Taxing Wages

2020
Taxing Wages Trends in labour taxes across OECD
countries

2020 The tax wedge continues to decline

on average in the OECD
The OECD’s Taxing Wages 2020 report provides unique 37.5
information for each of the 36 OECD countries on the 2000: 37.4%
income taxes paid by workers, their social security
contributions, the transfers they receive in the form of 37.0
cash benefits, as well as the social security contributions
and payroll taxes paid by their employers. Results 2007: 36.6%
reported include the marginal and average tax burden 2013: 36.5%
36.5
for one- and two-earner households, and the implied
total labour costs for employers.
2018: 36.1%
36.0
This brochure summarises the main results of this
2019: 36.0%
edition by:

l Presenting an analysis of the average tax wedge 35.5

in OECD countries in 2019, the changes from the 2009 (post-crisis): 35.5%

previous year and the trends between 2000 and

2019 for a selection of household types that are Change in tax wedge: 2018-2019
covered in Taxing Wages 2020. 19 OECD countries saw their tax wedge increase
17 OECD countries saw their tax wedge decrease
l Presenting a brief analysis of the net personal Largest increases (percentage points) Largest decreases
average tax rate for a single average worker across +1.1
+1
OECD countries for 2019.
+0.4 +0.4 +0.3 +0.3
The brochure also presents the main results of the 0
BEL FIN NLD AUS LTU
EST MEX SVN NZL KOR
associated report on Taxing Wages in Selected Partner
Economies: Brazil, China, India, Indonesia and South -0.5 -0.5 -0.6
-1
Africa in 2018 (see Box 2). -0.9

Taxing Wages 2020 presents results for 2019, so does -2

not include the impact of COVID-19 on wages or tax
rates. However, it provides an important baseline to
-3
measure the impact of COVID-19 on labour taxation,
in advance of next year’s edition, which will include -3.4
the impact of COVID-19 on these indicators in 2020.
 OECD – TAXING WAGES 2020 . 3

The tax wedge

Tax wedge for the average worker in OECD countries
Table 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
2019 (see column 1). While in Austria, Belgium, France,
Germany, Hungary and Italy, the tax wedge was about
45% or more, it was lower than 20% in Chile and New
Zealand. The highest tax wedge is observed in Belgium
(52.2%) and the lowest in Chile (7.0%). Table 1 shows that
the average tax wedge in OECD countries was 36.0% in
The average tax wedge in 2019 varied considerably 2019.
across OECD countries, from 7% in Chile to over
52% in Belgium
The changes in tax wedge between 2018 and 2019 for
the average worker without children are described
2 countries OECD average 5
in column 2 of Table 1. The OECD average decreased
have a tax wedge 36.0% countries
below 20% have a tax by 0.11 percentage points. Among the OECD member
wedge countries, the tax wedge increased in 19 countries and
above
fell in 17. Most of the increases and decreases were
45%
comparatively small: a decrease of more than one
Germany percentage point was observed only in Lithuania (3.43
percentage points); and only Estonia saw an increase
Chile New Zealand France Belgium exceeding one percentage point (1.08 percentage points).
Italy
Austria

Box 1: The Tax Wedge

Taxing Wages 2020 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
One-earner married couples with two children face
a lower average tax wedge is calculated by expressing the sum of personal income tax,
employee and employer social security contributions plus any
payroll taxes, minus any benefits received by the employee, as a
26.4% 36.0%
percentage of labour costs. Employer social security contributions
and (in some countries) payroll taxes are added to gross wage
earnings of employees in order to determine a measure of total
labour costs. However, it should be recognised that this measure
may be less than the true labour costs faced by employers
because, for example, employers may also have to make non-tax
compulsory payments.1 The average tax wedge measures that
part of labour costs which is taken in tax and social security
contributions net of cash benefits. In contrast, the marginal tax
wedge measures that part of an increase of total labour costs that
Tax wedge for a one-earner married couple with two children is paid in taxes and social security contributions less cash benefits.
compared to the average single OECD worker, as a share
of the labour costs 1. 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
(http://www.oecd.org/tax/tax-policy/tax-database.htm#NTCP).
4 . OECD – TAXING WAGES 2020

TABLE 1. COMPARISON OF TOTAL TAX WEDGE FOR THE AVERAGE WORKER IN OECD COUNTRIES
As % of labour costs, 2019

Annual change, 2019/18 (in percentage points)²

Country1 Total Tax wedge 2019 Tax wedge Income tax Employee SSC Employer SSC3
(1) (2) (3) (4) (5)
Belgium 52.2 -0.48 -0.47 0.00 -0.01
Germany 49.4 -0.18 0.03 -0.52 0.31
Italy 48.0 0.24 0.24 0.00 0.00
Austria 47.9 0.29 0.34 0.01 -0.06
France 46.7 -0.33 0.03 -0.45 0.09
Hungary 44.6 -0.46 0.10 0.13 -0.69
Czech Republic 43.9 0.18 0.28 0.01 -0.11
Slovenia 43.6 0.38 0.38 0.00 0.00
Sweden 42.7 -0.32 -0.32 0.00 0.00
Latvia 42.6 -0.04 -0.03 0.00 0.00
Finland 41.9 -0.52 0.02 0.07 -0.62
Slovak Republic 41.9 0.07 0.20 0.02 -0.15
Portugal 41.0 0.20 0.20 0.00 0.00
Greece 40.8 -0.12 0.08 -0.10 -0.09
Spain 39.5 0.10 0.10 0.00 0.00
Turkey 39.1 -0.12 -0.12 0.00 0.00
Luxembourg 38.4 0.20 0.33 0.02 -0.15
Netherlands 37.3 -0.56 -1.02 0.12 0.34
Estonia 37.2 1.08 1.08 0.00 0.00
Lithuania 37.2 -3.43 6.29 12.30 -22.02
Norway 35.7 -0.14 -0.14 0.00 0.00
Poland 35.6 -0.17 -0.18 0.00 0.01
Denmark 35.4 0.06 0.01 0.00 0.00
Ireland 33.2 0.30 0.22 0.00 0.08
Iceland 33.1 -0.22 -0.09 0.00 -0.13
Japan 32.7 0.05 0.02 -0.01 0.04
United Kingdom 30.9 -0.09 -0.12 0.02 0.02
Canada 30.5 -0.35 0.06 0.12 -0.53
United States 29.8 0.16 0.21 0.00 -0.06
Australia 27.9 -0.94 -0.94 0.00 0.00
Korea 23.3 0.31 0.17 0.14 0.00
Israel 22.7 0.20 0.18 -0.02 0.04
Switzerland 22.3 0.07 0.07 0.00 0.00
Mexico 20.1 0.39 0.42 0.00 -0.03
New Zealand 18.8 0.34 0.34 0.00 0.00
Chile 7.0 0.04 0.04 0.00 0.00
Unweighted average 
OECD Average 36.0 -0.11 0.22 0.33 -0.66
Notes: Single individual without children at the income level of the average worker. The highest tax wedge is observed in Belgium
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 (52.2%) and the lowest in Chile (7.0%). The
a percentage point from the sum of columns (3)-(5). For Denmark, the Green Check (cash OECD average tax wedge was 36.0% of labour
benefit) contributes to the difference as it is not included in columns (3)-(5).
3. Includes payroll taxes where applicable.
costs in 2019.
Source: Data from Taxing Wages 2020 (OECD), www.oecd.org/ctp/tax-policy/taxing-wages.htm.
 OECD – TAXING WAGES 2020 . 5

In general, the rises in tax wedge rates were driven
by higher income taxes (see column 3). This was the
major factor for the majority of countries showing
an overall increase, the exceptions being Japan and
Korea. Among the group of countries with higher tax
wedges in 2019, the largest increase in personal income
taxes as a percentage of labour costs was in Estonia
(1.08 percentage points), as the income related basic
tax allowance decreased while gross wage earnings
increased between 2018 and 2019. In Japan and Korea,
the personal income tax and the total social security
contributions as a percentage of labour costs increased
evenly.
Decreases in the tax wedge were also derived for
the most part from lower income taxes in nine
OECD countries (Australia, Belgium, Latvia, the
Netherlands, Norway, Poland, Sweden, Turkey and
the United Kingdom). In seven other OECD countries
with decreasing tax wedges (Canada, Finland, France,
Germany, Greece, Hungary and Lithuania), the
changes were mostly driven by lower social security
contributions. Employer social security contributions as
a percentage of labour costs decreased in Canada (0.53
percentage points), Finland (0.62 percentage points),
Hungary (0.69 percentage points) and Lithuania (22.02
percentage points). In Lithuania, a reform of labour
taxation was introduced in 2019, which involved a major
reduction in employer social security contributions,
with most of this reduction being replaced with an
increase in employee social security contributions
and a corresponding increase in gross wages. The
total employer’s social security contribution rate,
including the payroll tax rate, declined from 31.2% in
2018 to 1.79% in 2019 while the total employee‘s social
security contribution rate increased from 9% to 19.5%.
In addition, an income ceiling of around 9.5 times the
average wage was also introduced for employee and
employer social security contributions. To offset the
increase in employee social security contributions
the reform also required employers to increase gross
wages by 28.9%. In France and Germany the employee
social security contributions as a percentage of labour
costs decreased by 0.45 and 0.52 percentage points
respectively. In Greece, the decreases in the employee
and the employer social security contributions (by 0.19
percentage points in total) more than offset the increase
in the income tax (0.08 percentage points). For Iceland,
the decrease in the tax wedge resulted from a decline
of almost the same magnitude in the income tax (0.09
percentage points) and in employers’ social security
contributions (0.13 percentage points).
Figure 1 shows the constituent components of the tax
wedge in 2019, i.e. income tax, employee and employer
social security contributions (including payroll taxes
where applicable), as a percentage of labour costs for the
average worker without children.

30.80 30.70 30.60 30.50 30.50 30.40 30.60 30.90 30.10 30.30 30.70 29.90 29.80 31.50 3
32.60 32.20 32.30 33.80 33.90 33.90 34.00 34.10 32.80 32.40 32.60 32.50 32.10 31.40 3
The highest tax 40.40 43.60 42.50 42.20 42.80 42.80 42.70 42.20 38.70 36.70 37.00 37.00 37.10 37.40 3
wedge is observed 22.90 22.90 22.90 22.40 22.20 22.20 22.10 22.40 21.90 21.90 22.10 22.30 22.10 22.20 2
50.10 49.10 47.80 48.20 48.40 48.10 47.80 45.30 44.80 43.20 42.80 42.80 42.90 43.00 4
in Belgium (52.2%) 38.60 38.90 39.10 38.60 38.80 39.00 39.10 39.00 38.00 38.30 39.70 40.00 40.60 40.70 4
46.30 46.20 46.10 46.20 46.30 45.60 45.30 43.30 42.90 42.20 42.50 42.60 42.50 42.40 4
and the lowest in 41.90 42.50 42.10 42.50 42.20 38.00 38.30 38.40 38.80 37.70 37.90 38.80 39.60 41.10 4
Chile (7.0%) 37.30
38.20
36.40
38.00
37.60
38.00
37.40
38.20
37.40
38.40
36.80
38.70
37.50
39.00
37.30
38.20
36.90
34.70
36.50
34.10
37.10
34.20
38.00
34.30
37.60
35.50
41.40
35.60
4
3
38.60 39.20 38.60 38.10 38.10 37.20 37.40 37.50 37.60 37.30 37.30 37.60 37.40 37.40 3
19.40 19.40 19.40 19.50 19.70 20.00 20.40 21.10 20.50 18.10 17.00 15.90 16.40 16.90 1
40.00 37.40 37.40 37.20 38.80 38.90 38.40 38.70 39.20 38.00 38.10 38.00 38.60 40.60 3
12.70 13.30 15.90 16.80 15.30 14.70 15.10 15.90 15.10 15.30 16.00 18.70 19.00 19.30 1
35.80 34.50 31.60 32.10 32.50 33.40 34.00 35.00 34.70 34.90 35.30 37.30 37.10 38.20 3
45.70 45.70 45.20 44.30 44.80 45.40 44.40 43.00 41.60 40.70 40.60 40.70 40.90 41.10 4
43.20 43.00 43.10 42.70 42.80 43.10 42.70 42.20 41.30 40.90 44.00 44.20 44.30 43.70 4
16.40 16.50 16.10 16.40 17.00 17.30 18.20 19.70 20.00 19.50 20.10 20.50 21.00 21.50 2
29.80 29.90 30.20 27.40 27.30 27.70 28.80 29.30 29.50 29.20 30.20 30.80 31.30 31.60 3
47.10 46.60 46.60 46.00 46.30 45.90 46.10 46.40 46.60 46.80 47.20 47.60 47.70 47.80 4
29.60 30.70 30.80 27.70 26.40 25.50 24.30 24.90 22.90 21.30 20.70 20.80 20.40 20.40 2
35.30 31.70 29.50 30.40 31.00 30.30 29.10 28.10 28.20 29.80 30.90 32.60 33.00 33.90 3
28.80 29.30 30.90 31.50 31.90 32.10 31.80 30.50 30.90 30.50 33.40 34.10 33.80 34.10 3
54.70 55.80 53.70 50.80 51.70 51.10 51.90 54.50 54.10 53.10 46.60 49.50 49.50 49.00 4
 37.30 36.40 37.60 37.40 37.40 36.80 37.50 37.30 36.90 36.50 37.10 38.00 37.60 41.40 41.1
38.20 38.00 38.00 38.20 38.40 38.70 39.00 38.20 34.70 34.10 34.20 34.30 35.50 35.60 35.7
38.60 39.20 38.60 38.10 38.10 37.20 37.40 37.50 37.60 37.30 37.30 37.60 37.40 37.40 36.9
19.40 19.40 19.40 19.50 19.70 20.00 20.40 21.10 20.50 18.10 17.00 15.90 16.40 16.90 17.2
6 . OECD – TAXING WAGES 2020
40.00 37.40 37.40 37.20 38.80 38.90 38.40 38.70 39.20 38.00 38.10 38.00 38.60 40.60 39.0
12.70 13.30 15.90 16.80 15.30 14.70 15.10 15.90 15.10 15.30 16.00 18.70 19.00 19.30 19.5
35.80 34.50 31.60 32.10 32.50 33.40 34.00 35.00 34.70 34.90 35.30 37.30 37.10 38.20 38.6
45.70 45.70 45.20 44.30 44.80 45.40 44.40 43.00 41.60 40.70 40.60 40.70 40.90 41.10 41.0
FIGURE 1. INCOME TAX PLUS 43.20
EMPLOYEE
43.00AND
43.10 42.70 42.80 43.10 42.70 42.20 41.30 40.90 44.00 44.20 44.30 43.70 43.0
EMPLOYER SOCIAL SECURITY CONTRIBUTIONS,
16.40 16.50 16.10 16.40 17.00 17.30 18.20 19.70 20.00 19.50 20.10 20.50 21.00 21.50 21.7
OECD COUNTRIES, 2019 29.80 29.90 30.20 27.40 27.30 27.70 28.80 29.30 29.50 29.20 30.20 30.80 31.30 31.60 32.0
As % of labour costs 47.10 46.60 46.60 46.00 46.30 45.90 46.10 46.40 46.60 46.80 47.20 47.60 47.70 47.80 47.8
Belgium 29.60 30.70 30.80 27.70 26.40 25.50 24.30 24.90 22.90 21.30 20.70 20.80 20.40 20.40 21.1
Germany
35.30 31.70 29.50 30.40 31.00 30.30 29.10 28.10 28.20 29.80 30.90 32.60 33.00 33.90 34.0
28.80 29.30 30.90 31.50 31.90 32.10 31.80 30.50 30.90 30.50 33.40 34.10 33.80 34.10 33.9
Italy
54.70 55.80 53.70 50.80 51.70 51.10 51.90 54.50 54.10 53.10 46.60 49.50 49.50 49.00 49.0
Austria
38.70 38.10 39.10 39.70 41.10 41.20 42.20 42.00 41.40 41.20 40.00 42.90 42.80 41.10 40.2
France
52.90 51.90 52.50 53.20 52.20 52.10 52.30 51.80 51.30 50.80 49.00 49.70 49.70 49.30 49.3
Hungary
50.40 50.10 49.90 50.10 50.30 50.50 49.70 49.70 49.80 49.80 49.90 50.00 50.10 48.80 48.4
Czech Republic 47.50 46.10 45.70 44.80 44.20 44.40 44.00 43.90 43.80 42.50 42.30 42.30 42.50 43.10 43.6
Slovenia 41.30 41.00 42.10 42.30 41.50 39.90 39.00 39.00 38.40 39.20 40.10 40.30 40.40 39.90 40.0
Sweden 41.50 40.60 40.00 40.00 38.60
The 38.50 38.60of 38.80
percentage labour 38.60 37.20
costs paid 35.90 36.10
in income tax 36.20 35.80 35.6
Latvia 42.60 42.60 43.00 43.20 varies
43.50 considerably
43.70 42.50 42.90across43.40
OECD42.00
countries. The42.60 42.50
42.10 42.40 42.6
Finland 7.00 7.00 7.00 7.00 lowest7.00
7.00 figures are in7.00
7.00 Chile (0.05%),
7.00 7.00with Greece,
7.00 Israel,
7.00 7.00 7.00 7.0
Slovak Republic 32.90 31.50 31.70 31.70 31.90 31.90 31.70 31.30 31.30 30.50 30.40Republic
Japan, Korea, Mexico, Poland and the Slovak 30.60 30.80 31.00 31.6
57.10 56.70 56.30 55.70 also 55.50
55.40 below 10%.
55.50The highest
55.60 values
55.90 are in
55.70 Denmark
55.90 56.10 56.00 55.70 55.6
Portugal
(35.6%), with Australia and Iceland over 20%. The
Greece
47.30 46.90 47.10 47.40 48.30 48.10 48.50 48.80 49.00 47.90 48.20 48.50 48.80 49.20 49.4
percentage of labour costs paid in employee social
31.00 27.60 28.00 28.20 28.20 28.50 28.30 27.70 26.90 26.70 26.80 26.70 27.30 27.40 27.7
Spain security contributions also varies widely, ranging
Turkey from zero in Australia, Denmark and New Zealand to
Luxembourg 19.0% in Slovenia and 19.2% in Lithuania. Employers
Netherlands
in France pay 26.6% of labour costs in social security
contributions, the highest amongst OECD countries.
Estonia
The corresponding figures are also more than 20% in 8
Lithuania
other countries - Austria, Belgium, the Czech Republic,
OECD Average Estonia, Italy, the Slovak Republic, Spain and Sweden.
Norway
Poland As a percentage of labour costs, the total of employee
Denmark
and employer social security contributions exceeds
20% in more than half of the OECD countries. It also
Ireland
represents at least one-third of labour costs in five OECD
Iceland
countries: Austria, the Czech Republic, France, Germany
Japan and the Slovak Republic.
United Kingdom
Canada Single compared to one-earner couple taxpayers in
United States
OECD countries
Table 2 compares the tax wedges for a one-earner
Australia
married couple with two children and a single individual
Korea
without children, at average earnings levels. These tax
Israel wedges varied widely across OECD countries in 2019 (see
Switzerland columns 1 and 2). The size of the tax wedge for the couple
Mexico with children is generally lower than the one observed
Income tax
New Zealand Employee SSC for the individual without children, since many OECD
Employer SSC countries provide a fiscal benefit to households with
Chile
children through advantageous tax treatment and/or
0% 10% 20% 30% 40% 50% 60% cash benefits. Hence, the OECD average tax wedge for the
Notes: Single individual without children at the income level of the average worker. one-earner couple with two children was 26.4% compared
Includes payroll taxes where applicable. to 36.0% for the single average worker. This gap has
Source: Data from Taxing Wages 2020 (OECD) narrowed slightly (by 0.03 percentage points) since 2018.
 OECD – TAXING WAGES 2020 . 7

Box 2: Taxing Wages in selected partner economies

The associated report Taxing Wages in Selected Partner
Economies examines the taxation of labour income in five
major countries: Brazil, China, India, Indonesia and South
Africa (the BIICS countries). It sets out the key features of the
taxation of labour income in each of the five countries in 2018
and then uses this information together with corresponding
details for earlier years to model changes to the tax burden
between 2010 and 2018 in each case.
Across the BIICS countries, there are two main groups of
countries with regard to tax wedge levels for the single worker,
as shown in the Figure below. In Brazil and China (where the
modelling assumes the worker is based in Shanghai), the
average tax wedges in 2018 (column 1) were 32.5% and 32.4%,
respectively; slightly below the OECD average of 36.1%. The
corresponding averages in Indonesia and South Africa are 7.8%
and 16.3%, which are low compared with the vast majority of
OECD countries. The same is true in India where two scenarios
are considered. In India, SSCs are paid in businesses with more
than 20 employees, which is the minority case. Thus, the first
scenario, which is more representative of the workforce, does
not include any SSCs. As a result, the tax wedge for the average
single worker only counts the PIT and amounts to 2.0%. The state
income tax accounts for the whole PIT (the modelling focuses
on the state of Maharashtra), as no central income tax is levied
at that level of earnings. The second scenario for India covers the
situation where the employee works in a business with more
than 20 employees and includes the applicable SSCs. In that
particular case the tax wedge is 27.8%.
The composition of the tax wedge also differs between the
BIICS countries. In Brazil, China, India and Indonesia, the average
worker pays little or no PIT and the employer SSC component
forms 50% to 80% of the tax wedge. In South Africa, there is a
different picture – the PIT component of the tax wedge (13.93%)
is 0.43 percentage points above the OECD average (13.50%) and
it forms more than 80% of the total tax wedge.
The Figure below shows a graphical illustration of the tax wedge
components.

FIGURE A. INCOME TAX PLUS EMPLOYEES’ AND EMPLOYERS’ SOCIAL SECURITY CONTRIBUTIONS IN THE
BIICS, 2018
For a single worker on average wage, as % of labour costs

Brazil

China

India

Indonesia

South Africa

OECD average

0 10 20 30 40

Income tax Employee SSC Employer SSC

Notes: Single individual without children at the income level of the average worker.
India: the scenario when SSCs are payable
Includes payroll taxes where applicable.
Source: www.oecd.org/tax/tax-policy/taxing-wages-in-selected-partner-economies.pdf
8 . OECD – TAXING WAGES 2020

TABLE 2. COMPARISON OF TOTAL TAX WEDGE FOR SINGLE AND ONE-EARNER COUPLE TAXPAYERS, 2019
As % of labour costs

Annual change, 2019/18 (in percentage points)

Country 1
Family² Total Tax Single³ Total Tax Family Tax Single Tax Difference between single
wedge 2019 (1) wedge 2019 (2) wedge (3) wedge (4) and family (4)-(3) (5)
Italy 39.2 48.0 0.58 0.24 -0.34
Greece 37.8 40.8 -0.11 -0.12 -0.01
Finland 37.5 41.9 -0.48 -0.52 -0.04
Turkey 37.5 39.1 -0.21 -0.12 0.09
Sweden 37.4 42.7 -0.29 -0.32 -0.03
France 36.8 46.7 -2.34 -0.33 2.01
Belgium 36.5 52.2 -0.96 -0.48 0.48
Germany 34.3 49.4 -0.09 -0.18 -0.08
Spain 34.2 39.5 0.26 0.10 -0.16
Austria 33.7 47.9 -3.67 0.29 3.96
Latvia 32.4 42.6 -0.20 -0.04 0.17
Netherlands 32.3 37.3 -0.52 -0.56 -0.04
Norway 32.1 35.7 -0.27 -0.14 0.14
Slovak Republic 31.1 41.9 0.51 0.07 -0.44
Hungary 29.6 44.6 -0.59 -0.46 0.13
Portugal 29.4 41.0 0.34 0.20 -0.14
Lithuania 29.0 37.2 -4.24 -3.43 0.81
Slovenia 28.5 43.6 3.32 0.38 -2.94
Japan 27.5 32.7 0.07 0.05 -0.02
Estonia 27.5 37.2 1.37 1.08 -0.29
Czech Republic 26.6 43.9 1.03 0.18 -0.85
United Kingdom 26.3 30.9 0.02 -0.09 -0.11
Denmark 25.2 35.4 0.22 0.06 -0.16
Iceland 21.6 33.1 -0.59 -0.22 0.36
Australia 20.8 27.9 -0.78 -0.94 -0.16
Korea 20.6 23.3 -0.36 0.31 0.67
Israel 20.3 22.7 0.24 0.20 -0.05
Mexico 20.1 20.1 0.39 0.39 0.00
United States 18.8 29.8 0.33 0.16 -0.17
Ireland 17.9 33.2 0.25 0.30 0.05
Poland 17.7 35.6 2.62 -0.17 -2.79
Luxembourg 17.3 38.4 0.23 0.20 -0.03
Canada 11.6 30.5 -0.45 -0.35 0.10
Switzerland 9.9 22.3 0.12 0.07 -0.04
Chile 7.0 7.0 0.00 0.04 0.04
New Zealand 3.5 18.8 1.55 0.34 -1.22
Unweighted average
OECD Average 26.4 36.0 -0.07 -0.11 -0.03
Notes: In all OECD countries, the tax wedge for families
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. on average earnings with children was either
3. Single individual without children and earnings at the average wage level. lower or, in Mexico, the same, as the average
Source: Data from Taxing Wages 2020 (OECD), www.oecd.org/ctp/tax-policy/taxing-wages.htm. single earner without children.
 50.10 49.10 47.80 48.20 48.40 48.10 47.80 45.30 44.80 43.20 42.80 42.80 42.90 43.00 42.5
38.60 38.90 39.10 38.60 38.80 39.00 39.10 39.00 38.00 38.30 39.70 40.00 40.60 40.70 40.7
46.30 46.20 46.10 46.20 46.30 45.60 45.30 43.30 42.90 42.20 42.50 42.60 42.50 42.40 42.5
41.90 42.50 42.10 42.50 42.20 38.00 38.30 38.40 38.80 37.70 37.90 38.80 39.60 41.10 41.3
37.30 36.40 37.60 37.40 37.40 36.80 37.50 37.30 36.90 36.50 37.10 38.00 37.60 41.40 41.1
38.20 38.00 38.00 38.20 38.40 38.70 39.00 38.20 34.70 34.10 34.20 34.30 35.50 35.60 35.7
38.60 39.20 38.60 38.10 38.10 37.20 37.40 37.50 37.60 37.30 37.30 37.60 37.40 37.40 36.9
19.40 19.40 19.40 19.50 19.70 20.00 20.40 21.10 20.50 18.10 17.00 15.90 16.40 16.90 17.2
The fiscal preference for families
40.00 37.40 37.40 37.20 38.80 38.90 38.40 38.70 39.20 38.00 38.10 38.00 38.60 40.60 39.0
12.70 13.30 15.90 16.80 15.30 14.70 15.10 15.90 15.10 15.30 16.00 18.70 19.00 19.30 19.5
increased in 13 OECD countries:
35.80 34.50 31.60 32.10 32.50 33.40 34.00 35.00 34.70 34.90 35.30 37.30 37.10 38.20 38.6
45.70 45.70 45.20 44.30 44.80 45.40 44.40 43.00 41.60 40.70 40.60 40.70 40.90 41.10 41.0
Austria, Belgium, Canada, 43.20 43.00 43.10 42.70 42.80 43.10 42.70 42.20 41.30 40.90 44.00 44.20 44.30 43.70 43.0
Chile, France, Hungary, Iceland,
16.40 16.50 16.10 16.40
29.80 29.90 30.20 27.40
17.00 17.30 18.20 19.70 20.00 19.50 20.10 20.50 21.00
27.30 27.70 28.80 29.30 29.50 29.20 30.20 30.80 31.30
21.50
31.60
21.7
32.0
Ireland, Korea, Latvia, Lithuania,
47.10 46.60 46.60 46.00 46.30 45.90 46.10 46.40 46.60 46.80 47.20 47.60 47.70 47.80 47.8
29.60 30.70 30.80 27.70 26.40 25.50 24.30 24.90 22.90 21.30 20.70 20.80 20.40 20.40 21.1
Norway and Turkey. 35.30 31.70 29.50 30.40 31.00 30.30 29.10 28.10 28.20 29.80 30.90 32.60 33.00 33.90 34.0
28.80 29.30 30.90 31.50 31.90 32.10 31.80 30.50 30.90 30.50 33.40 34.10 33.80 34.10 33.9
54.70 55.80 53.70 50.80 51.70 51.10 51.90 54.50 54.10 53.10 46.60 49.50 49.50 49.00 49.0
38.70 38.10 39.10 39.70 41.10 41.20 42.20 42.00 41.40 41.20 40.00 42.90 42.80 41.10 40.2
52.90 51.90 52.50 53.20 52.20 52.10 52.30 51.80 51.30 50.80 49.00 49.70 49.70 49.30 49.3
50.40 50.10 49.90 50.10 50.30 50.50 49.70 49.70 49.80 49.80 49.90 50.00 50.10 48.80 48.4
47.50 46.10 45.70 44.80 44.20 44.40 44.00 43.90 43.80 42.50 42.30 42.30 42.50 43.10 43.6
41.30 41.00 42.10 42.30 41.50 39.90 39.00 39.00 38.40 39.20 40.10 40.30 40.40 39.90 40.0
The tax savings realised by a one-earner also greater than one percentage point in Lithuania.
41.50 40.60married
40.00 couple
40.00 38.60 38.50 38.60 38.80 38.60 37.20 35.90 36.10 36.20 35.80 35.6
with two children compared to a single worker without Detailed explanations on the labour taxation reform in
42.60 42.60 43.00 43.20 43.50 43.70 42.50 42.90 43.40 42.00 42.10 42.60 42.50 42.40 42.6
children were greater than 20% of labour costs in Lithuania are given in the section on the tax wedge above
7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.0
Luxembourg, and 15% of labour costs or more in nine and also in the country details in Part II of the report.
32.90 31.50 31.70 31.70 31.90 31.90 31.70 31.30 31.30 30.50 30.40 30.60 30.80 31.00 31.6
other countries – Belgium, Canada, the Czech Republic,
57.10 56.70 56.30 55.70
Germany, Hungary, Ireland, New Zealand, Poland and
55.40 55.50 55.50 55.60 55.90 55.70 55.90 56.10 56.00
A comparison of the changes in tax wedges between
55.70 55.6
47.30 46.90
Slovenia. The tax burdens of one-earner 47.10couples
married 47.40 48.30
201848.10 48.50
and 2019 48.80 49.00
for one-earner 47.90couples
married 48.20 with
48.50 48.80 49.20 49.4
31.00wage
and single workers on the average 27.60 28.00
were 28.20
the same 28.20 28.50 28.30
two children 27.70persons
and single 26.90 without
26.70 children,
26.80 26.70
at 27.30 27.40 27.7
in Mexico and differed by three percentage points or less the average wage level, is shown in column 5 of Table 2
in Chile, Greece, Israel, Korea and Turkey (see columns 1 The fiscal preference for families increased in 13 OECD
and 2). countries: Austria, Belgium, Canada, Chile, France,
Hungary, Iceland, Ireland, Korea, Latvia, Lithuania, Norway
In 27 of the 36 OECD countries, there was only a small and Turkey. Additionally, the effects of changes in the tax
change (not exceeding plus or minus one percentage system on the tax wedge were of the same magnitude for
point) in the tax wedge of an average one-earner married both household types only in Mexico. In seven countries:
couple with two children between 2018 and 2019 (see Finland, Greece, Japan, Luxembourg, the Netherlands,
column 3). There was no change in Chile. There were Sweden and Switzerland, the fiscal preference for families
increases of greater than one percentage point in decreased by less than 0.05 percentage points.
Slovenia (3.32 percentage points), Poland (2.62 percentage
points), New Zealand (1.55 percentage points), Estonia Tax wedge for two-earner couples in OECD countries
(1.37 percentage points) and the Czech Republic (1.03 The preceding analysis focuses on two households with
percentage points). In contrast, the tax wedge for families comparable levels of income: the single worker at 100%
fell by more than one percentage point in three countries: of the average wage, and the married couple with one
Lithuania (4.24 percentage points), Austria (3.67 earner at 100% of the average wage, with two children.
percentage points) and France (2.34 percentage points). This section extends the discussion to include a third
For most of those countries, the changes in the tax wedge household type: the two-earner married couple, earning
resulted from the introduction of, or changes in, tax 100% and 67% of the average wage, with two children.
provisions or cash benefits for dependent children. For
Lithuania, the decrease in the tax wedge of an average For this household type, the OECD average tax wedge
one-earner married couple with two children was mainly as a percentage of labour costs for the household was
driven by reduced employer social security contributions 30.5% in 2019 (Figure 2 and Table 3). Belgium had a
resulting from the reform of labour taxation. By tax wedge of 44.5%, which was the highest among the
comparison, the decrease in the tax wedge of a single OECD countries. The other countries with tax wedges
taxpayer without children at the average wage level was exceeding 40% were Italy (41.9 %), and Germany
10 . OECD – TAXING WAGES 2020

TABLE 3. COMPARISON OF TOTAL TAX WEDGE FOR TWO-EARNER COUPLES WITH CHILDREN,
OECD COUNTRIES, 2019
As % of labour costs

Annual change, 2019/18 (in percentage points)²

Country 1
Total Tax wedge Tax wedge Income tax Employee SSC Employer SSC3 Cash benefits
2019 (1) (2) (3) (4) (5) (6)
Belgium 44.5 -0.63 -0.62 -0.01 -0.03 -0.02
Germany 42.5 -0.16 0.05 -0.52 0.31 0.00
Italy 41.9 0.34 0.29 0.00 0.00 -0.05
France 39.9 -0.48 0.06 -0.44 -0.09 0.00
Sweden 38.7 -0.35 -0.37 0.00 0.00 -0.02
Greece 38.3 -0.11 0.08 -0.10 -0.09 -0.01
Austria 38.3 -2.00 -2.09 0.01 -0.06 -0.14
Turkey 37.2 0.37 -0.31 -0.12 0.80 0.00
Slovak Republic 37.1 0.27 0.31 0.02 -0.15 -0.08
Finland 36.8 -0.56 -0.04 0.07 -0.62 -0.03
Spain 36.5 0.16 0.16 0.00 0.00 0.00
Portugal 35.9 0.30 0.30 0.00 0.00 0.00
Slovenia 35.8 0.53 0.37 0.00 0.00 -0.16
Hungary 35.6 -0.54 -0.23 0.13 -0.69 -0.26
Czech Republic 35.4 0.58 0.53 0.01 -0.11 -0.15
Latvia 35.4 -0.12 -0.21 0.00 0.00 -0.10
Norway 32.3 -0.23 -0.15 0.00 0.00 0.08
Iceland 31.9 -0.25 -0.12 0.00 -0.13 0.00
Lithuania 31.1 -5.24 6.46 12.30 -22.02 1.98
Estonia 30.9 0.99 1.00 0.00 0.00 0.01
Denmark 30.7 0.11 0.00 0.00 0.00 -0.10
Japan 29.7 0.05 0.01 -0.01 0.04 -0.01
Netherlands 29.3 -0.79 -0.98 -0.03 0.34 0.13
Luxembourg 26.7 0.32 0.36 0.02 -0.15 -0.10
United Kingdom 26.6 -0.03 -0.14 0.02 0.02 -0.07
Australia 25.8 -1.11 -1.11 0.00 0.00 0.00
Ireland 25.5 0.52 0.32 0.00 0.08 -0.13
Poland 25.1 -2.11 -0.01 0.00 0.01 2.10
United States 24.1 0.17 0.24 0.01 -0.07 0.00
Canada 23.9 -0.34 0.06 0.17 -0.53 0.03
Korea 20.7 -0.08 0.22 0.14 0.00 0.44
Mexico 18.6 0.36 0.39 0.00 -0.04 0.00
New Zealand 17.3 0.23 0.23 0.00 0.00 0.00
Israel 16.3 0.14 0.11 -0.03 0.03 -0.03
Switzerland 16.1 0.09 0.06 0.00 0.00 -0.03
Chile 6.7 0.00 0.00 0.00 0.00 0.00
Unweighted average          
OECD Average 30.5 -0.27 0.14 0.32 -0.64 0.09
Notes: Two-earner married couple, one at 100% and the other at 67% of the average wage, In OECD countries, most of the increases in
with 2 children.
1. Countries ranked by decreasing total tax wedge. income tax or social security contributions
2. Due to rounding, the changes in tax wedge in column (2) may differ by one hundredth were augmented or alleviated by changes in
of a percentage point from the sum of columns (3)-(6).
3. Includes payroll taxes where applicable.
cash benefits.
Source: Data from Taxing Wages 2020 (OECD), www.oecd.org/ctp/tax-policy/taxing-wages.htm.
 OECD – TAXING WAGES 2020 . 11

FIGURE 2. INCOME TAX PLUS EMPLOYEE AND EMPLOYER SOCIAL SECURITY CONTRIBUTIONS LESS CASH
BENEFITS, 2019
For two-earner couples with two children, as % of labour costs

55
Income tax Employee SSC Employer SSC Cash benefits Total tax wedge
50

45

40

35

30

25

20

15

10

-5

-10
Ge ium

y
Fr ly
Sw nce
Gr en
Au ce
va Tu ia
ep ey
Fin blic

rt n
ec un l
ep ry
Slo blic

Ne Ja e
L e n
ite m ds
ng g
Au dom

Ire lia

Ca tes

Ko a
Ne Me a
Ze co

Sw Isr d

ile
La ia
No tvia
Ice ay

Es nia
OE De nia
Av ark

er l
d
d

hu d

Un Po d
d nd
Cz H uga

itz ae
an

d
re
ag
th pa
Po pai

Ki ur

n
Ita

str

lan
lan

Lit lan

lan
h R ga
ee

Un uxe rlan
rw

a
k R rk

Ch
w xi
na
ed

ala
a
ve

a
o
CD nm

ite la
d bo

str
u

u
a
rm

er
lg

St
t
S
Be

30.80 30.70 30.60 30.50 30.50 30.40 30.60 30.90 30.10 30.30 30.70 29.90 29.80 31.50 3
Slo

32.60 32.20 32.30 33.80 33.90 33.90 34.00 34.10 32.80 32.40 32.60 32.50 32.10 31.40 3
Note: Two-earner married couple, one at 100% 40.40 43.60
and the other at 67%42.50 42.20
of the average wage,42.80 42.80Includes
with 2 children. 42.70 42.20
payroll 38.70
taxes where 36.70
applicable. 37.00 37.00 37.10 37.40 3
22.90 22.90 22.90 22.40 22.20 22.20 22.10 22.40 21.90 21.90
Source: Data from Taxing Wages 2020 (OECD), www.oecd.org/ctp/tax-policy/taxing-wages.htm. 22.10 22.30 22.10 22.20 2
50.10 49.10 47.80 48.20 48.40 48.10 47.80 45.30 44.80 43.20 42.80 42.80 42.90 43.00 4
(42.5%). At the other extreme, the 38.60
lowest38.90
tax wedge39.10 38.60 38.80 39.00 39.10 39.00 38.00 38.30 39.70 40.00 40.60 40.70 4
46.30
was observed in Chile (6.7%). The other countries 46.20 with46.20 46.30 45.60 45.30 43.30 42.90 42.20
46.10 42.50 42.60 42.50 42.40 4
tax wedges of less than 20% were41.90 42.50 (16.1
Switzerland
For two-earner
42.10%),42.50 42.20 38.00 38.30 38.40 38.80 37.70 37.90 38.80 39.60 41.10 4
Israel (16.3 %), New Zealand (17.3%) 37.30 and36.40
Mexico (18.6%).
37.60 couples, the
37.40 37.40 36.80 37.50 37.30 36.90 36.50 37.10 38.00 37.60 41.40 4
38.20 38.00 38.00 38.20 38.40 38.70 39.00 38.20 34.70 34.10 34.20 34.30 35.50 35.60 3
Figure 2 shows the average tax wedge 38.60 and 39.20 OECD average
its 38.60 38.10 38.10 37.20 37.40 37.50 37.60 37.30 37.30 37.60 37.40 37.40 3
components as a percentage of labour 19.40 19.40for19.40
costs the 19.50 19.70 20.00 20.40 21.10 20.50 18.10 17.00 15.90 16.40 16.90 1
two-earner couple for 2019. On average across OECD tax wedge as a
40.00 37.40 37.40 37.20 38.80 38.90 38.40 38.70 39.20 38.00 38.10 38.00 38.60 40.60 3
countries income tax represented 10.7% of the labour
12.70 13.30 15.90 16.80 15.30 14.70 15.10 15.90 15.10 15.30 16.00 18.70 19.00 19.30 1
costs and the sum of the employees’ and employers’ percentage of
35.80 34.50 31.60 32.10 32.50 33.40 34.00 35.00 34.70 34.90 35.30 37.30 37.10 38.20 3
social security contributions represented 22.1% of this.
The OECD tax wedge is net of cash benefits, which labour costs for
45.70 45.70 45.20 44.30 44.80 45.40 44.40 43.00 41.60 40.70 40.60 40.70 40.90 41.10 4
represented 2.3% of labour costs in 2019.
43.20 43.00 43.10 42.70 42.80 43.10 42.70 42.20 41.30 40.90 44.00 44.20 44.30 43.70 4
the household
16.40 16.50 16.10 16.40 17.00 17.30 18.20 19.70 20.00 19.50 20.10 20.50 21.00 21.50 2
29.80 in29.90 30.20 27.40 27.30 27.70 28.80 29.30 29.50 29.20 30.20 30.80 31.30 31.60 3
The cash benefits that are considered
Wages publication are those universally 47.10 46.60
the Taxing
paid to46.60
workers
was 30.5% in
46.00 46.30 45.90 46.10 46.40 46.60 46.80 47.20 47.60 47.70 47.80 4
in respect of dependent children29.60
six to eleven inclusive. In-work benefits
between 30.70
35.30 31.70
the ages
that are
2019.
30.80of 27.70 26.40 25.50 24.30 24.90 22.90 21.30
paid 30.40 31.00 30.30 29.10 28.10 28.20 29.80
29.50
20.70
30.90
20.80
32.60
20.40
33.00
20.40
33.90
2
3
to workers regardless of their family 28.80situation
29.30 are 30.90 also31.50 31.90 32.10 31.80 30.50 30.90 30.50 33.40 34.10 33.80 34.10 3
included in the calculations. For 54.70 the observed two-
55.80 53.70 50.80 51.70 51.10 51.90 54.50 54.10 53.10 46.60 49.50 49.50 49.00 4
earner couple, Denmark paid an38.70 income-tested
38.10 39.10 cash 39.70 41.10 41.20 42.20 42.00 41.40 41.20 40.00 42.90 42.80 41.10 4
benefit (the Green Check) that also benefited
52.90 51.90 childless
52.50 53.20 52.20 52.10 52.30 51.80 51.30 50.80 49.00 49.70 49.70 49.30 4
single workers.
50.40 50.10 49.90 50.10 50.30 50.50 49.70 49.70 49.80 49.80 49.90 50.00 50.10 48.80 4
47.50 46.10 45.70 44.80 44.20 44.40 44.00 43.90 43.80 42.50 42.30 42.30 42.50 43.10 4
41.30 41.00 42.10 42.30 41.50 39.90 39.00 39.00 38.40 39.20 40.10 40.30 40.40 39.90 4
41.50 40.60 40.00 40.00 38.60 38.50 38.60 38.80 38.60 37.20 35.90 36.10 36.20 35.80 3
 12 . OECD – TAXING WAGES 2020

Compared to 2018, the OECD average tax wedge of the
two-earner couple decreased by 0.27 percentage points
in 2019, as indicated in Table 3 (column 2), although
it increased for 17 out of the 36 OECD countries and
decreased in 18 countries. The tax wedge for the two-
earner couple remained unchanged for Chile. There were
no increases of more than one percentage point. For six
of those countries with an overall increase, the changes
were less than 0.20 percentage points (Denmark, Israel,
Japan, Spain, Switzerland and the United States).
In contrast, decreases of more than one percentage
point were observed in four countries: Lithuania (5.24
percentage points), Poland (2.11 percentage points),
Austria (2.00 percentage points) and Australia (1.11
percentage points). In Australia, both spouses had their
income tax liabilities reduced due to the introduction
of the Low and Middle Income Tax Offset in 2019. In
Austria, the decrease resulted from the introduction of
a tax credit for dependent children and in Poland, it is
due to an increase in the cash benefit for dependent
children. For Lithuania, the decrease in the tax wedge
was due to a reform of labour taxation that is described
in the section on the tax wedge above.
In most countries with an increasing tax wedge, the
change was mainly driven by higher income taxes. They
accounted for the whole increase in the tax wedge,
before the impact of cash benefits is taken into account,
in 14 countries: the Czech Republic, Estonia, Ireland,
Israel, Italy, Luxembourg, Mexico, New Zealand, Portugal,
the Slovak Republic, Slovenia, Spain, Switzerland and
the United States. In contrast, increasing employer social
security contributions were the main factor in Japan
and Turkey. However, most of those increases in income
tax or social security contributions were augmented or
alleviated by changes in cash benefits. In Denmark, the
decrease in cash benefits as a percentage of labour costs
represented the bulk of the increase in the tax wedge.

0.40 30.60 30.90 30.10 30.30 30.70 29.90 29.80 31.50 31.60 31.40 31.60 31.80 29.60 29.80
3.90 34.00 34.10 32.80 32.40 32.60 32.50 32.10 31.40 31.00 30.80 30.90 31.00
In Australia, both
30.90 30.90
2.80 42.70 42.20 38.70 36.70 37.00 37.00 37.10 37.40 38.10 38.20 38.20 39.00 39.20 39.10
2.20 22.10 22.40 21.90 21.90 22.10 22.30 22.10 22.20 21.90 21.90 22.10 22.10 spouses had their
22.20 22.30
8.10 47.80 45.30 44.80 43.20 42.80 42.80 42.90 43.00 42.50 42.60 42.80 42.90 43.00 42.70
9.00 39.10 39.00 38.00 38.30 39.70 40.00 40.60 40.70 40.70 39.40 39.40 39.30 income tax liabilities
39.40 39.50
5.60
8.00
45.30
38.30
43.30
38.40
42.90
38.80
42.20
37.70
42.50
37.90
42.60
38.80
42.50
39.60
42.40
41.10
42.50
41.30
42.60
41.40
42.70
41.50
42.90
41.70
reduced due to the
43.20
41.80
43.60
41.90
6.80 37.50 37.30 36.90 36.50 37.10 38.00 37.60 41.40 41.10 42.10 41.50 41.40 introduction of the
40.80 41.00
8.70 39.00 38.20 34.70 34.10 34.20 34.30 35.50 35.60 35.70 35.70 35.60 35.70 35.80 35.60
7.20 37.40 37.50 37.60 37.30 37.30 37.60 37.40 37.40 36.90 36.80 36.30 36.00 Low and Middle
35.80 35.70
0.00
8.90
20.40
38.40
21.10
38.70
20.50
39.20
18.10
38.00
17.00
38.10
15.90
38.00
16.40
38.60
16.90
40.60
17.20
39.00
17.60
37.00
17.90
37.20
18.10
37.40
Income Tax Offset in
18.40
37.80
18.80
37.30
4.70 15.10 15.90 15.10 15.30 16.00 18.70 19.00 19.30 19.50 19.80 20.10 20.40 2019.
19.70 20.10
3.40 34.00 35.00 34.70 34.90 35.30 37.30 37.10 38.20 38.60 39.50 39.60 37.80 38.20 38.40
5.40 44.40 43.00 41.60 40.70 40.60 40.70 40.90 41.10 41.00 41.20 41.30 41.10 40.70 37.20
3.10 42.70 42.20 41.30 40.90 44.00 44.20 44.30 43.70 43.00 42.50 42.50 42.70 42.60 42.60
7.30 18.20 19.70 20.00 19.50 20.10 20.50 21.00 21.50 21.70 22.00 22.30 22.50 23.00 23.30
7.70 28.80 29.30 29.50 29.20 30.20 30.80 31.30 31.60 32.00 32.30 32.40 32.50 32.70 32.70
5.90 46.10 46.40 46.60 46.80 47.20 47.60 47.70 47.80 47.80 47.80 47.80 47.70 47.80 48.00
5.50 24.30 24.90 22.90 21.30 20.70 20.80 20.40 20.40 21.10 21.80 22.30 22.10 22.50 22.70
0.30 29.10 28.10 28.20 29.80 30.90 32.60 33.00 33.90 34.00 33.20 32.70 32.60 32.90 33.20
2.10 31.80 30.50 30.90 30.50 33.40 34.10 33.80 34.10 33.90 34.30 33.90 33.10 33.40 33.10
1.10 51.90 54.50 54.10 53.10 46.60 49.50 49.50 49.00 49.00 49.00 48.20 46.20 45.00 44.60
1.20 42.20 42.00 41.40 41.20 40.00 42.90 42.80 41.10 40.20 38.90 40.30 40.60 41.00 40.80
2.10 52.30 51.80 51.30 50.80 49.00 49.70 49.70 49.30 49.30 49.40 49.50 49.60 49.50 49.40
0.50 49.70 49.70 49.80 49.80 49.90 50.00 50.10 48.80 48.40 48.00 47.60 47.10 47.00 46.70
4.40 44.00 43.90 43.80 42.50 42.30 42.30 42.50 43.10 43.60 43.50 44.10 43.00 42.40 41.90
9.90 39.00 39.00 38.40 39.20 40.10 40.30 40.40 39.90 40.00 39.00 39.00 39.00 36.20 37.20
8.50 38.60 38.80 38.60 37.20 35.90 36.10 36.20 35.80 35.60 35.90 35.90 35.80 35.40 35.40
3.70 42.50 42.90 43.40 42.00 42.10 42.60 42.50 42.40 42.60 42.80 43.00 43.40 43.80 43.90
7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00
 OECD – TAXING WAGES 2020 . 13

FIGURE 3. OECD TAX WEDGES SINCE 2000

For
40 three household types, as % of labour costs

38

36

34

32

30

28

26

24

22

20
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Single person at 100% of average earnings, no child

Two-earner married couple, one at 100% of average earnings and the other at 67 %, 2 children
One-earner married couple at 100% of average earnings, 2 children

Source: Data from Taxing Wages 2020 (OECD), www.oecd.org/ctp/tax-policy/taxing-wages.htm.

OECD
30.80 tax wedge
30.70 trends
30.60 30.50since 200030.40 30.60 30.90 30.10
30.50 30.30 30.70 29.90 29.80 31.50 31.60 31.40 31.60 31.80 29.6
The OECD tax wedge for the single average worker, the
32.60 32.20 32.30 33.80 33.90 33.90 34.00 34.10 32.80 32.40 32.60 32.50 32.10 31.40 31.00 30.80 30.90 31.00 30.9
one-earner married couple on the average wage with
40.40 43.60 42.50 42.20 42.80 42.80 42.70 42.20 38.70 36.70 37.00 37.00 37.10 37.40 38.10 38.20 38.20 39.00 39.2
two children and the two-earner married couple with
22.90 22.90 22.90 22.40 22.20 22.20 22.10 22.40 21.90 21.90 22.10 22.30 22.10 22.20 21.90 21.90 22.10 22.10 22.2
total wage earnings at 167% of the average wage and
50.10 49.10 47.80 48.20 48.40 48.10 47.80 45.30 44.80 43.20 42.80 42.80 42.90 43.00 42.50 42.60 42.80 42.90 43.0
two children have declined since 2000 (see Figure 3).
38.60
The tax 38.90
burden39.10 38.60
trend is 38.80
similar 39.00
for the three39.10 39.00 38.00
household 38.30 39.70 40.00 40.60 40.70 40.70 39.40 39.40 39.30 39.4
46.30 46.20 46.10 46.20 46.30 45.60 45.30
types, with the lowest tax wedge seen in 2009 for each 43.30of 42.90 42.20 42.50 42.60 42.50 42.40 42.50 42.60 42.70 42.90 43.2
41.90cases.
these 42.50For42.10 42.50 single
the average 42.20 worker,
38.00 the
38.30 38.40 38.80
tax wedge 37.70 37.90 38.80 39.60 41.10 41.30 41.40 41.50 41.70 41.8
37.30 36.40 37.60 37.40 37.40 36.80 37.50
decreased from 37.4% in 2000 to 36.0% in 2019, after 37.30 36.90 36.50 37.10 38.00 37.60 41.40 41.10 42.10 41.50 41.40 40.8
38.20 reached
having 38.00 38.00 38.20
its lowest 38.40
level 38.70
in 2009, 39.00 For
at 35.5%. 38.20
the 34.70 34.10 34.20 34.30 35.50 35.60 35.70 35.70 35.60 35.70 35.8
one-earner
38.60 39.20 married
38.60couple
38.10on38.10
the average
37.20 wage
37.40with two 37.60
37.50 37.30 37.30 37.60 37.40 37.40 36.90 36.80 36.30 36.00 35.8
children, the tax wedge declined between 2000
19.40 19.40 19.40 19.50 19.70 20.00 20.40 21.10 20.50 and 2019, 18.10 17.00 15.90 16.40 16.90 17.20 17.60 17.90 18.10 18.4
from
40.0028.5% to 26.4%
37.40 37.40 after having
37.20 38.80reached
38.90 its38.40
lowest level 39.20
38.70 38.00 38.10 38.00 38.60 40.60 39.00 37.00 37.20 37.40 37.8
of12.70
25.7%13.30
in 2009. Finally, for the two-earner married
15.90 16.80 15.30 14.70 15.10 15.90 15.10 15.30 16.00 18.70 19.00 19.30 19.50 19.80 20.10 20.40 19.7
couple on 167% of the average wage with two children,
35.80 34.50 31.60 32.10 32.50 33.40 34.00 35.00 34.70 34.90 35.30 37.30 37.10 38.20 38.60 39.50 39.60 37.80 38.2
the tax wedge changed from 32.8% in 2000 to 30.5% in
45.70 45.70 45.20 44.30 44.80 45.40 44.40 43.00 41.60 40.70 40.60 40.70 40.90 41.10 41.00 41.20 41.30 41.10 40.7
2019, with the lowest rate being 30.4% in 2009.
43.20 43.00 43.10 42.70 42.80 43.10 42.70 42.20 41.30 40.90 44.00 44.20 44.30 43.70 43.00 42.50 42.50 42.70 42.6
16.40 16.50 16.10 16.40 17.00 17.30 18.20 19.70 20.00 19.50 20.10 20.50 21.00 21.50 21.70 22.00 22.30 22.50 23.0
Taxing Wages 2020 presents OECD tax wedge trends
29.80 29.90 30.20 27.40 27.30 27.70 28.80 29.30 29.50
up to 2019. Labour taxes continued to decrease in
29.20 30.20 30.80 31.30 31.60 32.00 32.30 32.40 32.50 32.7
47.10countries
OECD 46.60 46.60
for the46.00 46.30 45.90year
sixth consecutive 46.10 46.40 46.60
in the 46.80 47.20 47.60 47.70 47.80 47.80 47.80 47.80 47.70 47.8
29.60 30.70 30.80 27.70 26.40 25.50 24.30 24.90 22.90 21.30 20.70 20.80 20.40 20.40 21.10 21.80 22.30 22.10 22.5
run-up to 2020. The emergency measures applied in
35.30to address
2020 31.70 29.50 30.40 31.00
the COVID-19 30.30 impact
pandemic’s 29.10 on 28.10 28.20
For the average single worker, the tax
29.80 30.90 32.60 33.00 33.90 34.00 33.20 32.70 32.60 32.9
28.80 29.30
business 30.90 31.50
and household cash31.90 32.10
flows, in some31.80 30.50 30.90
countries wedge decreased from 37.4% in 2000
30.50 33.40 34.10 33.80 34.10 33.90 34.30 33.90 33.10 33.4
54.70
via 55.80 53.70
concessions related50.80 51.70
to social 51.10contributions
security 51.90 54.50 54.10 53.10 46.60 49.50 49.50 49.00 49.00 49.00 48.20 46.20 45.0
(SSCs),
38.70 may
38.10strengthen the observed
39.10 39.70 trend. 42.20 42.00 41.40
41.10 41.20 to 36.0% in 2019...
41.20 40.00 42.90 42.80 41.10 40.20 38.90 40.30 40.60 41.0
52.90 51.90 52.50 53.20 52.20 52.10 52.30 51.80 51.30 50.80 49.00 49.70 49.70 49.30 49.30 49.40 49.50 49.60 49.5
50.40 50.10 49.90 50.10 50.30 50.50 49.70 49.70 49.80 49.80 49.90 50.00 50.10 48.80 48.40 48.00 47.60 47.10 47.0
47.50 46.10 45.70 44.80 44.20 44.40 44.00 43.90 43.80 42.50 42.30 42.30 42.50 43.10 43.60 43.50 44.10 43.00 42.4
14 . OECD – TAXING WAGES 2020

The net personal average tax rate

in OECD countries
Taxing Wages 2020 presents a second main indicator,
which measures income tax plus employee social
security contributions less cash benefits as a percentage
of gross wage earnings; i.e. the net personal average tax
rate. On average, the net personal average tax rate for a
single worker at average earnings in OECD countries was
25.9% in 2019 (see Figure 4). In other words, disposable
or after tax income2 represented 74.1% of the gross wage
earnings for the single average worker.
Belgium and Germany had the highest net personal
average tax rate at 39.3% of gross wages for both
countries, with Denmark and Lithuania being the only
other countries with rates of more than 35%. Chile and
Mexico had the lowest net personal average tax rates at
7.0% and 10.8% of gross average earnings respectively.
Taxing Wages 2020 also shows the net personal average
tax rates for other household types with or without
children.

2. 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). In addition, non-tax compulsory
payments that affect households’ disposable incomes are not included in the calculations presented in the publication, but further analyses on those payments are
presented in the online report: www.oecd.org/tax/tax-policy/non-tax-compuslory-payments.pdf.

Box 3: Methodology
The analysis in Taxing Wages 2020 focuses on full-time private
sector 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).
The term tax includes the personal income tax, social security
contributions 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 – are not taken into account. The benefits included are those
paid by general government as cash transfers, usually in respect of
dependent children.
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 20189are those for the tax year 2019-20.
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 2019 in respect of
Australia has been defined to mean its tax year 2018-2019.
For information on the tax burden on other household
types, please see Taxing Wages 2020. A full description of the
methodology is set at in the Taxing Wages 2020 Annex.
 OECD – TAXING WAGES 2020 . 15

FIGURE 4. INCOME TAX AND EMPLOYEE SOCIAL SECURITY CONTRIBUTIONS LESS CASH BENEFITS, 2019
For a single worker on average wage, as % of gross wage earnings

Germany
Belgium
Lithuania
Denmark
Slovenia
Hungary
Austria
Italy
Finland
Luxembourg
Netherlands
Iceland
Latvia
Turkey
France
Norway
Portugal
Greece
OECD Average
Ireland
Poland
Czech Republic
Sweden
Slovak Republic
United States
Australia
United Kingdom
Canada
Japan
Spain
New Zealand
Israel
Switzerland
Estonia
Korea
Income tax
Mexico
Social security contributions
Chile Cash benefits

-5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Source: Data from Taxing Wages 2020 (OECD), www.oecd.org/ctp/tax-policy/taxing-wages.htm.

 2020

rs personal income
d payroll taxes
d benefits are
he results also enable
t position of single
arginal effective
nd household
dren). The average
ecurity contributions,
of gross earnings

e of Employment

title OECD Tax

Taxing Wages
2018-2019

SPECIAL FEATURE: HOW TAX

SYSTEMS INFLUENCE CHOICE
OF EMPLOYMENT FORM
Taxing Wages

stical databases.
2018-2019

ISBN 978-92-64-66575-0

9HSTCQE*ggfhfa+ 2020

OECD (2020), Taxing Wages 2020, OECD Publishing,

Paris, https://doi.org/10.1787/047072cd-en.

FURTHER READING
OECD, Non-tax compulsory payments (NTCPs) as an Paturot, D., K. Mellbye and B. Brys (2013), “Average
additional burden on labour income in 2018. Personal Income Tax Rate and Tax Wedge Progression
https://oe.cd/taxing-wages-associated-materials in OECD Countries”, OECD Taxation Working Papers,
No. 15, OECD Publishing, Paris.
OECD, Taxing Wages associated paper: selected partner http://dx.doi.org/10.1787/5k4c0vhzsq8v-en
economies (Brazil, China, India, Indonesia and South
Africa), 2017-2018. OTHER STATISTICAL SOURCES
https://oe.cd/taxing-wages-associated-materials
OECD Tax Database,
OECD/IDB/CIAT (2016), Taxing Wages in Latin America and http://oe.cd/tax-database
the Caribbean 2016, OECD Publishing, Paris.
http://dx.doi.org/10.1787/9789264262607-en

Paturot, D. (2018), “Taxing wages: How taxes affect the

disposable income of workers and wage costs of
employers in OECD countries”, OECD Observer,
https://dx.doi.org/10.1787/dc903af5-en.

© OECD 2020

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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.
For more information:
The statistical data for Israel are supplied by and under the
responsibility of the relevant Israeli authorities. The use of such data oecd.taxingwages@oecd.org
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. http://oe.cd/TaxingWages

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