%
5 200 plus 1 300 per child
5 900
1. 3% of net income, minimum CHF 2 000 CHF, maximum CHF 4 000.
2. 1.1% of income up to CHF 148 200; 0.5% of income beyond CHF 148 200.
3. For the purposes of this publication, taxpayers are assumed to always receive the relevant maximum deduction.
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1.2.3. Postnumerando tax rates
Cantonal income tax (Zurich)
a) Basic income tax rates for married, divorced, widowed or single taxpayers living with children:
Taxable income (CHF)
Up to 13 500
13 500 to 19 600
19 160 to 27 300
27 300 to 36 700
36 700 to 47 400
47 400 to 61 300
61 300 to 92 100
92 100 to 122 900
122 900 to 169 300
169 300 to 224 700
224 700 to 284 800
284 800 to 354 100
Over 354 100
1
Base amount (CHF)
--
--
122
353
729
1 264
2 098
4 254
6 718
10 984
16 434
23 045
31 361
0
2
3
4
5
6
7
8
9
10
11
12
13
Plus % of the excess (CHF)
--
13 500
19 600
27 300
36 700
47 400
61 300
92 100
122 900
169 300
224 700
284 800
354 100
b) Basic income tax rates for other taxpayers (single without children).
Taxable income (CHF)
1
Up to
6 700
6 700 to 11 400
11 400 to 16 100
16 100 to 23 700
23 700 to 33 000
33 000 to 43 700
43 700 to 56 100
56 100 to 73 000
73 000 to 105 500
105 500 to 137 700
137 700 to 188 700
188 700 to 254 900
Over 254 900
--
--
94
235
539
1 004
1 646
2 514
3 866
6 791
10 011
15 621
23 565
Base amount (CHF)
0
2
3
4
5
6
7
8
9
10
11
12
13
Plus % of the excess (CHF)
--
6 700
11 400
16 100
23 700
33 000
43 700
56 100
73 000
105 500
137 700
188 700
254 900
1. Fractions below CHF 100 are disregarded.
c) Annual multiple as a percentage of basic tax rates:
-- Canton of Zurich
-- Commune of Zurich
-- Roman Catholic church tax
-- Reformed Church tax
100
119
10 (for info.)
10 (for info.)
A personal tax of CHF 24 is added.
1.2.4. Tax rates used for this study
This study uses the rates of tax levied by the federal, cantonal and communal tax authorities.
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2. Compulsory social security contributions to schemes operated within the
government sector
2.1. Employee contributions
2.1.1. Retirement pensions
5.3% of gross income for old age insurance.
2.1.2. Health insurance
--
2.1.3. Unemployment
1.1% on the portion of income up to CHF 148 200; 0.5% for income over CHF 148 200.
2.1.4. Work-related accidents
--
2.1.5. Family allowances
--
2.1.6. Other
--
2.2. Employer contributions
2.2.1. Retirement pensions
5.3% of gross income for old age insurance.
2.2.2. Health insurance
--
2.2.3. Unemployment
1.1% on the portion of income up to CHF 148 200; 0.5% for income over CHF 148 200.
2.2.4. Work-related accidents
--
2.2.5. Family allowances
The employer pays a benefit for dependent children of an employee. The effective benefits paid depend
on the Canton of residence and the respective employer. As of 1 January 2009, a new Swiss-wide
minimum amount of CHF 2 400 (for children up to 16 years of age and CHF 3 000 for children in education
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614
between 16 and 25 years of age) has been established. In most cases, the benefit paid exceeds this
minimum. The average family benefit is estimated to amount to CHF 3 000 per child per year.
This benefit is taxable along with other components of income.
The family allowance contributions are not included in the Taxing Wages results either as they are paid to
a privately-managed fund. These contributions therefore qualify as non-tax compulsory payments (see
also section 5.3).
2.2.6. Other
--
3. Universal cash benefits
3.1. Benefits linked to marital status
No such benefits are paid.
3.2. Benefits for dependent children
The employer pays a benefit of, on average, approximately CHF 3 000 per year for each dependent child
of an employee. This benefit is taxable along with other components of income. See 2.25.
4. Main changes in the tax/benefit system since 1998
On 1 January 1999, the canton of Zurich switched from biennial praenumerando taxation to annual
postnumerando taxation on individual income. As a result, the direct federal tax is based on annual
postnumerando taxation as well.
As of 1 January 2008, the basic deduction for married couples and the deduction for two-income couples
were introduced. These measures are intended to minimise the marriage penalty and to reduce the high
taxation of secondary earners, thereby increasing labour force participation of skilled secondary earners.
As of 1 January 2012, the tax credit for children reduces the tax liability by CHF 251 per child.
4.1. Changes to labour taxation due to the COVID pandemic in 2020 and 2021
None.
5. Memorandum item
5.1. Identification of the average worker
The population includes men and women working in industry, arts and crafts. The stated income is for the
average of workers in the same sector. The geographical scope is the entire country, whereas the amount
of tax is computed in respect of the canton and commune of Zurich.
5.2. Method of calculation used
Unemployment benefits: not included;
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615
Sick leave payments: not included;
Paid leave allowances: included;
Overtime: included;
Periodic cash bonuses: included;
Fringe benefits: not included;
Basic method used for calculation: monthly wages are multiplied by 12;
Close of the income tax year: 31 December;
Reference period for computing wages: from 1 January to 31 December of the year in question.
5.3. Calculation of non-tax compulsory payments
Switzerland imposes some important non-tax compulsory payments (NTCPs). These NTPCs are not
included in the Taxing Wages models except when they qualify as standard personal income tax reliefs.
Compulsory payments indicators, which combine the effect of taxes and NTCPs, are calculated by the
OECD Secretariat and presented in the OECD Tax Database (See:
https://oe.cd/taxing-wages).
Switzerland levies the following employee and/ or employer NTCPs:
Contributions to the second pillar of the pension system (occupational pension funds):
Occupational pension funds are mandatory for salaried persons earning at least CHF 21 330
annually. Old age insurance is based on individual savings. The savings assets accumulated by
the insured person on his individual savings account over the years serve to finance the old age
pension. The constituted capital is converted into an annual old age pension on the basis of a
conversion factor. Contribution rates depend on the occupation and the pension fund. An estimated
representative rate amounted to 8.06% for employees and 10.86% for employers in 2018.
Health insurance is compulsory for all persons domiciled in Switzerland. Every family member is
insured individually, regardless of age. Health insurance contributions are lump sum contributions
per capita depending on age, sex, canton of residence and insurer. The national average rates for
2021 amount to CHF 5 826.00 for adults and CHF 1 383.60 for children per year. Health insurance
premiums can be reduced depending on the contributor’s income level and his family situation.
Each canton has its own definition of the income thresholds and the reduction regime. The health
insurance premium and reduction rates of the Canton of Zurich are used in the calculations.
Family allowance: Employers have to make family allowance contributions. The contribution rates
differ among cantons and family contribution funds. A representative rate has to be estimated, for
2020 it amounts to 1.2%.
Accident insurance: Accident insurance is compulsory for every employee. Employees are
automatically insured by their employer, whereas the employers are more or less automatically
assigned to a particular insurance company depending on their branch of trade. The risk and
associated costs of the respective business activity determines the insurance premiums. A
representative rate would have to be estimated.
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616
2021 Parameter values
Average earnings/yr
Tax allowances
Tax credit
Partner Allowance
Ave_earn
fed_child_al
fed_child_cred
partner_rate_fed
partner_min_fed
partner_max_fed
Married_ded_fed
partner_local
sing_par_al
work_exp
work_exp_min
work_exp_max
local_basic
local_child
IFD_min_s
IFD_sch_s
94 489
6 500
251
0.5
8 100
13 400
2 600
5 900
0
0.03
2 000
4 000
0
9 000
-
0
0.0077
0.0088
0.0264
0.0297
0.0594
0.066
0.088
0.11
0.132
0.115
-
0
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
0.09
0.1
0.11
0.12
0.13
0.115
24
0
0.02
0.03
0.04
0.05
0.06
0.07
0.08
0.09
Secretariat estimate
Basic deduction for married couples
Partner income local
Single parent
Workrelated
Allowances for local tax
Federal tax
Single
14 500
31 600
41 400
55 200
72 500
78 100
103 600
134 600
176 000
755 200
Married
IFD_min_m
IFD_sch_m
28 300
50 900
58 400
75 300
90 300
103 400
114 700
124 200
131 700
137 300
141 200
143 100
145 000
895 900
Cantonal tax
Single
Zurich_min
Zurich_sch_s
6 700
11 400
16 100
23 700
33 000
43 700
56 100
73 000
105 500
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617
0.1
0.11
0.12
0.13
0
0.02
0.03
0.04
0.05
0.06
0.07
0.08
0.09
0.1
0.11
0.12
0.13
2.19
0.053
0
28 440
0.0806
0.011
0.005
148 200
2 600
1 300
1 700
3 500
700
3 000
137 700
188 700
254 900
13 500
19 600
27 300
36 700
47 400
61 300
92 100
122 900
169 300
224 700
284 800
354 100
Married
Zurich_sch_m
Canton and Commune Tax Mutiple
Social security contributions
Pension
Pillar 2 pension
Unemployment
income ceiling
Cantonal deductible limit
deductible extra for child
Max other insurance deduction
single
married couples
child
Child cash transfer
statetax_mult
old_age
pension_rate
NTCP_old_age_max
NTCP_pension_ee
unemp_rate
unemp_rate2
unemp_ciel
local_dedn
local_dedn_c
max_dedn_s
max_dedn_m
max_dedn_c
child_ben
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618
2021 Tax equations
The equations for the Swiss system in 2021 are mostly calculated on a family basis.
Variable names are defined in the table of parameters above, within the equations table, or are the
standard variables “married” and “children”. A reference to a variable with the affix “_total” indicates the
sum of the relevant variable
values for the principal and spouse. And the affixes “_princ” and “_spouse”
indicate the value for the principal and spouse, respectively. Equations for a single person are as shown
for the
principal, with “_spouse” values taken as 0.
Line in country table and
intermediate steps
1.
2.
Earnings
Allowances:
Variable
name
earn
partner_al
J
Range
Equation
Children
Soc sec contributions
children_al
SSC_al
J
B
Work related
work_al
B
Other
Total
Credits in taxable income
CG taxable income
CG tax before credits
oth_al
tax_al
taxbl_cr
tax_inc
CG_tax_ex
cl
Children_cr
ed
CG_tax
local_tax_i
nc
local_tax
J
J
J
J
J
3.
4.
5.
6.
7.
8.
Tax credits :
CG tax
State and local taxes
J
J
J
IF(earn_spouse-work_al_spouse-
SSC_spouse>partner_min_fed,(Married*MAX(partner_min_fed,MIN(partne
r_max_fed,partner_rate_fed*(earn_spouse-work_al_spouse-
SSC_spouse)))),earn_spouse-work_al_spouse-
SSC_spouse)+Married*Married_ded_fed
Children*fed_child_al+ (Children>0)*(Married=0)*sing_par_al
SSC +
NTCP_pension_ee*IF(earn_princ>0.75*NTCP_old_age_max,MAX(0.125*N
TCP_old_age_max,earn_princ-
0.875*NTCP_old_age_max),0)+NTCP_pension_ee*IF(earn_spouse>0.75*
NTCP_old_age_max,MAX(0.125*NTCP_old_age_max,earn_spouse-
0.875*NTCP_old_age_max),0)
IF(earn-
SSC>work_exp_min,MAX(work_exp_min,MIN(work_exp_max,work_exp*(e
arn-SSC))),earn-SSC)
IF(Married,IF(Children>0,max_dedn_m+Children*fed_dedn_c,max_dedn_
m),IF(Children>0,max_dedn_s+Children*fed_dedn_c,max_dedn_s))
partner_al+children_al+SSC_al+work_al+oth_al
Cash_tran
positive(earn_total-tax_al+taxbl_cr)
IF(Married+Children='0,' Tax(tax_inc,
IFD_sch_s)+IFD_min_s*(Tax(tax_inc, IFD_sch_s)>0), Tax(tax_inc,
IFD_sch_m)+IFD_min_m*(Tax(tax_inc, IFD_sch_m)>0))
Child_cred*Children
Positive(CG_tax_excl- Children_cred)
MAX(earn_total+taxbl_cr-local_basic*(1+Married)-Children*local_child-
work_al_total-SSC_total-(local_dedn*(1+Married)+Children*local_dedn_c)-
(earn_spouse>0)*partner_local,0)
IF((Married+Children)>0, Tax(local_tax_inc,
Zurich_sch_m)*statetax_mult+(1+Married)*Zurich_min*(Tax(local_tax_inc,
Zurich_sch_m)>0), Tax(local_tax_inc,
Zurich_sch_s)*statetax_mult+(Tax(local_tax_inc,
Zurich_sch_s)>0)*Zurich_min)
(old_age)*earn+IF(earn<=unemp_ciel,earn*unemp_rate,unemp_ciel*unem
p_rate+(earn-unemp_ciel)*unemp_rate2)
Children*child_ben
SSC
9.
11.
13.
Employees' soc security
Cash transfers
Employer's soc security
SSC
Cash_tran
SSC_empr
B
J
B
Key to range of equation B calculated separately for both principal earner and spouse P calculated for principal only (value taken as 0 for spouse
calculation) J calculated once only on a joint basis.
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619
Turkey
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in the
tax/benefit system. The methodology also includes the parameter values and
tax equations underlying the data.
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620
Turkey 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Stamp tax
Total
6.
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
32.8%
n.a.
42.8%
n.a.
38.7%
n.a.
47.8%
n.a.
38.7%
n.a.
47.8%
n.a.
32.8%
n.a.
42.8%
n.a.
10.2%
15.0%
25.2%
36.3%
14.4%
15.0%
29.4%
39.9%
18.1%
15.0%
33.1%
43.1%
8.5%
15.0%
23.5%
34.9%
0
0
43 699
10 223
0
0
61 567
15 258
0
0
97 371
25 480
0
0
44 665
10 223
8 762
14 716
13 078
25 619
21 840
48 231
8 762
13 751
8 762
13 078
21 840
8 762
3 220
5 954
0
3 220
12 541
0
3 220
26 391
0
4 186
4 988
0
3 220
3 220
3 220
4 186
8 762
0
49 653
8 731
443
9 174
13 078
0
74 109
15 099
662
15 761
21 840
0
123 762
28 506
1 105
29 611
8 762
0
49 653
8 731
443
9 174
8 762
13 078
21 840
8 762
0
0
0
0
67
none
58 415
100
none
87 187
167
none
145 602
67
2
58 415
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621
Turkey 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Stamp tax
Total
6.
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
38.7%
25.2%
47.8%
36.3%
38.7%
32.8%
47.8%
42.8%
38.7%
38.7%
47.8%
47.8%
38.7%
32.8%
47.8%
42.8%
12.5%
15.0%
27.5%
38.3%
12.0%
15.0%
27.0%
37.9%
13.8%
15.0%
28.8%
39.4%
12.7%
15.0%
27.7%
38.5%
0
0
63 177
15 258
0
0
106 232
25 480
0
0
124 101
30 515
0
0
105 266
25 480
13 078
24 009
21 840
39 370
26 156
50 273
21 840
40 336
13 078
21 840
26 156
21 840
4 830
10 931
0
7 405
17 530
0
7 405
24 117
0
6 440
18 496
0
4 830
7 405
7 405
6 440
13 078
0
74 109
15 099
662
15 761
21 840
0
123 762
23 830
662
24 492
26 156
0
148 217
30 199
662
30 860
21 840
0
123 762
23 830
662
24 492
13 078
21 840
26 156
21 840
0
0
0
0
100-0
2
87 187
100-67
2
145 602
100-100
2
174 373
100-67
none
145 602
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The national currency unit is the
“Türk Lirası” (TL). In 2021, TL
8.46 were equal to USD 1. In that year, the
average worker earned TL 87 187 (Country estimate).
1. Personal Income Tax Systems
1.1. Central government income tax
1.1.1. Tax unit
Spouses are taxed separately on earned income. This rule has been applied since 1 January 1999.
1.1.2. Tax allowances and tax credits
1.1.2.1. Standard reliefs:
Reliefs for social security contributions: Employee's social security contributions are deductible
from gross earnings. These contributions are 15% of gross income as stated by the Social
Insurance Act. The contribution to the unemployment fund is included in this amount and equals
1% of gross income.
Contributions to public pension funds established by law are deductible.
Work related expenses: None.
Minimum Living Relief: The calculation of the minimum living allowance is based on the annual
gross amount of the minimum wage for employees older than 16 at the beginning of the calendar
year in which the income is obtained, multiplied by the following rates:
‒
‒
‒
‒
‒
50% for the taxpayer him or herself;
10% for the spouse who neither works nor has an income;
7.5% for each of the first two children;
10% for third child;
5% for each additional child.
This total amount is then multiplied by the rate (15%) which is applied to the first income bracket of PIT
Schedule stated in Article 103 of PIT Law, and then minimum living relief is calculated by offsetting 1/12 of
the allowance amount against monthly calculated tax due on employment income. Any excess is non-
refundable.
According to Article 6 of Law No: 7103 (dated: 21.03.2018) when the net wages of minimum wage earners
fall below the amount determined for the month of January of the current year because of moving into the
second tax bracket (rate: 20%), minimum living relief will be increased by the same amount for the months
when the net wage falls below net minimum wage determined for the month of January.
1.1.2.2. Main non-standard tax reliefs applicable to an AW
Reliefs for disabled: Article 31 of PIT Law (implemented in 01.01.2004 by the law 4842) regulates
tax relief for disabled persons. The employee who lost his/her working capacity with at least 80%
is considered to be disabled in the 1st degree; employees are disabled in the 2nd respectively 3rd
degree if they lost their working capacity with at least 60% respectively 40%. In these cases, the
following amounts are deductible from monthly wages:
‒
Disabled in the 1st degree: TL 1 500
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623
‒
‒
Disabled in the 2nd degree: TL 860
Disabled in the 3rd degree: TL 380
Legal deductions for public institutions such as OYAK (Social Aid Institution for Military Officers).
50% of the premiums paid by the wage-earner for life insurance policies which belong to himself
(or herself), the spouse and dependent children and all of the premiums paid by the wage- earner
for personal insurance policies including death, accident, health, illness, disablement,
unemployment, maturity, birth, education, etc. provided that the insurance is contracted with a
company establishment in or with a main office in Turkey. (The total amount of deductible premiums
cannot exceed 15% of the wage that is earned in the current month. The annual amount cannot
exceed the annual minimum wage.
Membership payments made to labour unions.
1.1.3. Tax schedule
The tax schedule in 2021 is as follows:
Taxable income (TL)
Up to 24 000
24 000 up to 53 000
53 000 up to 190 000
190 000 up to 650 000
Over 650 000
Tax on lower threshold (TL)
3 600
9 400
46 390
207 390
Tax on excess amount above lower threshold (%)
15
20
27
35
40
1.2. State and local income taxes
Income tax is levied only by the central government.
1.3. Stamp tax
The stamp tax base is gross earnings. The tax rate is 0.759% in 2021
2. Compulsory Social Security Contributions to Schemes Operated within the
Government Sector
2.1. Employees' contributions
2.1.1. Pensions (disability, old age and death insurance): 9%
2.1.2. Sickness: 5%
2.1.3. Unemployment: 1%
2.2.
Employers’ contributions
2.2.1. Pensions (disability, old age and death insurance): 11%
2.2.2. Sickness: 7.5%
2.2.3. Unemployment: 2%
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2.2.4. Pensions (for short term insurance branches): 2%
In order to increase employment and reduce regional imbalances in Turkey; various incentives policies
have been implemented by state, by laws 4447, 4857, 5084, 5225, 5510, 5746, 6111, 6486 by Council of
Minister’s Decree of 2012/3305 (Unemployment Law
No: 4447, Labour Law No: 4857, Investment and
Employment Promotion Law No: 5084, Investment Incentives and The Law of Cultural Initiatives Law No:
5225, Social Security General Health Insurance Law No: 5510, Promotion Research and Development
Activities Law No: 5746, Law On The Restricting Of Certain Receivables and Amendment To The Law Of
Social Insurance and General Health Insurance and Certain Other Laws And Decree Laws No: 6111,
Amendment To The Law Of Social Insurance and General Health Insurance and Certain Other Laws No:
6486, Council of Minister’s Decree No: 2012/3305 on Government Subsidies for Investments,
Law On
Amendments To Tax Laws And Certain Other Laws And Decrees: 7103).
One of the various incentives is reduction of premiums. If disability, old age and death insurance premiums
paid regularly by employers as stated law 5510 article of 81 (Social Security and General Health Insurance
Law), 5% of total 11% premiums are paid by state on behalf of employers. (5% discount applied in
employers share). In addition to 5% discount, 6% discount is implemented from 2013 in the working places
located in 51 provinces, Gökçeada and Bozcaada determined by taking into account the social-
development index.
With law no: 7103 (dated: 21.03.2018) Provisional Article 19 has been added to Unemployment Law (Law
no: 4447). Additional employment incentive is being implemented in order to increase the employment
rate. This incentive’s objective group consists of unemployed persons who have no more than 10 insured
days in last three months.
The support will be applied until December 2022 and benefiting period for each employee, consists of
12 months (if the insured is disabled, or if the insured is woman older than 18 years old or man between
18-25 years old, it is 18 months).
In 2021, the incentive provides SSC support up to TL 3577.5 (for employees with gross wages of TL 9
540) and income and stamp tax support of TL 215 for every additional employee in establishments
operating in the manufacturing or information technologies sectors. For other sectors; the support is
TL 1 341 56 for SSC premiums
(regardless of the gross wage, the amount of support to be given cannot
exceed this amount),
and TL 215 for income and stamp tax (TL 1 556.53 in total).
The Provisional Article 85 is added to Law No 5510 by the Law No 7333/16 issued in the Official Gazette
on 28 July 2021. For employees whose daily gross earnings are below TL147 (TL 294 in workplaces with
collective bargaining agreements) TL 75 (TL 2.5 per day) of Employers SSC will be covered by
Government in 2021.
For employees whose gross earnings are below the base or above ceiling earnings, which are determined
once in a year, these contribution rates are applied to the base or ceiling amounts respectively. In 2021,
the base amount is approximately TL 42 930 and the ceiling amount is approximately TL 321 975. Under
the Law No. 5510 (Social Security and General Health Insurance Law), the base wage for social security
contributions is equal to the minimum wage. Because employees cannot be less than the minimum wage,
the base wage is not considered in this publication. However, the ceiling earnings are considered for the
purposes of this Report.
With law no:7252 (dated: 28.07.2020) Insured persons working in the private sector workplaces who
benefited from short
–
time working allowance before 1/7/2020; In case short time working in the work
place ends and normal weekly working hours proceed in the same workplace, full amount of employee’s
and employer’s
premium shares calculated over minimum wage is covered by the Fund for three months
beginning from the month following the end of short working on condition that it does not exceed
30/06/2021.
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3. Universal Cash Transfers
Employees obtain universal cash transfers according to the collective labour agreements that are signed
between their employer and the labour union(s). These agreements vary with the bargaining power of the
different parties in the different sectors in the economy. This explains why there is no standard amount
reflecting these general transfers.
4. Main Changes in Tax/Benefit System Since 2004
Personal Income Tax Law (No: 193) which is about income tax, Social Security and General Health
Insurance Law (No: 5510) which is about social security contributions and Unemployment Insurance Law
(No: 4447) which is about unemployment insurance fund are the main laws about tax/benefit system.
The main changes have been made to the following laws 5615, 6009, 6327 and 6645 which are as follows:
According to
Act No: 5615, the new application “Minimum Living Relief” began to be implemented.
(See the section 1.1.2).
According to Act No: 6009, the taxation of the wages are differentiated than the taxation of the
other taxable revenue resources like trading income, income from immovable property or income
from investments. By this way, it is ensured that wages (comparative to other income items) are
later entered into the 3rd bracket on the income tax schedule.
According to Act No: 6327, (published in the Official Gazette issue 28338 on 29 June 2012) there
are important amendments in the Private Pension System Regulations. According to this law, any
citizen of the Republic of Turkey will have the right for state subsidy for his/her paid contributions
to the Private Pension Account. The contribution upper limit to favour this incentive is the annual
amount of minimum wage 25% of this amount shall be transferred to the account of the insured
party as a state subsidy. The state subsidy shall be earned in proportion to the amount of time
within the system.
According to Act No: 6645, “Minimum Living Relief” rate is changed from 5% to 10% which is used
for third child’s rate.
4.1. Changes to labour taxation due to the COVID pandemic in 2020 and 2021
Due to force majeure, the wage withholding payments of the sectors determined in the tax procedure law
notification No.518 dated March 24, 2020 for April, May and June have been postponed to October,
November and December.
5. Memorandum Items
5.1. Identification of an AW
Weighted mean, by the number of employees, of the monthly average wage
1
information obtained from
‘Structure of Earnings Survey, 2010’, published by TURKSTAT, according to NACE Rev.2 classification
for B-N sections is calculated
2
and B-N aggregated data is gained. (The annual average wage data is
calculated by multiplying the monthly average wage values by 12).
The data from 2011-2017
is reached by using 2010=100 base year ‘Hourly Earnings Index’ and 2010
annual average wage data.
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626
The data from 2018-2021 is reached by using
2015=100 base year ‘Hourly
Earnings Index’
and 2015
annual average wage data.
5.2. Contribution to private pension and health schemes
Business enterprises (employers) are permitted to make additional contributions for pension savings of
their employees. However, these amounts of additional premiums are limited by main tax laws. Such
additional pension arrangements, which are optional, are not widely used.
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2021 Parameter values
Average earnings/yr.
Income tax
Tax_sch
Ave_earn
87 187
0 .15
0 .20
0 .27
0 .35
0 .40
0 .00759
0 .15
321 975
900
52 920
0 .175
0 .15
0 .5
0 .1
0 .075
0 .1
0 .05
42 930
Country estimate
24 000
53 000
190 000
650 000
Stamp tax
Employees SSC
Stamp_rate
SSC_rate
SSC_ceil
SSC_support
SSC_supp_lim
Employers SSC
Minimum living relief
SSC_empr
credit_rate
basic_allow
spouse_allow
child_allow
third_child_allow
add_child_allow
min_wage
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2021 Tax equations
The equations for the Turkish system are on an individual basis.
The functions which are used in the equations (Taper, MIN, Tax etc) are described in the technical note
about tax equations. Variable names are defined in the table of parameters above, within the equations
table, or are the standard variables “married” and “children”. A reference to a variable with the affix “_total”
indicates the sum of the relevant variable values for the principal and spouse. And the affixes “_princ” and
“_spouse” indicate the value for the principal and spouse, respectively. Equations for a single
person are
as shown for the principal, with “_spouse” values taken as 0.
Line in country table and
intermediate steps
1.
2.
3.
4.
5.
6.
Earnings
Allowances:
Credits in taxable income
CG taxable income
Stamp tax
CG tax before credits
Tax credits :
Variable name
earn
tax_al
taxbl_cr
tax_inc
stamp_tax
CG_tax_excl
tax_cr
Range
Equation
B
B
B
B
B
P
7.
8.
9.
11.
13.
CG tax
State and local taxes
Employees' soc security
Cash transfers
Employer's soc security
CG_tax
local_tax
SSC
cash_trans
SSC_empr
S
B
B
B
B
B
SSC
0
Positive(earn-tax_al)
earn*stamp_rate
Tax(tax_inc,tax_sch)
=credit_rate*min_wage*(basic_allow+spouse_allow*(IF(Wife=0;Married
;0))+
IF(OR(Children=1;Children=2);
Children*child_allow;0)+IF(Children='3;(2*child_allow)' +(Children-
2)*third_child_allow;0)+IF(Children>3;(2*child_allow)
+(1*third_child_allow)+(1*add_child_allow);0))+IF(AND(earn<=min_wa
ge;tax_inc>1st_inc_tax_thrsld);(tax_inc-
1st_inc_tax_thrsld)*(2nd_inc_tax_rate-1st_inc_tax_rate);0)
IF(spouse_earn>0,credit_rate*min_wage*basic_allow,0)
positive(CG_tax_excl-tax_cr)+stamp_tax
0
Min(earn,SSC_ceil)*SSC_rate
0
Positive(Min(earn,SSC_ceil)*SSC_empr-
IF(earn<SSC_supp_lim,SSC_support,0))
Key to range of equation B calculated separately for both principal earner and spouse P calculated for principal only (value taken as 0 for spouse
calculation) J calculated once only on a joint basis.
Notes
1
Monthly wage: Include the sum of monthly basic wages, over time payments, payments for shift
work/night work and other regular payments paid to employees in November 2010 by employers.
2
The average wage amount from 2010 is calculated as a result of a joint working performed by authorities
from TURKSTAT and Ministry of Finance.
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United Kingdom
(2021-2022 Inocme tax year)
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.
Methodological information is available for personal income tax systems,
compulsory social security contributions to schemes operated within the
government sector, universal cash transfers as well as recent changes in the
tax/benefit system. The methodology also includes the parameter values and
tax equations underlying the data.
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United Kingdom 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
32.0%
n.a.
40.2%
n.a.
32.0%
n.a.
40.2%
n.a.
42.0%
n.a.
49.0%
n.a.
32.0%
n.a.
40.2%
n.a.
11.5%
8.1%
19.6%
26.7%
14.3%
9.4%
23.7%
31.3%
22.9%
7.3%
30.2%
37.7%
11.5%
8.1%
13.4%
21.0%
0
0
23 698
2 846
0
0
33 567
4 849
0
0
51 286
8 915
1 833
1 833
25 531
2 846
2 388
5 767
4 129
10 411
5 348
22 157
2 388
5 767
2 388
4 129
5 348
2 388
0
3 379
0
0
6 282
0
0
16 809
0
0
3 379
0
0
0
0
0
12 570
0
16 895
3 379
12 570
0
31 408
6 282
12 570
0
60 873
16 809
12 570
0
16 895
3 379
12 570
12 570
12 570
12 570
67
none
29 465
100
none
43 978
167
none
73 443
67
2
29 465
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United Kingdom 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
32.0%
20.4%
40.2%
27.4%
32.0%
32.0%
40.2%
40.2%
32.0%
32.0%
40.2%
40.2%
32.0%
32.0%
40.2%
40.2%
13.7%
9.4%
18.9%
27.0%
13.2%
8.9%
19.5%
27.2%
14.3%
9.4%
21.6%
29.4%
13.2%
8.9%
22.0%
29.4%
1 833
1 833
35 652
4 849
1 833
1 833
59 098
7 695
1 833
1 833
68 967
9 698
0
0
57 265
7 695
4 129
10 159
6 517
16 177
8 258
20 821
6 517
16 177
4 129
6 517
8 258
6 517
0
6 030
0
0
9 661
0
0
12 563
0
0
9 661
0
0
0
0
0
13 830
0
30 148
6 030
25 140
0
48 303
9 661
25 140
0
62 815
12 563
25 140
0
48 303
9 661
13 830
25 140
25 140
25 140
100-0
2
43 978
100-67
2
73 443
100-100
2
87 955
100-67
none
73 443
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The national currency is the Pound Sterling (GBP). In 2021, GBP 0.73 was equal to USD 1. In 2021-2022,
the Average Worker is estimated to earn GBP 43 978 (Secretariat estimate).
1. Personal Income Tax System
1.1. Central government income taxes
1.1.1. Tax unit
The tax unit is the individual, but certain reliefs depend on family circumstances (see Section 1.1.2.1.).
1.1.2. Tax allowances and tax credits
All figures shown are those applying at the start of the tax year in April.
1.1.2.1. Standard reliefs
Basic reliefs: A personal allowance of GBP 12 570 is granted to each individual with income below
GBP 100 000. The personal allowance is then tapered away by GBP 1 for every GBP 2 of income
above GBP 100 000.
Standard marital status reliefs: Marriage Allowance
– Allows the transfer of 10% of an individual’s
personal allowance to their husband, wife or civil partner. The allowance is restricted to couples
where the higher earner is a basic rate taxpayer and is only beneficial if the lower earner owes
below the personal allowance. The allowance has to be claimed and is given only to those who
meet the eligibility criteria.
Universal Credit (UC): a payment (treated as a non-wastable tax credit for this analysis) available
to low income families with or without children which is gradually replacing a number of benefits
and tax credits (including Working and Child Tax Credit). The maximum amount depends on the
age of the claimant(s), whether they are single or in a couple, the number of children, whether
claimant(s) have a disability or health condition that limits their capability for work, if claimant(s)
have disabled children, whether the claimant(s) are carers, and childcare and housing costs. A
couple where one is aged over 25 with a child born prior to 6 April 2017 would receive a maximum
monthly amount of GBP 792.41 or GBP 9 508.92 per year, assuming no other elements are
payable. UC is reduced by 63 pence for each GBP of earnings (net of income tax and employee
social security contributions) above a threshold (or
“work allowance”) of GBP
515 per
month/GBP 6 180 per year; a different threshold of GBP 293 per month is applied if the claimant
has housing costs. Claimant(s) receive a work allowance if they have limited capability for work or
have children. UC may also be reduced by other income the claimant may have. There are further
rules around the amount of savings held by claimants, and for some claimants the total amount
payable is subject to a cap. As a continued response to the COVID-19 pandemic, for the first six
months of the tax year (April to September 2021) the standard allowance for UC is temporarily
increased by GBP 86.67 per month.
Relief for social security contributions and other taxes: None.
1.1.2.2. Main non-standard tax reliefs applicable to an AW.
Work-related expenses: Flat rate expenses for tools and special clothing are allowed to certain
occupational categories. Since this provision is not applicable to all manufacturing occupations;
and hence average workers, and because the rates vary slightly across categories, this relief is
considered here as non-standard;
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633
Contributions to approved superannuation schemes or personal pension schemes are deducted
when calculating taxable income. Premiums on approved life assurance policies payable to life
assurance companies attract 12.5% tax relief for policies entered into force before 13 March 1984.
1.1.3. Tax schedule
In 2021-22 all taxpayers are liable on taxable income other than savings and dividend income at the basic
rate of 20% on the first GBP 37 700, 40% over the basic rate limit of GBP 37 700 and 45% over the higher
rate limit of GBP 150 000. (Taxable Income is defined as gross income for income tax purposes less
allowances and reliefs available at the marginal rate.) Dividend income is charged at 7.5% up to the basic
rate limit of GBP 37 700, 32.5% above GBP 37 500 and 38.1% above GBP 150 000. The Dividend
Allowance is GBP 2 000 in 2021-22, meaning that dividend taxpayers will not have to pay tax on the first
GBP 2 000 of their dividend income, no matter what non-dividend income they have. Savings income is
charged at 0% up to the starting rate limit on the first GBP 5 000, at 20% up to GBP 37 700, 40% above
GBP 37 700 and 45% above GBP 150 000. From 2016-17, a new Personal Savings Allowance was
introduced giving GBP 1 000 of savings income tax free for taxpayers with total income below the basic
rate limit or GBP 500 for those with total income below the higher rate limit.
Taxable income (GBP)
0–37 700
37 700–150 000
Over 150 000
Rate %
20
40
45
1.2. State and local income tax
From 2018-19 the Scottish Government has introduced a starter rate band for non-savings non-dividend
income of Scottish taxpayers. In 2021-22, the starter rate band applied from GBP 12 500 to GBP 14 667.
The basic rate band for non-savings non-dividend income is set from GBP 14 667 to GBP 25 296. The
Scottish Government has an intermediate rate band for non-savings non-dividend income of Scottish
taxpayers from GBP 25 296 to GBP 43 662. The higher rate band for non-savings non-dividend income of
Scottish taxpayers in 2021-22 is from GBP 43 662 to GBP 150 000. In 2021-22 all Scottish taxpayers are
liable on taxable income other than savings and dividend income at the starter rate of 19% on the first
GBP 2 097, 20% over the starter rate limit of GBP 2 097, 21% over the basic rate limit of GBP 12 726,
41% over the intermediate rate limit of GBP 31 092 and 46% over the higher rate limit of GBP 150 000.
(Taxable Income is defined as gross income for income tax purposes less allowances and reliefs available
at the marginal rate.)
2. Compulsory Social Security Contributions to Schemes Operated Within the
Government Sector
2.1.
Employees’ contributions
National Insurance contributions are payable by employees earning more than GBP 184 in any week.
These are 12% of earnings between GBP 184 and GBP 967 and 2% of earnings above GBP 967.
Depending on eligibility, members of the National Insurance scheme qualify for pensions, sickness,
industrial injury, unemployment benefits, etc. All employees earning under GBP 184 per week have no
National Insurance contribution liability but a notional contribution will be deemed to have been paid in
respect of earnings between GBP 120 and GBP 184 to protect benefit entitlement.
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2.2.
Employers’ contributions
Employer's contributions are not payable for employees earning less than GBP 170 per week. The rate of
employers’ contributions for employees is 13.8% of earnings above GBP
170 per week.
The apprenticeship levy was introduced in April 2017. The apprenticeship levy is charged at a rate of 0.5%
on the gross pay bill of employers. Employers will receive an allowance of GBP 15 000 per year to offset
against the levy meaning that only employers with a gross pay bill of over GBP 3m will end up paying the
levy. Due to the fact that the apprenticeship levy does not apply to all employers, it is not included in the
Taxing Wages calculations
3. Universal Cash Transfers
3.1. Transfers related to marital status
None (widows’ benefit is covered by the government pensions scheme noted above).
3.2. Transfers for dependent children
A child benefit of GBP 21.15 per week is paid in respect of the first child in the family up to the age of 19
(if the child aged 16-19 is in education or training) with GBP 14.00 per week paid for each subsequent
child.
Since January 2013, a tax charge has applied for any taxpayer who has income over GBP 50 000 and
either they or their partner are in receipt of Child Benefit. For those with adjusted net income (ANI, pre-tax
income less certain allowances) between GBP 50 000 and GBP 60 000, the amount of the charge will be
1% of the Child Benefit for every GBP 100 of income over GBP 50 000. For those with income over
GBP 60 000, the amount of the charge will equal the amount of Child Benefit. Child Benefit recipients can
opt out of receiving payments as an alternative to paying the charge. Where both adults are over the
threshold, the liability falls on the adult with the highest ANI.
4. Recent changes in the tax/benefit system
4.1. Changes to labour taxation due to the COVID pandemic in 2020 and 2021
As a continued response to the COVID-19 pandemic, for the first six months of the tax year (April to
September 2021) the standard allowance for UC is temporarily increased by GBP 86.67 per month.
Coronavirus Job Retention Scheme: The Coronavirus Job Retention Scheme enables employers to claim
a taxable grant covering up to 80% of the wages for furloughed employees (capped at GBP 2 500 a month
per employee). The initial scheme applied from March to July 2020 and was open to all employers. The
Coronavirus Job Retention Scheme has since been extended four times, with the latest extension until 30
September 2021.
Self-Employment Income Support Scheme - initial two grants: The Self-Employment Income Support
Scheme provided taxable grants to self-employed people, or members of a partnership, who have lost
income. It was open to around 3.4 million people. On 17 August 2020, the scheme reopened for a second
round of grant applications (open until 19 October 2020).
Self-Employment Income Support Scheme-third grant: The Self-Employed Income Support Scheme grant
extension provided a grant to self-employed individuals who were eligible for the Self-Employed Income
Support Scheme and were actively continuing to trade but facing reduced demand due to COVID-19.
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Self-Employment Income Support Scheme-fourth and fifth grants: The Self-Employment Income Support
Scheme grant extension provides a grant to self-employed individuals who are currently eligible for the
Self-Employment Income Support Scheme and are actively continuing to trade but are facing reduced
demand due to COVID-19. The fourth grant will cover the period February to April 2021, and can be
claimed from late April. The fifth grant will cover the period May to September 2021 and can be claimed
from July 2021.
Income Tax Self-Assessment- Deferral: Self-Assessment taxpayers who cannot pay tax bills on time
because of COVID-19 were given the option of deferring payment of their July 2020 Payment on Account
until 31 January 2021. Taxpayers who deferred payments were expected to make payment at the start of
2021.
Employment-related securities- Enterprise Management Incentive: Those participating in an Enterprise
Management Incentive scheme are required to meet the ‘working time requirement’. This means that
the
employee’s time committed to the company must be equal to or exceed the statutory threshold of 25 hours
per week or if less, 75% of their working time. This measure introduces a time-limited exception to the
disqualifying event rules, whereby, if an employee would otherwise have met the scheme requirements
but did not do so for reasons connected to the COVID-19 pandemic, the time that they would have spent
on the business of the company will count towards their working time.
Increase in the basic element of Working Tax Credit by GBP 20 per week: A temporary GBP 20-a-week
increase in the basic element of working tax credits for 2020-21.
Time to Pay - Income Tax Self-Assessment: Enhanced Time to Pay: Time to Pay is an existing service
that supports businesses and individuals in financial difficulty to pay back outstanding tax liabilities using
payment plans. HM Revenue & Customs announced a helpline to promote and improve access to the
scheme for businesses affected by COVID-19. On 25 September 2020, the government announced the
eligibility criteria for self-serve Time to Pay arrangements would be extended to allow taxpayers with
outstanding Self-Assessment tax bills of up to GBP 30 000 (previously GBP 10 000) to arrange a Time to
Pay of up to 12 months online. This built on the Self-Assessment deferral policy, allowing taxpayers who
deferred their liabilities until January 2021 the option to pay back outstanding tax bills in instalments.
Payments to working households: A one-off tax-free payment of GBP 500 if a customer was receiving
Working Tax Credit or Child Tax Credit, but did not get a payment because their income was too high to
get Working Tax Credit payments on 2 March 2021. The lump sums were paid direct to customers' bank
accounts by 23 April 2021, rather than through the Online Tax Credits service. Customers did not need to
apply, HM Revenue & Customs made contact with eligible customers.
Income tax exemptions for COVID-19 tests: The government will legislate in the Finance Bill 2021 to
introduce a retrospective income tax exemption for payments that an employer makes to an employee to
reimburse for the cost of a relevant coronavirus antigen test for the tax year 2020-21.
Self-assessment- Penalty easement: Self-assessment customers were not issued a late-filing penalty for
the 31 January 2021 deadline for 2019-20 returns, provided they did file by the 28 February 2021. From
the 1 March 2021, late filing penalties will be administered for those who are still yet to submit their return.
5. Memorandum Items
5.1. Identification of AW and valuation of earnings
A new Annual Survey of Hours and Earnings (ASHE) has been developed to replace the New Earnings
Survey (NES) (results of which are published in Labour Market Trends) and shows the average weekly
earnings of full-time employees in April each year. It covers men and women at adult rates in the United
Kingdom (excluding Northern Ireland). The annual figure used for the gross earnings of the AW in the
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636
United Kingdom is the annual equivalent of the arithmetic average of the weekly earnings figures for April
at the beginning and end of the fiscal year, as published in Labour Market Trends.
The earnings figures exclude the earnings of those whose pay was affected by absence (due to sickness
etc.). They include overtime, payment by results and shift payments. But they do not include benefits in
kind (which could in some circumstances be included in the employee's taxable income in the United
Kingdom).
5.2.
Employers’
contributions to private pension, health etc. schemes
In 2008, there were 9.0 million active members of occupational pension schemes with two or more
members in the UK, of whom 3.6 million were in the private sector and 5.4 million in the public sector.
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637
2021 Parameter values
Average earnings/yr
Allowances
Ave_earn
Basic_al
PA taper start
43 978
12570
100000
Secretariat's estimate
Income tax
Married_al
Married_rate
Tax_sch
1260
0
0.2
0.4
0.45
0
0.12
0.02
0.138
8840
21.15
14
50000
60000
0.01
100
37700
150000
Employees SSC
Primary threshold
Upper earnings limit
Employers SSC
Child benefit (first)
Child benefit (others)
SSC_sch
9568
50270
SSC_rate2
ST
CB_first
CB_others
CB_1st_thres
CB_2nd_thres
CB_taper1
CB_taper2
UNIVERSAL CREDIT
Monthly rates
Standard allowance (single over 25)
Standard allowance (couple over 25)
Temporary standard allowance uplift (6 months)
Child element (first child born<6 Apr 2017)
Child element
Work allowance (no housing costs)
Taper rate
Number of days in year
UC_standard_single
UC_standard_couple
UC_standard_temp
UC_child_1
UC_child
UC_WA
UC_taper
numdays
324.84
509.91
86.67
282.5
237.08
515
0.63
365
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2021 Tax equations
The equations for the UK system are mostly on an individual basis. But Universal Credit is calculated on
a family basis and child benefit is calculated only once. This is shown by the Range indicator in the table
below.
The functions which are used in the equations (Taper, MIN, Tax etc) are described in the technical note
about tax equations. Variable names are defined in the table of parameters above, within the equations
table, or are the standard
variables “married” and “children”. A reference to a variable with the affix “_total”
indicates the sum of the relevant variable values for the principal and spouse. And the affixes “_princ” and
“_spouse” indicate the value for the principal and spouse,
respectively. Equations for a single person are
as shown for the principal, with “_spouse” values taken as 0.
Line in country table and
intermediate steps
Variable
name
Range
Equation
1.
2.
Earnings
Allowances:
Earn
tax_al
B
3.
4.
5.
6.
Credits in taxable income
CG taxable income
CG tax before credits
6. Universal Credit
(nonwastable)
taxbl_cr
tax_inc
CG_tax_ex
cl
tax_cr
B
B
B
J
Tax_al
IF(earn<PA_taper,IF(AND(earn<(BRL+Basic_al),earn_spouse<Basic_al,Mar
ried='1),IF(earn>earn_spouse,Basic_al+Married_al,Basic_al-
Married_al),Basic_al),IF(earn>(PA_taper+(Basic_al*2)),0,MAX(0,(Basic_al-
((earn-PA_taper)'/2)))))
0
Positive(earn-tax_al)
Tax(tax_inc, tax_sch)
(IF(Children>0,IF(Married=0,Taper(SUM(UC_child_1,(Children-
1)*UC_child,UC_standard_single,UC_standard_temp/2),((monthly_net_earn
ings),UC_WA,UC_taper),Taper(SUM(UC_child_1,(Children-
1)*UC_child,UC_standard_couple,,UC_standard_temp/2),(monthly_net_ear
nings),UC_WA,UC_taper)),IF(Married=0,Taper(sum(UC_standard_single,U
C_standard_temp/2),(monthly_net_earnings),0,UC_taper),Taper(sum(UC_st
andard_couple,UC_standard_temp/2),(monthly_net_earnings),0,UC_taper)))
)*12
CG_tax_excl-tax_cr
0
Tax(earn, SSC_sch)
='IF(princ_earn>CB_1st_thres,IF(princ_earn>CB_2nd_thres,0,((1-(AA7-
CB_1st_thres)'/(CB_taper2/CB_taper1)))*(numdays/7*((Children>0)*CB_first
+CB_others*Positive(Children-
1)))),(numdays/7*((Children>0)*CB_first+CB_others*Positive(Children-1))))
(earn>ST)*(earn-ST)*SSC_rate2
Tax_cr-transfer
IF(CG_tax_excl<0, -CG_tax_excl, 0)
7.
8.
9.
11.
CG tax
State and local taxes
Employees' soc security
Cash transfers
CG_tax
local_tax
SSC
cash_trans
B
B
B
J
13.
Employer's soc security
SSC_empr
B
J
J
Memorandum item: Non-wastable tax credit
tax expenditure component
Taxexp
cash transfer component
Transfer
Key to range of equation B calculated separately for both principal earner and spouse P calculated for principal only (value taken as 0 for spouse
calculation) J calculated once only on a joint basis.
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639
United States
This chapter includes data on the income taxes paid by workers, their social
security contributions, the family benefits they receive in the form of cash
transfers as well as the social security contributions and payroll taxes paid
by their employers. Results reported include the marginal and average tax
burden for eight different family types.Methodological information is
available for personal income tax systems, compulsory social security
contributions to schemes operated within the government sector, universal
cash transfers as well as recent changes in the tax/benefit system. The
methodology also includes the parameter values and tax equations
underlying the data.
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United States 2021
The tax/benefit position of single persons
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
26.3%
n.a.
31.5%
n.a.
36.3%
n.a.
40.8%
n.a.
38.3%
n.a.
42.7%
n.a.
48.6%
n.a.
52.3%
n.a.
14.1%
7.7%
18.4%
24.7%
17.2%
7.7%
22.6%
28.4%
21.9%
7.7%
29.5%
34.7%
-6.2%
7.7%
-8.5%
-0.1%
1 400
34 414
3 533
1 400
48 737
5 123
0
74 081
8 349
4 200
45 775
3 533
1 400
1 400
0
4 200
3 227
9 166
4 816
15 617
8 043
31 053
3 227
605
3 227
4 816
8 043
3 227
0
3 357
2 582
0
6 837
3 964
0
16 241
6 769
7 208
- 4 686
2 065
0
0
0
6 000
0
0
0
1 208
12 550
0
29 629
3 357
12 550
0
50 404
6 837
12 550
0
92 584
16 241
18 800
0
23 379
2 522
0
0
0
0
12 550
12 550
12 550
18 800
67
none
42 179
100
none
62 954
167
none
105 134
67
2
42 179
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United States 2021
The tax/benefit position of married couples
Wage level (per cent of average wage)
Number of children
1.
2.
Gross wage earnings
Standard tax allowances
Basic allowance
Married or head of family
Dependent children
Deduction for social security contributions and income taxes
Work-related expenses
Other
Total
3.
4.
5.
6.
Tax credits or cash transfers included in taxable income
Central government taxable income (1 - 2 + 3)
Central government income tax liability (exclusive of tax credits)
Tax credits
Basic credit
Married or head of family
Children
Other
Total
7.
8.
9.
Central government income tax finally paid (5-6)
State and local taxes
Employees' compulsory social security contributions
Gross earnings
Taxable income
Total
10. Total payments to general government (7 + 8 + 9)
11. Cash transfers from general government
For head of family
For two children
Total
12. Take-home pay (1-10+11)
13. Employer's compulsory social security contributions
14. Average rates
Income tax
Employees' social security contributions
Total payments less cash transfers
Total tax wedge including employer's social security contributions
15. Marginal rates
Total payments less cash transfers: Principal earner
Total payments less cash transfers: Spouse
Total tax wedge: Principal earner
Total tax wedge: Spouse
26.3%
26.3%
31.5%
32.0%
26.3%
26.3%
31.5%
31.5%
36.3%
36.3%
40.8%
40.8%
26.3%
26.3%
31.5%
31.5%
2.3%
7.7%
1.0%
8.5%
8.9%
7.7%
11.2%
17.9%
12.0%
7.7%
15.2%
21.6%
15.0%
7.7%
20.0%
26.1%
5 600
62 298
5 123
5 600
93 384
8 656
5 600
106 719
10 245
2 800
84 139
8 656
5 600
5 600
5 600
2 800
4 816
6 256
8 043
17 350
9 632
24 789
8 043
23 795
4 816
8 043
9 632
8 043
6 000
- 1 855
3 296
6 000
3 206
6 101
6 000
7 675
7 482
0
9 206
6 546
6 000
6 000
6 000
0
0
0
0
0
25 100
0
37 854
4 145
25 100
0
80 034
9 206
25 100
0
100 809
13 675
25 100
0
80 034
9 206
0
0
0
0
25 100
25 100
25 100
25 100
100-0
2
62 954
100-67
2
105 134
100-100
2
125 909
100-67
none
105 134
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The national currency is the dollar (USD). In 2021, the average worker earned USD 62 954 (Secretariat
estimate).
1. Personal Income Tax System
1.1. Central/federal government income taxes
1.1.1. Tax unit
Families are generally taxed in one of three ways:
As married couples filing jointly on the combined income of both spouses;
As married individuals filing separately and reporting actual income of each spouse; or
As heads of households (only unmarried or separated individuals with dependents).
All others, including dependent children with sufficient income, file as single individuals.
1.1.2. Tax allowances and tax credits
1.1.2.1. Standard reliefs
Basic reliefs: In 2021 a married couple filing a joint tax return is entitled to a standard deduction of
USD 25 100. The standard deduction is USD 18 800 for heads of households and USD 12 550 for
single individuals. This relief is indexed for inflation. More liberal standard deductions are available
for taxpayers who are age 65 or older and taxpayers who are blind. Special rules apply to children
who have sufficient income to pay tax and are also claimed as dependents by their parents.
Standard marital status reliefs: Married couples generally benefit from a more favourable schedule
of tax rates for joint returns of spouses (see Section 1.1.3). There are no other general tax reliefs
for marriage.
Relief for children: Low income workers with dependents are allowed a refundable (non-wastable)
earned income credit. For taxpayers with one child, the credit is 34% of up to USD 10 640 of earned
income in 2021. The credit phases down when income exceeds USD 19 520 (25 470 for married
taxpayers) and phases out when it reaches USD 42 158 (48 108 for married taxpayers). The
earned income threshold and the phase-out threshold are indexed for inflation. For taxpayers with
two children, the credit is 40% of up to USD 14 950 of earned income in 2021. The credit phases
down when income exceeds USD 19 520 (25 470 for married taxpayers) and phases out when it
reaches USD 47 915 (53 865 for married taxpayers). For taxpayers with three or more children the
credit is 45% of up to USD 14 950 of earned income. The credit phases down when income
exceeds USD 19 520 (25 470 for married taxpayers) and phases out when it reaches USD 51 464
(57 414 for married taxpayers).
Since 1998, taxpayers are permitted a tax credit for each qualifying child under the age of 17. For
2021 the age was extended to include otherwise qualifying 17-year-old children. In 2021 the
maximum credit is USD 3600 for children under 6 and 3000 for children between 6 and 17
(inclusive). The refundable (non-wastable) child credit for 2021 is 100 percent of the amount of
credit in excess of tax liability and is (for the first time) not limited to taxpayers with earnings. Certain
additional adjustments related to timing of payments and income related to COVID relief in 2021
were introduced; they are described in Section 4.
Other dependent tax credit: For qualifying dependents other than qualifying children for whom a
child tax credit was claimed, there is a USD 500 non-refundable credit. The Taxing Wages
calculations do not include the other dependent tax credit.
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Phase out of child tax credit and other dependent tax credit: The maximum credit is reduced for
taxpayers with income in excess of certain thresholds. The portion of the child credit in excess of
USD 2 000 is reduced by USD 50 for each USD 1 000 by which modified aggregate gross income
exceeds USD 150 000 for married taxpayers filing jointly (USD 112 500 for head of household filers
and 75 000 for all other filers), with modified rules for large families. The remainder of the child tax
credit plus the other dependent tax credit is reduced by USD 50 for each USD 1 000 by which
modified aggregate gross income exceeds USD 400 000 for married taxpayers filing jointly
(USD 200 000 for single and head of household taxpayers).
Relief for low income workers without children: In 1994 and thereafter, low income workers without
children are eligible for the earned income credit. In 2021 low income workers without children are
permitted a non-wastable earned income credit of 15.3% of up to USD 9 820 of earned income.
The credit phases down in 2021 when income exceeds USD 11 610 (17 550 for married taxpayers)
and phases out completely when income reaches USD 21 430 (27 370 for married taxpayers). In
2021, this credit is available for taxpayers at least 19 years old who are not full-time students.
Relief for social security and other taxes. In 2021, the withholding rate for Social Security taxes
and Medicare for employees is 7.65%. The earned income credits described above are sometimes
considered an offset to Social Security and Medicare contributions made by eligible employees.
Furthermore, only a portion of Social Security benefits are subject to tax.
1.1.2.2. Main non-standard reliefs applicable to an AW
The basic non-standard relief is the deduction of certain expenses to the extent that, when itemised, they
exceed in aggregate the standard deduction. For the purposes of this Report, it is assumed that workers
claim the standard deduction. The principal itemised deductions claimed by individuals where the standard
deduction is not being claimed are:
Medical and dental expenses that exceed 7.5% of income (10% in 2020);
State and local income taxes, real property taxes, and personal property taxes are capped at
USD 10 000 per return;
Home mortgage interest on USD 750 000 of qualified residence loans;
Investment interest expense up to investment income with an indefinite carry forward of disallowed
investment interest expense;
Contributions to qualified charitable organisations (including religious and educational institutions);
Casualty and theft losses to the extent that each loss exceeds USD 100 and that all such losses
combined exceed 10% of income;
Miscellaneous expenses such as gambling losses, casualty and theft losses of income-producing
property, and impairment related work expenses of disabled persons to the extent that, in
aggregate; they exceed 2% of income.
In 2019 based on preliminary statistics,
1
the most recent year for which such statistics are available,
the 13% of taxpayers with income between USD 50 000 and USD 100 000 (the AW range) who
itemised their deductions claimed average deductions as follows: taxes paid, USD 6 909;
charitable contributions, USD 5 241; home mortgage interest expense, USD 9 785;
Contributions to pension and life insurance plans. No relief is provided for employee contributions
to employer sponsored pension plans or for life insurance premiums. However, tax relief is provided
for certain retirement savings.
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1.1.3. Tax schedule
Federal Income Tax rates
Single Individual
0 to 9 950
9 950 to 40 525
40 525 to 86 375
86 375 to 164 925
164 925 to 209 425
209 425 to 523 600
523 600 and over
Taxable Income Bracket (USD)
1
Joint Return of Married Couple
0 to 19 900
19 900 to 81 050
81 050 to 172 750
172 750 to 329 850
329 850 to 418 850
418 850 to 628 300
628 300 and over
Marginal Tax Rate (%)
Head of Household
0 to 14 200
14 200 to 54 200
54 200 to 86 350
86 350 to 164 900
164 900 to 209 400
209 400 to 523 600
523 600 and over
10
12
22
24
32
35
37
1. The taxable income brackets are indexed for inflation.
There is a 3.8% tax on the lesser of certain net investment income or income in excess of USD 200000
(USD 250 000 for joint returns). Net investment income includes interest, dividends, capital gains, rental
and royalty income, and income from businesses trading financial instruments.
Beginning in 2018, owners of sole proprietorships, partnerships, S corporations, and some trusts and
estates are eligible to deduct up to 20 percent of qualified business income (QBI). QBI is subject to
limitations, depending on the taxpayer’s taxable income,
based on factors that may include the type of
trade or business, the amount of wages paid by the business and the unadjusted basis of qualified property
held by the trade or business.
1.2. State and local income taxes
1.2.1. General description of the system
The District of Columbia and 41 of the 50 States impose some form of individual income tax.
2
In addition,
some local governments (cities and counties) impose an individual income tax, although this is not
generally the case. State individual income tax structures are usually related to the federal tax structure by
the use of similar definitions of taxable income, with some appropriate adjustments. This linkage is not a
legal requirement but a practical convention that functions for the convenience of the taxpayer who must
fill out both federal and State income tax returns.
The Taxing Wages calculations assume that the average worker lives in Detroit, Michigan. The state of
Michigan permits a personal exemption of USD 4
900 for the taxpayer, the taxpayer’s spouse and each
child, and taxes income at the rate of 4.25%. Michigan allows taxpayers who are eligible to claim the federal
earned income tax credit to claim a Michigan earned income tax credit. The Michigan earned income tax
credit is a refundable (non-wastable) credit equal to 6% of the federal earned income tax credit.
The city of Detroit permits a personal exemption of USD 600 and taxes income at the rate of 2.4%.
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2. Compulsory Social Security Contributions to Schemes Operated within the
Government Sector
2.1.
Employees’ contributions
2.1.1. Pensions
In 2021, the rate for employee contributions is 7.65% (6.2% for old age, survivors, and disability insurance,
and 1.45% for old age hospital insurance). The 6.2% rate applies to earnings up to USD 142 800.
Beginning in 1994, there is no limit on the amount of earnings subject to the 1.45% rate. There is an
additional 0.9% tax on employee wages and salaries that exceed USD 200 000 (USD 250 000 for joint
returns) as the additional hospital insurance tax on high-income taxpayers. The additional tax on wages
and salaries is subject to withholding (but without regard to the earnings of the spouse) when wages from
a particular job exceed USD 200 000 per year. These thresholds are not indexed for inflation.
There is no distinction by marital status or sex.
2.1.2. Other
No compulsory employee contributions exist.
2.2.
Employers’ contributions
2.2.1. Pensions
The rate for employers’ contributions is 6.2% on earnings up to USD
142 800 and 1.45% of all earnings
(without limit).
2.2.2. Unemployment
Employers are required by the federal government to pay unemployment tax of 6% on earnings up to
USD 7 000. Taxes are also paid to various state-sponsored unemployment plans which may generally be
credited against the required federal percentage. In 2020 the estimated average unemployment insurance
tax rate in Michigan was 2.94% of the first USD 9 000 of wages. The Taxing Wages model considers that
the Federal government allows employers to take a credit for state unemployment taxes of up to 5.4%,
resulting in a net Federal tax of 0.6% on earnings up to USD 7 000.
3. Universal Cash Transfers
3.1. Transfers related to marital status
None.
3.2. Transfers for dependent children
No general cash transfers exist, although low-income mothers qualifying for categorical welfare grants may
receive cash transfers.
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4. Principal Changes since 2017
In December 2017, Congress passed and the President signed the Tax Cuts and Jobs Act
–
the most
significant change in U.S. tax law in a generation, incorporating change to the taxation of individuals and
businesses. For individuals, the Act temporarily lowers income tax rates, increases the standard
deduction, increases the child tax credit, and adds a credit for other dependents. The Act also temporarily
eliminates some deductions, credits and exemptions for individuals. In addition the individual alternative
minimum tax (AMT) exemption and phase-out thresholds are temporarily increased so that fewer taxpayers
are subject to the AMT. Pass-through entities that are generally taxed at the individual level only and may
be eligible for a new temporary deduction. These temporary provisions expire at the end of 2025. In
addition, inflation adjustments of amounts and thresholds are changed to be determined by the chained
consumer price index. Finally, there are substantial changes in business taxation, many that are
permanent, such as lowering the top corporate tax rate from 35 to 21 percent and moving the U.S.
international tax system towards a territorial system.
In December 2020, Congress passed, and the President signed, the American Rescue Plan which
increased the generosity of many personal credits for 2021 only.
4.1. Changes to labour taxation due to the COVID pandemic in 2020 and 2021
Families First Coronavirus Response Act enacted 18 March 2020 provides employers with less than 500
employees with a refundable tax credit to offset the cost of providing a worker with paid sick and family
leave through 2020. The Act caps the amount of qualified sick leave wages taken into account for each
employee at USD 511 per day for 10 work days. Similarly, the family leave credit offsets USD 200 per day
of wages for employees who must care for a loved one or whose child is home because of a school or day
care closing. Self-employed workers would also qualify for the same level of refundable sick and family
leave tax credits to offset wages. Businesses can retain and access funds that they would have otherwise
paid in
the employer’s Social Security
taxes. If those amounts are not sufficient to cover the cost of paid
leave, employers can seek an expedited advance from the IRS by submitting a streamlined claim form.
Employers with U.S. Small Business Administration Loans are not eligible for employee retention credit.
The Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) was enacted on 27 March 2020
in response to the pandemic. Among other provisions, there is a tax credit paid in general to citizens, the
so-called 2020 Recovery Rebate Credit (RRC). While the RRC can be claimed on the 2020 tax return filed
in 2021, an advance payment (Economic Impact Payment, EIP) of the credit was made in 2020 of
USD 1 200 per taxpayer (USD 2 400 for married couples) plus USD 500 per child under age 17. While
there is no cap on the RRC, it phases out at 5 percent of Adjusted Gross Income (AGI) in excess of
USD 150 000 for married couples, USD 112 500 for head of household, and USD 75 000 for all other filers.
The CARES Act also delays the timing of required federal tax deposits for certain employer payroll taxes
and self-employment taxes incurred between March 27, 2020 (the date of enactment) and December 31,
2020. Fifty percent of the deferred amount has to be paid by 31 December 2021 and the remainder by 31
December 2022. These taxes include the 6.2 percent Social Security tax for wage earners and comparable
6.2 percent Self-Employment Contributions Act tax due on net earnings from self-employment.
The CARES Act also provides businesses with a refundable Social Security tax credit for 50 percent of
qualified wages up to USD 10 000 for each employee for qualifying calendar 2020 quarters during the
COVID-19 crisis. The credit is available to employers whose (1) operations were fully or partially
suspended, due to a COVID-19-related shut-down order, or (2) gross receipts declined by more than 50
percent when compared to the same quarter in the prior year. For employers with greater than 100 full-
time employees, qualified wages are wages paid to employees when they are not providing services due
to the COVID-19-related circumstances described above. For eligible employers with 100 or fewer full-time
employees, all employee wages qualify for the credit, whether the employer is open for business or subject
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to a shut-down order. The credit is provided for the first USD 10 000 of compensation, including health
benefits, paid to an eligible employee. The credit is provided for wages paid or incurred from 13 March
2020 through 31 December 2020. Employers with Small Business Administration Loans under the CARES
Act are not eligible for the employee retention credit.
Finally, for 2020, taxpayers taking the standard deduction can deduct USD 300 of cash contributions to
charities. The act also increased the limitations on deductions for charitable contributions by individuals
who itemize. For individuals, the 50% of adjusted gross income limitation was raised to 100% for cash gifts
in 2020.
The Consolidated Appropriations Act of 2021, (CAA) enacted 27 December 2020, provides an additional
2020 Recovery Rebate Credit (additional 2020 RRC) of USD 600 per eligible individual (USD 1 200 for
married couples) plus USD 600 per child under age 17. While the credit can be claimed on 2020 tax returns
filed in 2021, an advance payment of the additional 2020 RRC (second round Economic Impact Payment)
was made beginning in 2020. While there is no cap on the additional 2020 RRC, it phases out at 5 percent
of Adjusted Gross Income (AGI) in excess of USD 150 000 for married couples, USD 112 500 for head of
household, and USD 75 000 for all other filers.
The CAA extended the paid sick leave and family leave tax credits enacted by the Families First
Coronavirus Relief Act through 31 March 2021.
The CAA also allowed taxpayers taking the standard deduction to deduct USD 600 of cash contributions
to charities in 2021. The CAA extended the 100% of AGI limit on cash charitable contributions enacted in
the Families First Coronavirus Relief Act through 2021.
The American Rescue Plan Act (ARP) enacted 21 March 2021 provides a 2021 Recovery Rebate Credit
(2021 RRC) of USD 1 400 per eligible individual (USD 2 800 for married couples) plus USD 1 400 per
dependent. While the credit can be claimed on 2021 tax returns filed in 2022, an advance payment of the
2021 RRC (third round Economic Impact Payment) was made in 2021. The credit phases out
proportionately beginning at USD 150 000 of AGI and is fully phased out at USD 160 000 of AGI for married
couples, USD 112 500 to USD 120 000 for head of household, and USD 75 000 to USD 80 000 for all
other filers.
The ARP extended the paid sick leave and family leave tax credits enacted by the Families First
Coronavirus Relief Act through 30 September 2021.The ARP excluded from gross income subject to tax
the first USD 10 200 per recipient of unemployment compensation received in 2020 for taxpayers with AGI
below USD 150 000.
The ARP made the Child Tax Credit (CTC) fully refundable increased to age 17 the maximum qualifying
age and increased the maximum value of the credit for most taxpayers for taxable year 2021. Half of the
amount of the 2021 CTC is distributed in monthly advance payments over the second half of 2021 ahead
of filing 2021 returns in 2022. A taxpayer’s Federal income tax will be increased,
dollar-for-dollar, if their
total CTC advance payments during 2021 exceed the amount of the CTC to which they are eligible for that
year. However, safe harbour rules may reduce the additional income tax owed depending on the taxpayer’s
modified AGI.
See Section 1.1.2.1 for a complete description of parameters and income thresholds.
5. Memorandum Items
5.1. Identification of an AW at the wage calculation
The AW is identified from monthly data compiled from establishment questionnaires covering more than
40 million non-agricultural full- and part-time workers. Beginning in March 2006, data on average weekly
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hours and average hourly earnings cover all employees rather than solely production or non-supervisory
workers. To obtain average annual wages, the product of average weekly hours (including overtime) and
average hourly earnings (including overtime) is multiplied by 52 and is adjusted to reflect a full-time
equivalent worker. The AW is estimated to be USD 59 517 for 2020.
5.2. Employer contributions to private social security arrangements
Employers commonly contribute to private pension plans (both defined benefit and defined contribution),
health insurance and life insurance. Data for these contributions are available only on a total workforce
basis. It is not possible to state with accuracy the levels applicable to the AW. The following are estimates
for 2020 for employees in private industry:
Pension
% of workers covered
USD employer portion per covered employee
55
n.a.
Health
58
9190 (family)
4 610 (single)
Life
59
n.a.
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649
2021 Parameter values
Average earnings/yr
Standard deductions
Ave_earn
Married_al
25100
hh_al
single_al
Federal tax schedules
Single individuals
Fed_sch_s
18800
25550
0.1
0.12
0.22
0.24
0.32
0.35
0.37
0.1
0.12
0.22
0.24
0.32
0.35
0.37
0.1
0.12
0.22
0.24
0.32
0.35
0.37
rate
0.153
0.34
0.4
0.45
3 000
50
400 000
200 000
2000
150000
112500
600
0.024
4 900
0
0.0425
0.06
0
0
9950
40 525
86 375
164 925
209 425
523 600
19 900
81 050
172 750
329 850
418 850
628 300
14 200
54 200
86 350
164 900
209 400
523 600
income limit
9820
10 640
14 950
14 950
threshold
11610
19 520
19 520
19 520
thresh-
married
17550
25 470
25 470
25 470
phase-
out
0.153
0.1598
0.2106
0.2106
62 954
Secretariat estimate
Married filing jointly
Fed_sch_m
Head of household
Fed_sch_h
Earned income credit
EIC_sch
no children
1 child
2 children
3 or more children
chcrd_max
chcrd_rdn
chcrd_thrsh_m
chcrd_thrsh_oth
chcrd_rdn_lim
chcrd_thrsh1_m
chcrd_thrsh1_oth
Detroit_ex
Detroit_rate
Mich_ex
Mich_ex_child
Mich_rate
Mich_EIC_rate
Mich_cr_sch
Child credit
Detroit
Michigan
Michigan’s
earned
income tax credit
credit schedule on
city tax
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650
0
0
0.062
0.062
0.0145
0.009
142 800
250 000
200 000
0.006
0.054
7 000
0.0294
9 000
1400
1400
150000
112500
75000
160000
120000
80000
maximum
Pension contributions
Ceiling for employers
and employees
Mich_cr_max
pens_rate_er
pens_rate_ee
hosp_rate
add_hosp_rate
pens_ceil
add_hosp_thresh_m
add_hosp_thresh_oth
Unemp_rate
Unemp_dedn_rate
Unemp_max
Mich_unemp_rate
Mich_unemp_max
covid_RRC_adult
covid_RRC_dep
Covid_RRC_limit_m
Covid_RRC_limit_h
Covid_RRC_limit_o
Covid_RRC_limit2_m
Covid_RRC_limit2_h
Covid_RRC_limit2_o
Unemployment
insurance tax
Michigan unemploy
insur
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2021 Tax equations
The equations for the US system in 2021 are mostly calculated on a family basis. There is a special function
EIC which is used to calculate the earned income credit. Variable names are defined in the table of
parameters above, within the equations table, or are the standard variables “married” and “children”. A
reference to a variable with the affix “_total” indicates the sum of the relevant variable values for the
principal
and spouse. And the affixes “_princ” and “_spouse” indicate the value for the principal and spouse,
respectively. Equations for a single person are as shown for the principal, with “_spouse” values taken as
0.
Line in country table and
intermediate steps
1.
2.
3.
4.
5.
6.
Earnings
Allowances:
Credits in taxable income
CG taxable income
CG tax before credits
6. Tax credits :
Variable name
earn
tax_al
taxbl_cr
tax_inc
CG_tax_excl
EIC
ch_crd
Range
Equation
J
J
J
J
J
J
7.
8.
CG tax
State and local taxes
tax_cr
CG_tax
local_tax
J
J
J
9.
Employees' soc security
SSC
B
11.
Cash transfers
Cash_tran
RRC_max
RRC_adj
J
J
IF(Married, Married_al, IF(Children=0, single_al, hh_al))
0
positive(earn-tax_al+taxbl_cr)
Tax(tax_inc, IF(Married, Fed_sch_m, IF(Children,
Fed_sch_h, Fed_sch_s)))
EIC(Children, earn_total, EIC_sch)
(Positive((chcrd_rdn_lim*Children)-
(chcrd_rdn*Positive(TRUNC(earn,-3)-
IF(Married>0,chcrd_thrsh_m,chcrd_thrsh_oth))/1000))+Po
sitive(((Children*chcrd_max)-(chcrd_rdn_lim*Children))-
(chcrd_rdn*Positive(TRUNC(earn,-3)-
IF(Married>0,chcrd_thrsh1_m,chcrd_thrsh1_oth))/1000)))*
(Children>0)
EIC+ch_crd
CG_tax_excl-tax_cr
Detroit_rate* Positive(earn_total-
Detroit_ex*(1+Married+Children))+
Mich_rate*Positive(earn_total -
Mich_ex*(1+Married+Children) - Mich_ex_child*Children) -
MIN(Mich_cr_max, Tax(AJ7, Mich_cr_sch)) -
Mich_EIC_rate*EIC
pens_rate_ee*MIN(earn,
pens_ceil)+hosp_rate*earn+add_hosp_rate*Positive(earn-
IF(Married,add_hosp_thresh_m,add_hosp_thresh_oth))
IF(Married=0,Covid_RRC_adult,2*Covid_RRC_adult)+(Chi
ldren*Covid_RRC_child)
Positive(RRC_max-IF(Married>0,Positive(earn-
Covid_RRC_limit_m)*(RRC_max/(Covid_RRC_limit2_m-
Covid_RRC_limit_m)),IF(Children>0,Positive(earn-
Covid_RRC_limit_h)*(RRC_max/(Covid_RRC_limit2_h-
Covid_RRC_limit_h)),Positive(earn-
Covid_RRC_limit_o)*(RRC_max/(Covid_RRC_limit2_o-
Covid_RRC_limit_o)))))
pens_rate_er*MIN(earn, pens_ceil)
+hosp_rate*earn+MIN(earn,Unemp_max)*Unemp_rate
+MIN(earn,Mich_unemp_max)*Mich_unemp_rate
13.
Employer's soc security
SSC_empr
B
Memorandum item: non-
wastable tax credits
tax expenditure component
cash transfer component
taxexp
transfer
(rate_rd_crd+EIC)-transfer
IF(CG_tax<0, -CG_tax, 0)
Key to range of equation B calculated separately for both principal earner and spouse P calculated for principal only (value taken as 0 for spouse
calculation) J calculated once only on a joint basis.
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Notes
1
Due to the Tax Cuts and Jobs Act, beginning in 2017 fewer individual taxpayers itemize deductions but
instead use the standard deduction.
2
New Hampshire and Tennessee tax only interest and dividend income received by individuals.
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Annex A. Methodology and limitations
Methodology
Introduction
The personal circumstances of taxpayers vary greatly. This Report therefore adopts a specific
methodology to produce comparative statistics covering taxes, benefits and labour costs across OECD
member countries
1
. The framework of the methodology is as follows:
The Report focuses on eight different household types which vary by composition and
level of earnings.
Each household contains a full-time adult employee working in one of a broad range of
industry sectors of each OECD economy. Some of the households also have a spouse
working less than full-time.
The annual income from employment is assumed to be equal to a given fraction of the
average gross wage earnings of these workers.
Additional assumptions are also made regarding other relevant personal circumstances
of these wage earners in order to calculate their tax/benefit position.
The guidelines described in the following paragraphs form the basis for the calculations shown in
Chapter 1 and Parts I, II and III. Table A A.1 sets out the terminology that is used. Where a country has
had to depart from the guidelines, this is noted in the text and/or in the country chapters contained in Part
III of the Report. The number of taxpayers with the defined characteristics and the wage level of the
average workers differ between OECD economies.
Taxpayer characteristics
The eight household types identified in the Report are set out in Table A A.2. Any children in the household
are assumed to be aged between six and eleven inclusive.
The household is assumed to have no income source other than from employment and cash benefits.
The range of industries covered
The standard assumption for calculating average wage earnings is based on Sectors B-N of the
International Standard Industrial Classification of All Economic Activities (ISIC Revision 4, United Nations)
2
(see Table A A.3). Many countries (for more detailed country information, see Table 1.8) have now adopted
this approach.
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Table A A.1. Terminology
General terms
Average worker (AW)
Single persons
Couple with two children
Labour costs
Net take-home pay
Personal average tax rate
( tax burden)
Tax wedge
Elasticity of income after tax
An adult full-time worker in the industry sectors covered whose wage earnings represent the average for
workers.
Unmarried men and women.
Married couple with two dependent children between six to eleven years of age inclusive.
The sum of gross wage earnings, employers’ social security contributions and payroll taxes.
Gross wage earnings less the sum of personal income tax and employee social security contributions plus
cash transfers received from general government.
The sum of personal income tax and employee social security contributions expressed as a percentage of
gross wage earnings.
The sum of personal income tax, employee and employer social security contributions plus any payroll tax
less cash transfers expressed as a percentage of labour costs.
Percentage change in ‘after-tax’ income following an increase in one currency unit of income before tax
(defined more precisely as one minus a marginal tax rate divided by one minus a corresponding average
tax rate).
Terms used under the income tax
Tax reliefs
Tax allowances
Tax credits
Standard tax reliefs
A generic term to cover all the means of giving favourable income tax treatment to potential taxpayers.
Amounts deducted from gross earnings to arrive at taxable income.
Amounts which a taxpayer may subtract from his tax liability. They are described as payable if they can
exceed tax liability (sometimes the terms ‘refundable’ and ‘non-wastable’ are used).
Reliefs unrelated to the actual expenses incurred by taxpayers and automatically available to all taxpayers
who satisfy the eligibility rules specified in the legislation are counted as standard reliefs. These also
include deductions for compulsory social security contributions.
Any standard tax relief available irrespective of marital or family status.
Additional tax relief given to married couples. (In some countries, this is not distinguished from the basic
relief which may be doubled on marriage).
Reliefs wholly determined by reference to actual expenses incurred.
Amount of income tax payable after accounting for any reliefs calculated on the basis of the tax provisions
covered in this Report, divided by gross wage earnings.
The rate which appears in the schedule of the income tax and in the schedule of social security
contributions.
Basic relief
Marriage allowance
Non-standard tax reliefs
Average rate of income tax
Schedule rate
Terms used under cash transfers
Cash transfers
Cash payments made by general government (agencies) paid to families usually in respect of dependent
children.
Table A A.2. Characteristics of taxpayers
Marital status
Single individual
Single individual
Single individual
Single individual
Married couple
Married couple
Married couple
Married couple
Children
No children
No children
No children
2 children
2 children
2 children
2 children
No children
Principal earner
67% of average earnings
100% of average earnings
167% of average earnings
67% of average earnings
100% of average earnings
100% of average earnings
100% of average earnings
100% of average earnings
Second earner
67% of average earnings
100% of average earnings
67% of average earnings
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Table A A.3. International Standard Industrial Classification of All Economic Activities
Revision 3.1 (ISIC Rev. 3.1)
A
Agriculture, hunting and forestry
B
Fishing
C
Mining and quarrying
D
Manufacturing
E
Electricity, gas and water supply
F
Construction
G
Wholesale and retail trade; repair of motor vehicles, motorcycles and personal and household goods
H
Hotels and restaurants
I
Transport, storage and communications
J
Financial intermediation
K
Real estate, renting and business activities
L
Public administration and defence; compulsory social security
M
Education
N
Health and social work
O
Other community, social and personal service activities
P
Activities of private households as employers and undifferentiated production activities of private households
Q
Extraterritorial organisations and bodies
Revision 4 (ISIC Rev.4)
A
Agriculture, forestry and fishing
B
Mining and quarrying
C
Manufacturing
D
Electricity, gas, steam and air conditioning supply
E
Water supply; sewerage, waste management and remediation activities
F
Construction
G
Wholesale and retail trade; repair of motor vehicles and motorcycles
H
Transportation and storage
I
Accommodation and food service activities
J
Information and communication
K
Financial and insurance activities
L
Real estate activities
M
Professional, scientific and technical activities
N
Administrative and support service activities
O
Public administration and defence; compulsory social security
P
Education
Q
Human health and social work activities
R
Arts, entertainment and recreation
S
Other service activities
T
Activities of households as employers; undifferentiated goods- and services-producing activities of households for own use
U
Activities of extraterritorial organizations and bodies
This approach broadly corresponds to the previous calculation based on sectors C-K incl. defined in the
International Standard Industrial Classification of All Economic Activities (ISIC Revision 3.1,
United Nations) which was adopted in the 2005 edition of
Taxing Wages.
The reasons for moving to a
broadened average wage definition were set out in the Special Feature of Taxing Wages 2003-2004.
Defining gross wage earnings
This section sets out the assumptions underlying the calculation of the average earnings figures for ‘the
average worker’. The gross wage earnings data have been established using statistical data and the
methodologies for calculating the earnings data in each country are set out in Table A A.4. Further
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information on the calculation of the earnings figures is provided in the country chapters in Part II. The
sources of the statistical data for each country are set out in Table A A.5.
The main assumptions are as follows:
The data relate to the average earnings in the relevant industry sectors for the country as a whole.
The calculations are based on the earnings of a full-time adult worker (including both manual and
non-manual). They relate to the average earnings of all workers in the industry sectors covered.
No account is taken of variation between males and females or due to age or region.
The worker is assumed to be full-time employed during the entire year without breaks for sickness
or unemployment. However, several countries are unable to separate and exclude part-time
workers from the earnings figures (see Table A A.4). Most of them report full-time equivalent wages
in these cases. In four countries (Chile, Ireland, Slovak Republic and Turkey), the wages of part-
time workers can be neither excluded nor converted into full-time equivalents because of the ways
in which the earnings samples are constructed. As a result, average wages reported for these
countries will be lower than an average of full-time workers (for example, an OECD Secretariat
analysis of available Eurostat earnings data for selected European countries has shown that full-
time employees’ earnings in 2014 were on average 12% higher than earnings of all employees and
4% higher than earnings of all employees expressed in full-time equivalent units). Also, in most of
the OECD countries where sickness payments are made by the employer, either on behalf of the
government or on behalf of private sickness schemes, these amounts are included in the wage
calculations. It is unlikely that this has a marked impact on the results since employers usually
make these payments during a short period and the amounts usually correspond very closely to
normal hourly wages.
The earnings calculation includes all cash remuneration paid to workers in the industries covered
taking into account average amounts of overtime, cash supplements (e.g. Christmas bonuses,
thirteenth month) and vacation payments typically paid to workers in the covered industry sectors.
However, not all countries are able to include overtime pay, vacation payments and cash bonuses
according to the definition.
The earnings figures include supervisory and/or management employees, though some countries
are not able to do this. In such countries, the reported averages are lower than would otherwise be
the case (for example, an OECD Secretariat analysis of available Eurostat earnings data for
selected European countries has shown that excluding this type of workers can reduce average
earnings by 10% to 18%).
Fringe benefits
–
which include, for example, provision of food, housing or clothing by the employer
either free of charge or at below market-price
–
are, where possible, excluded from the calculation
of average earnings. This could affect comparability of tax wedges
–
as the reliance on fringe
benefits may vary between countries and over time. However, the lack of comparability is limited
as fringe benefits rarely account for more than 1-2% of labour costs and are normally more common
among high-income employees than in the income ranges covered by
Taxing Wages
(50% to
250% of average earnings). Table A A.4 shows that some Member countries are not able to
exclude fringe benefits from the earnings figures reported and used in
Taxing Wages.
The decision
to exclude was been taken because:
o
o
o
these types of benefits are difficult to evaluate in a consistent way (they may be valued at the
actual cost to the employer, their value to the employee or their fair market value).
in most countries, they are of minimal importance for workers at the average wage level.
the tax calculations would be significantly more complicated if the tax treatment of fringe
benefits were to be incorporated.
Employers’ contributions to private
pension, family allowance or health and life insurance schemes
are excluded from the calculations, though the amounts involved can be significant. In the
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United States, for example, these contributions can account for more than 5% of the earnings of
employees. The country chapters in Part II indicate of the existence of schemes which may be
relevant for an average worker.
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Table A A.4. Method used to calculate average earning
Country
Items included and excluded from the earnings base
Sickne
ss
1
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
Inc
Exc
Exc
Exc
Exc
Exc
Inc
Exc
Exc
Inc
Exc
Vacati
ons
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Overti
me
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Exc
Inc
Inc
Recurring
cash
payments
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Fringe
Benefits
Exc
Taxable
value Inc
Exc
Exc
Exc
Exc
Exc
Exc
Exc
Exc
Exc
Types of worker included and excluded in the
average wage measure
Supervisory
Managerial
part-time
workers
workers
workers
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
5
Exc
Exc
Exc
Inc
6
Inc
Exc
Inc
Inc
6
Inc
6
Inc
Exc
Basic method of calculation used
Income tax
year ends
Period to which
the earnings
calculation refers
Average weekly earnings x 52
Average annual earnings
Average annual earnings
Average weekly hours x average hourly
earnings x 52
Hourly earnings x hours worked
Hourly earnings x hours worked
Average annual earnings
Average monthly earnings x 12
Hourly earnings x hours worked
Average earnings
Hourly wages x usual working time or
(monthly earnings x months) + vacation
payments+ end of year bonuses
Annual earnings
Annual earnings
Hourly earnings x hours worked
Average monthly earnings x 12
Hourly earnings x hours worked x 12
Average Annual Earnings
Average earnings
Average monthly earnings x 12
Monthly earnings in June x 12
Average monthly earnings x 12
Average monthly earnings x 12
30th June
31st December
31st December
31st December
31st December
31st December
31st December
31st December
31st December
31st December
31st December
Fiscal year
Calendar year
Calendar year
Calendar year
Calendar year
Calendar year
Calendar year
Calendar year
Calendar year
Calendar year
Calendar year
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Exc
Exc
Exc
Exc
Exc
Exc
Exc
Exc
3
Exc
Exc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc 2
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Exc
Exc
Inc
Exc
Exc
Exc
Exc
Exc
4
Exc
Exc
Exc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
5
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Exc
Exc
Exc
Exc
Exc
Exc
Exc
Inc
6
Exc
Exc
Exc
31st December
31st December
31st December
31st December
31st December
31st December
31st December
31st December
31st December
31st December
31st December
Calendar year
Calendar year
Calendar year
Calendar year
Calendar year
Calendar year
Calendar year
Calendar year
Calendar year
Calendar year
Calendar year
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Lithuania
Luxembourg
Exc
Exc
Inc
Inc
Inc
Inc
Inc
Inc
Exc
Exc
Inc
Inc
Inc
Inc
Exc
Exc
Average monthly earnings x 12
Aggregate annual earnings divided by annual
average number of full-time employees. Any
parts of earnings that exceed the upper social
contribution limit (7 times the minimum wage)
are not recorded.
Average monthly earnings x 12
Annual gross earnings
Average weekly earnings in each quarter x 13
Annual wages + estimated overtime
Average monthly earnings x 12
Weighted monthly average x 12
Average monthly earnings x 12
Average monthly earnings * 12
Weighted monthly average x 12
Average hourly earnings in September x hours
worked; and monthly earnings in September *
12
Monthly earnings x 12
Average annual earnings
Average gross annual earnings
Average weekly earnings x 52
31st December
31st December
Calendar year
Calendar year
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Exc
Exc
Exc
Exc
Inc
Exc
Exc
Inc
Exc
Exc
Inc
Inc
Inc
Exc
Inc
Inc
Inc
Inc
Inc
Inc
Exc
Exc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Exc
Exc
Exc
Exc
Exc
Inc
Exc
Exc
Exc
Actual value
Inc
Exc
Actual value
inc
Exc
Exc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
5
Inc
Inc
Inc
Inc
5
Inc
Inc
Inc
Exc
Exc
Inc
6
Inc
6
Inc
6
Exc
Inc
6
Inc
Exc
Inc
6
31st December
31st December
31st March
31st December
31st December
31st December
31st December
31st December
31st December
31st December
Calendar year
Calendar year
Tax year
Calendar year
Calendar year
Calendar year
Calendar year
Calendar year
Calendar year
Calendar year
Switzerland
Turkey
United Kingdom
United States
Exc
Exc
Exc
Exc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
Inc
2
Inc
Exc
Inc
Inc
Inc
Exc
Inc
Inc
Inc
6
Inc
Exc
Inc
6
31st December
31st December
5th April
31st December
Calendar year
Calendar year
Fiscal year
Calendar year
Notes: Exc = Excluded, Inc = Included, '-' = information not available.
1. Usually includes compensation paid by employer whether paid on behalf of the government or as part of a private sickness scheme.
2. Excludes profit sharing bonuses in Greece and the United States plus end of year bonuses in the United States.
3. Sickness payments are only included to the extent that they are paid by the employer. For manual workers, this is only the case during the first three days of sick leave, while payments for the fourth day onwards are made
by INPS.
4. Partly: the (small) taxable part of fringe benefits is included.
5. Except for top management (Finland); except if income from profits exceeds 50% of total income (Hungary); except for sole-proprietors (New Zealand); only income earned based on a standard employment contract is
included (Slovak Republic).
6. Part-time wages are converted to full-time equivalents before calculating the average wage measure. For the Slovak Republic, part-time workers with non-standard temporary employment contracts are excluded.
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Table A A.5. Source of earnings data, 2021
Country
Australia
Type of sample
Quarterly survey of firms resulting in a
representative sample of wage and salary
earners in each industry.
Annual Wage Tax Statistics.
Data collected or estimated on the basis of
an annual establishment survey and social
insurance registers of employees.
Monthly survey of all firms.
Monthly sample of businesse with 10+
employees.
The Great Integrated Household Survey
Salaries and total number of workers by
salary scale and institutional sector.
Employer survey data.
Danish Employers Confederation survey of
earnings.
-
(1) Finnish Employers Federation survey of
hourly and monthly earnings; (2) Survey
for unorganized employers "Structure of
Earnings Statistics" published by the
Central Statistical Office.
Social insurance registers covering all
employers.
Survey carried out by the Federal
Statistical Office.
Survey carried out by National Statistics
Service and Social Security Institutions.
Monthly surveys among enterprises with at
least five employees.
Monthly survey of earnings in the private
sector market.
Quarterly surveys of industrial
employment, earnings and hours worked.
-
Quarterly indicators of wages in industry
and services (OROS).
Basic survey on wage structure of all
establishments with more than 10
employees.
Labour Force Survey at Establishments.
Average monthly wages and salaries
(DSG01)
-
Monthly aggregated files of Social security
services.
Administrative data from the Mexican
Social Security Institute (Instituto Mexicano
del Seguro Social (IMSS)).
Survey "Employment and Wages".
The quarterly employment survey is a
sample survey of significant business with
an employment count of 1 or more.
Sample of enterprises based on published
sector statistics for 3rd quarter – except
Source
Australian Bureau of Statistics “Average Weekly Earnings, Australia” and
"Labour Force, Australia".
"Lohnsteuerstatistik".
Statistics Division of the Ministry of Economy (Federal Public Service,
Economy, SMEs, Self-employed and Energy). Same source as for Eurostat
"Annual gross earnings" data.
Statistics Canada, “Survey of Employment Payrolls and Hours”.
National Statistics Institute of Chile (INE).
National Administrative Department of Statistics (DANE)
Actuarial and Economic Management. Statistics Area. “Caja Costarricense del
Seguro Social” (CCSS)
National Statistical Office.
Annual Report Danish Employers Confederation (Dansk Arbejds
Giverforening).
Statistics Estonia/Ministry of Finance.
“Wages Statistics” published by the Central Statistical Office.
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
INSEE, "Déclarations Sociales Nominatives" (DSN).
National Statistical Office.
National Statistical Service Labour Statistics. Same source as for Eurostat
"Annual gross earnings" data.
Central Statistical Office.
Statistics Iceland.
Central Statistics Office.
Central Bureau of Statistics.
National Institute of Statistics.
Ministry of Health, Labour and Welfare, Annual Report.
Korea
Latvia
Lithuania
Luxembourg
Mexico
Ministry of Employment and Labour.
The Latvian Central Statistical Bureau.
Statistics Lithuania.
National Statistical Office and Social Security Services.
The National Minimum Wage Commission (Comisión Nacional de Salarios
Mínimos (CONASAMI)).
Central Bureau of Statistics, Statline.
Statistics New Zealand INFOS.
Netherlands
New Zealand
Norway
Statistics Norway Wage.
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661
agriculture, forestry and fishing and private
households.
Structure of Earnings Survey.
Estimates for different sectors.
Quarterly survey of employers.
Monthly survey of employees.
Quarterly survey of firms.
September survey of Swedish employers.
Swiss Statistics Office. Personnes actives
occupées selon la branche économique.
Annual Manufacturing Industry Survey.
1% sample of PAYE earnings.
Monthly surveys by Department of Labour
on the basis of a questionnaire covering
more than 40 million non-agricultural wage
and salary-workers.
Portugal
Poland
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
Ministry of Labour.
Monthly Statistical Bulletin.
Slovak Statistical Office.
Statistical Office of the Republic of Slovenia.
Instituto Nacional de Estadistica “Encuesta Trimestral de Coste Laboral”
(Labour Cost Survey).
Statistics Sweden.
La vie économique, SECO (Secrétariat d’État à l’économie) table B.8.1,
http://www.bfs.admin.ch/bfs/portal/fr/index/themen/03/04.html.
Turkish Statistical Institute.
Office for National Statistics, Annual Survey of Hours and Earnings ( ASHE ).
Employment, Hours, and Earnings from the Current Employment Statistics
Survey.
Calculating average gross wage earnings
Table A A.4 indicates the basic calculation method used in each country while more details are, where
relevant, provided in the country chapters in Part II. In principle, countries are recommended to calculate
annual earnings by referring to the average of hourly earnings in each week, month or quarter, weighted
by the hours worked during each period, and multiplied by the average number of hours worked during the
year, assuming that the worker is neither unemployed nor sick and including periods of paid vacation. A
similar procedure was recommended to calculate overtime earnings. For countries unable to separate out
part-time employees from the data, it is recommended that earnings of part-time employees should if
possible be converted into their full-time equivalents.
Statistical data on average gross wage earnings in 2021 were not available when the current Report was
written. For most countries, estimates of gross wage earnings of average workers in 2021 were therefore
derived by the Secretariat on the basis of a uniform approach: year 2020 earnings levels are multiplied by
the country-specific annual percentage change of wages for the whole economy reported in the most
recently published edition of the OECD
Economic Outlook
(i.e.
OECD Economic Outlook Volume 2021
issue 2)
. This transparent procedure is intended to avoid any bias in the results. In some countries, there
were varying approaches;
The final 2021 average gross wage earnings was used for Australia.
National estimates were used for the Chile, Colombia, Costa Rica, New Zealand and Turkey as
the
OECD Economic Outlook Volume 2020 Issue 2
did not provide percentages changes in wages
for those countries.
In some countries, average wage earnings were also estimated for prior years - France (2018 and
2019), the Netherlands (2019), Poland (from 2017onwards), Portugal (from 2013 onwards) and
Switzerland (2007, 2009, 2011, 2013, 2015, 2017 and 2019) as no country information on average
wage earnings levels was available for these years in these particular countries.
Twenty-one OECD countries have opted to provide national estimates of the level of gross wage earnings
of average workers in 202. These estimates were not used in the Taxing Wages calculations (except for
the countries listed above) because of potential inconsistency with the Secretariat estimates derived for
other countries. However they are included in Table A A.6 to enable comparisons to be made between the
estimates obtained by applying the Secretariat formula and those from national sources. In most cases,
the two categories are fairly close.
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Table A A.6. Estimated gross wage earnings, 2020-2021 (in national currency)
Average wage
2020
Australia
1
Austria
Belgium
Canada
Chile
1
Colombia
1
Costa Rica
1
Czech
Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
1
Norway
Poland
Portugal
Slovak
Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
1
United
Kingdom
United States
90 866
49 087
50 312
71 994
10 277 863
18 345 584
8 294 100
416 997
440 000
17 224
46 470
37 922
51 000
18 834
5 043 851
9 528 000
49 876
165 240
32 262
5 082 722
46 753 752
13 656
16 844
64 424
138 349
54 510
65 079
628 685
60 723
19 959
13 418
21 054
26 028
464 186
91 427
72 933
41 897
59 517
Average wage 2021 (Secret.
estimates)
92 022
50 460
52 248
74 037
Average wage 2021 (country
estimates)
93 313
49 970
EO 2021 (issue 2) forecasted
rates for 2021
1
1.3
2.8
3.8
2.8
435 312
457 613
18 329
47 915
39 971
52 556
18 831
5 400 419
10 103 366
50 636
176 029
34 032
5 146 879
47 021 176
15 270
18 711
67 263
136 170
55 339
659 902
64 093
20 602
14 075
22 485
26 832
482 897
94 489
43 978
62 954
10 776 819
19 240 596
8 761 423
423 515
450 560
18 416
47 793
4.4
4.0
6.4
3.1
5.4
3.1
0.0
7.1
6.0
1.5
6.5
5.5
1.3
0.6
11.8
11.1
4.4
-1.6
1.5
5.0
5.5
3.2
4.9
6.8
3.1
4.0
3.3
5.0
6.0
5 391 877
10 204 000
170 160
48 723 192
14 748
18 694
152 368
56 394
66 077
646 288
14 334
21 854
87 187
1. The country AW estimate is used instead of the OECD Secretariat’s AW estimate in the Taxing Wages calculations.
StatLink 2
https://stat.link/x0ijyk
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Table A A.7. Purchasing power parities and exchange rates for 2021
Monetary unit
Australia
Austria
Belgium
Canada
Chile
Colombia
Costa Rica
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Israel
Italy
Japan
Korea
Latvia
Lithuania
Luxembourg
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
AUD
EUR
EUR
CAD
CLP
COP
CRC
CZK
DKK
EUR
EUR
EUR
EUR
EUR
HUF
ISK
EUR
ILS
EUR
JPY
KRW
EUR
EUR
EUR
MXN
EUR
NZD
NOK
PLN
EUR
EUR
EUR
EUR
SEK
CHF
TRL
GBP
USD
Exchange rates
1
1.33
0.84
0.84
1.25
754.87
3,734.94
21.60
6.27
0.84
0.84
0.84
0.84
0.84
301.34
126.90
0.84
3.23
0.84
109.70
1,144.56
0.84
0.84
0.84
20.14
0.84
1.40
8.54
3.84
0.84
0.84
0.84
0.84
8.52
0.91
8.46
0.73
1.00
Purchasing power parities
1.50
0.76
0.75
1.25
428.89
1,386.48
331.09
12.67
6.47
0.52
0.82
0.71
0.74
0.52
150.93
146.51
0.75
3.53
0.65
99.12
849.59
0.48
0.46
0.86
9.74
0.76
1.43
10.03
1.78
0.56
0.52
0.55
0.60
8.70
1.12
2.35
0.68
1.00
Note: 1. Average of 12 months daily rates.
Source: OECD Economic Outlook Volume 2021 Issue 2.
StatLink 2
https://stat.link/14zxgr
Coverage of taxes and benefits
The Report is concerned with personal income tax and employee and employer social security
contributions payable on wage earnings. In addition, payroll taxes (see section on Payroll taxes) are
included in the calculation of the total wedge between labour costs to the employer and the corresponding
net take-home pay of the employee. In this Report, tax and benefit measures that are related to the
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COVID- 19 pandemic and that are consistent with the assumptions detailed in this Annex have been
included in the calculations. Further information is available in the Chapter 2, the Special Feature.
The calculation of the after-tax income includes family benefits paid by general government as cash
transfers (see section on Family cash benefits from general government). Income tax due on capital
income and non-wage labour income, several direct taxes (net wealth tax, corporate income tax) and all
indirect taxes are not considered in this Report. However, all central, state and local government income
taxes are included in the data.
In this Report, compulsory social security contributions paid to general government are treated as tax
revenues. Being compulsory payments to general government they clearly resemble taxes. They may,
however, differ from taxes in that the receipt of social security benefits depends upon appropriate
contributions having been made, although the size of the benefits is not necessarily related to the amount
of the contributions. Countries finance compulsory public social security programmes to a varying degree
from general tax and non-tax revenue and earmarked contributions, respectively. Better comparability
between countries is obtained by treating social security contributions as taxes, but they are listed under
a separate heading so that their amounts can be identified in any analysis.
The Report covers the personal income tax, employee and employer social security and cash benefits
regulations that are applied during the whole tax year. Any changes that occur during the tax year are
taken into account in the Taxing Wages calculations.
Calculation of personal income taxes
The method by which income tax payments are calculated is described in the country chapters in Part II.
First, the tax allowances applicable to a taxpayer with the characteristics and income level related to gross
annual wage earnings of an average worker are determined. Next, the schedule of tax rates is applied and
the resulting tax liability is reduced by any relevant tax credits. An important issue arising in the calculation
of the personal income tax liability involves determining which tax reliefs should be taken into account.
Two broad categories of reliefs may be distinguished:
Standard tax reliefs: reliefs which are unrelated to actual expenditures incurred by the taxpayer
and are automatically available to all taxpayers who satisfy the eligibility rules specified in the
legislation. Standard tax reliefs are usually fixed amounts or fixed percentages of income and are
typically the most important set of reliefs in the determination of the income tax paid by workers.
These reliefs are taken into account in the calculations
–
they include:
o
o
o
o
o
The basic relief which is fixed and is available to all taxpayers or all wage earners, irrespective
of their marital or family status;
The standard relief which is available to taxpayers depending on their marital status;
The standard child relief granted to a family with two children between the ages of six to eleven
inclusive;
The standard relief in respect of work expenses, which is usually a fixed amount or fixed
percentage of (gross) wage earnings; and,
Tax reliefs allowed for social security contributions and other (sub-central government) income
taxes are also considered as standard reliefs since they apply to all wage earners and relate
to compulsory payments to general government.
1
Non-standard tax reliefs: These are reliefs which are wholly determined by reference to actual
expenses incurred. They are therefore neither fixed amounts nor fixed percentages of income.
Examples of non-standard tax reliefs include reliefs for interest on qualifying loans (e.g. for the
purchase of a house), private insurance premiums, contributions to private pension schemes, and
charitable donations. These are not taken into account in calculating the tax position of employees.
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Standard reliefs are separately identified and their impact on average tax rates is calculated in the results
tables shown in the Country chapters. The latter include a brief description of the main non-standard reliefs
in most cases.
State and local income taxes
Personal income taxes levied by sub-central levels of government
–
state, provincial, cantonal or local
–
are included in the scope of this study. State income taxes exist in Canada, Switzerland and the
United States. Since 1997, Spain has an income tax for the Autonomous Regions. Local income taxes are
imposed in Belgium, Denmark, Finland, France, Iceland, Italy, Japan, Korea, Norway, Sweden,
Switzerland and the United States. In Belgium, Canada (other than Quebec), Denmark, Iceland, Italy,
Korea, Norway and Spain they are calculated as a percentage of taxable income or of the tax paid to
central government. In Finland, Japan, Sweden and Switzerland, local government provides different tax
reliefs from central government. In the United States, the sub-central levels of government operate a
separate system of income taxation under which they have discretion over both the tax base and tax rates.
Except for Canada, Spain and Switzerland, the rate schedule of these sub-central taxes consists of a single
rate.
When tax rates and/or the tax base of sub-central government income taxes vary within a country, it is
sometimes assumed that the average worker lives in a typical area and the income taxes (and benefits)
applicable in this area are presented. This is the procedure followed in Canada, Italy, Switzerland and the
United States where the tax base and tax rates vary very widely throughout the country. Belgium, Denmark,
Finland, Iceland and Sweden have preferred to select the average rate of sub-central government income
taxes for the country as a whole. Concerning France, the local tax rates, which vary widely depending on
the municipalities, are not assessed and are not included in the
Taxing Wages
calculations. The local rates
do not vary in practice in Korea and Norway. Japan and Spain have used the widely prevalent standard
schedule.
Social security contributions
Compulsory social security contributions paid by employees and employers to general government or to
social security funds under the effective control of government are included in the coverage of this Report.
In most countries, contributions are levied on gross earnings and earmarked to provide social security
benefits. In Finland, Iceland and the Netherlands, some contributions are levied as a function of taxable
income (i.e. gross wage earnings after most/all tax reliefs). Australia, Denmark and New Zealand do not
levy social security contributions.
Contributions to social security schemes outside the general government sector are not included in the
calculations. However, information on “non-tax compulsory payments” as well as “compulsory payment
indicators” is included in the OECD Tax Database, which is accessible
at
http://www.oecd.org/tax/tax-
policy/tax-database.
Payroll taxes
Payroll taxes have a tax base that is either a proportion of the payroll or a fixed amount per employee. In
the OECD Revenue Statistics, payroll taxes are reported under heading 3000. Sixteen OECD countries
report revenue from payroll taxes: Australia, Austria, Canada, Denmark, France, Hungary, Iceland, Ireland,
Israel, Korea, Latvia, Lithuania, Mexico, Poland, Slovenia and Sweden.
Payroll taxes are included in total tax wedges reported in this publication, given that they increase the gap
between gross labour costs and net take-home pay in the same way as income tax and social security
contributions do. The main difference with the latter is that the payment of payroll taxes does not confer an
entitlement to social security benefits. Also, the tax base of payroll taxes may differ from the tax base of
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employer social security contributions. For example, certain fringe benefits may only be liable to payroll
tax. Because this Report presents the standard case, the payroll tax base can be
–
depending on the
relevant legislation
–
gross wage (excluding fringe benefits and other items of compensation that vary per
employee), gross wage plus employer social security contributions, or a fixed amount per employee.
Seven of the OECD member countries include payroll taxes in the
Taxing Wages
calculations: Australia,
Austria, Hungary, Latvia, Lithuania, Poland and Sweden. The other countries reporting payroll tax revenue
in Revenue Statistics have not included these taxes in the calculations for the present Report for a variety
of reasons.
Family cash benefits from general government
Tax reliefs and family cash transfers universally paid in respect of dependent children between the ages
of six to eleven inclusive who are attending school are included in the scope of the study. If tax reliefs or
cash transfers vary within this age range, the most generous provisions are adopted, except that the case
of twins is explicitly disregarded. The implications of this are illustrated below - suppose the child benefit
programme of a country is structured as follows:
Age group
Children 6-8
Children 9-10
Children 11-14
100 units
120 units
150 units
Benefits per child
The most favourable outcome arises in the case of 11-year old twins: 300 units. However, as the case of
twins is excluded, the best outcome (given that children are between 6 and 11) now becomes 270 units
(one child 11 years old, one child 9 or 10 years old). This amount would be included in the country table.
Often, the amount in benefits is raised as children grow older. The calculations assume that the children
have been born on 1 January so the annual amount received in child benefits may be calculated from the
benefit schedule that is in place at the start of the year with any revisions to these amounts during the year
being taken into account.
Relevant cash payments are those received from general government. In some cases, the cash benefits
include amounts that are paid without consideration to the number of children.
Payable tax credits
Payable (non-wastable) tax credits are tax credits that can exceed tax liability, where the excess, if any,
can be paid as a cash transfer to the taxpayer. In principle, these credits can be treated in different ways
according to whether they are regarded as tax provisions or cash transfers or a combination of these. The
Special Feature in the 2016 edition of
Revenue Statistics
discusses these alternative treatments and the
conceptual and practical difficulties that arise in deciding which is the most appropriate approach for the
purpose of reporting internationally comparable tax revenue figures. It also provides figures which show
the impact of different treatments on tax to GDP ratios.
2
Based on this review, the Interpretative Guide of the
Revenue Statistics
requires that
only the portion of a payable tax credit that is claimed to reduce or eliminate a taxpayer’s liability
(the ‘tax expenditure’ component)
3
should be deducted in the reporting of tax revenues;
the part of the tax credit that exceeds a taxpayer’s tax liability and is paid to the taxpayer (the ‘cash
transfer’ component) should be treated as an expenditure item and not deducted in the reporting
of tax revenues.
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However, additional information is provided in
Revenue Statistics
on aggregate tax expenditure
components and aggregate transfer components of payable tax credits to show the effect of alternative
treatments.
4
In
Taxing Wages,
the situation is different as the full amount of the payable tax credit is taken into account
in the income tax calculation.
Strict consistency with the
Revenue Statistics
would require that only the tax expenditure component be
offset against derived income tax, with the excess (if any) treated as a cash transfer. However, this
approach would diminish rather than strengthen the informational content of the derived results in
Taxing
Wages.
In particular, limiting tax credit claims to tax expenditure amounts would yield a zero income tax
liability and zero average income tax rate where cash refunds are provided. Where tax credits claims are
not constrained in this way, negative income tax liabilities and negative average income tax rates would
result where cash transfers are provided. Arguably, these negative amounts more clearly convey the
taxpayer’s position (which is improved relative to the no-tax
situation). Also, not including the cash transfer
portion of payable tax credits in the ‘cash transfers from general government’ item of the country tables
permits greater transparency of the latter which focuses on ‘pure’ cash transfers only.
However, in order to improve the informational content of country tables as regards payable tax credits,
the memorandum item reporting at the bottom of the relevant country tables shows tax expenditure
amounts on one line, with a second line showing cash transfer amounts. Where more than one payable
tax credit program applies, the figures represent aggregates covering all the programs. Total program
costs in each of the household cases considered can be derived by adding the tax expenditure and cash
transfer amounts.
The calculation of marginal tax rates
In all except one case, the marginal tax rates are calculated by considering the impact of a small increase
in gross earnings on personal income tax, social security contributions and cash benefits. The exception
is the case of a non-working spouse where the move from zero to a small positive income is
unrepresentative of income changes and therefore of little interest. So, for this case, the marginal rates for
the spouse are calculated by considering the impact of an income increase from zero to 67% of the average
wage.
Limitations
General limitations
The simple approach of comparing the tax/benefit position for eight model families avoids many of the
conceptual and definitional problems involved in more complex international comparisons of tax burdens
and transfer programmes. However, a drawback of this methodology is that the earnings of an average
worker will usually occupy a different position in the overall income distribution in different economies,
although the earnings relate to workers in similar jobs in various OECD Member countries.
Because of the limitations on the taxes and benefits covered in the Report, the data cannot be taken as
an indication of the overall impact of the government sector on the welfare of taxpayers and their families.
Complete coverage would require studies of the impact of indirect taxes, the treatment of non-wage labour
income and other income components under personal income taxes and the effect of other tax allowances
and cash benefits. It would also require that consideration be given to the effect on welfare of services
provided by the state, either free or below cost, and the incidence of corporate and other direct taxes on
earnings and prices. Such a broad coverage is not possible in an international comparison of all OECD
countries. The differences between the results shown here and those of a full study of the overall impact
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on employees of government interventions in the economy would vary from one country to another. They
would depend on the relative shares of different kinds of taxes in government revenues and on the scope
and nature of government social expenditures.
The Report shows only the formal incidence of taxes on employees and employers. The final, economic
incidence of taxes may be quite different, because the tax burden may be shifted from employers onto
employees and vice versa by market adjustments to gross wages.
The income left at the disposal of a taxpayer may represent different standards of living in various countries
because the range of goods and services on which the income is spent and their relative prices differ as
between countries. In those countries where the general government sector provides a wide range of
goods and services (generous basic old age pension, free health services, public housing, university
education, et cetera), the taxpayer may be left with less cash income but may enjoy the same living
standards as a taxpayer receiving a higher cash income but living in a country where there are fewer
publicly provided goods and services.
Some specific limitations on the income tax calculation
The exclusion of non-wage income and the limited number of tax reliefs covered mean that the average
rates of income tax in the tables in this publication do not necessarily reflect the actual rates confronting
taxpayers at these levels of earnings. Actual rates may be lower than the calculated rates because the
latter do not take into account non-standard expense-related reliefs. On the other hand, actual rates may
be higher than calculated rates because the latter do not take into account tax on non-wage income
received by employees.
The decision not to calculate separately average rates of income tax taking into account the effect of non-
standard tax reliefs was taken because:
In many cases, expense-related reliefs are substitutes for direct cash subsidies. To take into
account these reliefs while ignoring any corresponding direct subsidies would distort comparisons
of take-home pay plus cash transfers;
The special tax treatment of certain expenses may be linked to special treatment of any income
associated with these expenses (e.g. the tax treatment of social security contributions and pension
income) which is beyond the scope of this study;
A few countries were unable to estimate the value of these reliefs and even those countries which
could do so could not limit their estimates to taxpayers with the characteristics assumed in the
above part on methodology; and,
Not all countries could calculate separately the reliefs available to different household types. Where
a split is provided between single individuals and families with children, there are large differences
in the value of the reliefs typically received by these two categories of households.
Limitations to time-series comparisons
The calculations of the tax burden on labour income in OECD countries reported in the 2004 and previous
editions of
Taxing Wages,
are based on an average earnings measure for manual full-time workers in the
manufacturing sector (the ‘average production worker’).
Any analysis of the results over time has to take into account the fact that the earnings data do not
necessarily relate to the same taxpayer throughout the period. The average earnings are calculated for
each year. As such, the results do not reflect the changing earnings and tax position of particular individuals
over time but rather to the position of workers earning a wage equal to average earnings in the covered
industry sectors in each particular year. This, in turn, may mean that the earnings levels referred to may
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be at different points in the income distribution over the period covered and changes in tax rates may be
influenced by these trends.
There have been changing definitions of the average worker over time. From the 2005 edition,
Taxing
Wages
has reported tax calculations under a broadened average worker definition that includes all full-
time employees covering industry sectors C-K (reference to ISIC Rev.3.1). The implications of adopting
this definition for time-series comparisons are discussed in the 2005 edition of
Taxing Wages.
As of the
2010 edition of the
Taxing Wages
Report, many countries have started reporting average wage earnings
for full-time employees covering industry sectors B-N of the ISIC Rev.4 industry classification (which
broadly corresponds to sectors C-K in ISIC Rev.3.1).
A Note on the Tax Equations
Each country chapter contains a section describing in a standard format the equations under-pinning the
calculations required to derive the amounts of income tax, social security contributions and cash transfers.
These algorithms represent in algebraic form the legal provisions described in the chapter and are
consistent with the figures shown in the country and comparative tables. This section describes the
conventions used in the definition of the equations and how they could be used by those wishing to
implement the equations for their own research.
The earlier sections of the country chapters describe how the tax and other systems work and present the
values of the parameters of those systems such as the levels of allowances and credits, and the schedule
of tax rates.
In the first part of the equations section is a table showing a brief description of each parameter (such as
“Basic tax credit”), the name of the parameter as used in the algebraic equation (“Basic_cred”) and the
actual value for the relevant
year (such as “1098”). Where there is a table of values –
for example a
schedule of tax rates and the associated thresholds of taxable income
–
a name is given to the entire table
(for example “tax_sch”). These variable names are those used in the equations.
After each table of parameters is the table of equations. The four columns contain information as follows:
The first two columns give a description and a variable name for the result of the equation on that
row of the table. These always include the thirteen main financial value entries in the country tables.
Additional rows define any intermediate values which are calculated either to show the detail
included in the tables (such as the subdivision of total tax allowances into the different categories)
or values which make the calculation clearer.
The third column shows the range of the calculation in that row. This is necessary to allow for the
different way that tax may be calculated for married couples. The options are:
o
B
The calculation is carried out separately for both the principal earner and the spouse using
their individual levels of earnings. This applies in the case of independent income tax and
usually also in respect of social security contributions.
P
The calculation applies for the principal earner only. An example is where the principal earner
can use any of the basic tax allowance of the spouse which cannot be set against the income
of the spouse.
S
The calculation applies for the spouse (i.e. second earner) at wage earnings equal to or lower
than the principal earner’s wage earnings.
J
The calculation is carried out only once on the basis of joint income. This applies to systems
of joint or household taxation and is also usual for the calculation of cash transfers in respect
of children.
o
o
o
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The final column contains the equation itself. The equation may refer to the variables in the
parameters table and to variables which result from one of the rows of the equations table itself.
Use is also made of the two standard variables “Married”, which have
the value 1 if the household
consists of a married couple and 0 in the case of a single individual, and “Children” which denotes
the number of children. Sometimes there is a reference to a variable with the affix “_total” which
indicates the sum of the relevant variable values for the principal earner and the spouse. Similarly,
the affixes “_princ” and “_spouse” indicate the value for the principal earner and spouse,
respectively.
In the equations a number of functions are used. Some of these are used in the same way as in a number
of widely available ‘spreadsheet’ computer packages. For example, MAX(X,Y) and MIN(X,Y) find the
maximum and minimum of the two values, respectively. IF(condition X,Y) chooses the expression X if the
condition is true and the expression Y if it is false. Boolean expressions are also used and are taken to
have the value 1 if true and 0 if false. As an example, (Children=2*CB_2 is equivalent to IF (Children=2,
CB_2,0).
There are also three special functions commonly used which denote calculations often required in tax and
social security systems. These are:
Tax (taxinc, tax_sch): This calculates the result of applying the schedule of tax rates and thresholds
in “tax_sch” to the value of taxable income represented by “taxinc”. This
function may be used in
any part of the equations, not just in the income tax calculation. For some countries it is used for
social security contributions or even for allowance levels which may be income dependent.
Positive (X): This gives the result X when this value is positive and zero otherwise. It is therefore
equivalent to MAX(0,X).
Taper (value, income, threshold, rate): This gives the amount represented by “value” if “income” is
less than “threshold”. Otherwise, it gives “value” reduced by “rate”
multiplied by (income-
threshold), unless this produces a negative result in which case zero is returned. This provides the
calculation which is sometimes required when a tax credit, for example, is available in full provided
that total income is below a threshold but is then withdrawn at a given rate for each currency unit
in excess of the threshold until it is withdrawn completely.
In some circumstances, there are country specific special VBA functions. These VBA functions involve
programming that is designed to simplify the tax calculations. The programming underlying these functions
is based on the description of the particular measure given in the relevant country chapter found in Part II.
For example, the Earned Income Credit in the United States is calculated using the VBA function called
EIC.
Anyone wishing to make their own implementation of the equations will have to write VBA functions
corresponding to these special functions or make appropriate modifications to any equations that use them.
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Notes
1
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.
2
Not all national statistical agencies use ISIC Rev.3.1 or ISIC Rev.4 to classify industries. However, the
Statistical Classification of Economic Activities in the European Community (NACE), the North American
Industry Classification System (NAICS) and the Australian and New Zealand Standard Industrial
Classification (ANZSIC) include a classification which is broadly in accordance with industries C-K in ISIC
Rev.3.1 or industries B-N in ISIC Rev.4.
3
In this case, the amount of tax relief is related to actual social security contributions paid by the employee
or withheld from her/his wage
–
thus in this respect this item deviates from the general definition of standard
tax relief under which relief is unrelated to actual expenses incurred.
4
5
OECD,
Revenue Statistics 1965–2017,
p. 62.
This characterisation must be viewed as informal, as the determination of tax expenditures requires the
identification of a benchmark tax system for each country, or preferably, a common international
benchmark. In practice it has not been possible to reach agreement on a common international benchmark
for such purposes.
6
See Table 1.6 in
OECD Revenue Statistics 2020.
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AVAILABLE ON LINE
Taxing Wages
IMPACT OF COVID‑19 ON THE TAX WEDGE IN OECD COUNTRIES
This annual publication provides details of taxes paid on wages in OECD countries. It covers personal income
taxes and social security contributions paid by employees, social security contributions and payroll taxes
paid by employers, and cash benefits received by workers. It illustrates how these taxes and benefits are
calculated in each member country and examines how they impact household incomes. The results also enable
quantitative cross‑country comparisons of labour cost levels and the overall tax and benefit position of single
persons and families on different levels of earnings. The publication shows average and marginal effective
tax rates on labour costs for eight different household types, which vary by income level and household
composition (single persons, single parents, one or two earner couples with or without children). The average
tax rates measure the part of gross wage earnings or labour costs taken in tax and social security contributions,
both before and after cash benefits, and the marginal tax rates the part of a small increase of gross earnings or
labour costs that is paid in these levies.
Taxing Wages 2022
includes a special feature entitled: "Impact of COVID‑19 on the Tax Wedge in OECD
countries".
ALSO AVAILABLE ON LINE
The data in this publication are also available on line via
www.oecd-ilibrary.org
under the title
OECD Tax
Statistics
(https://doi.org/10.1787/tax-data-en).
PRINT ISBN 978‑92‑64‑46546‑6
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2022
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