Taxing Wages

Foreword......Page 4
Table of Contents......Page 5
Part I. Basic Methodology and Main Results......Page 11
2. Review of results for 2004......Page 12
Table I.1. Comparison of wage levels......Page 13
Table I.2. Income tax plus employee social security contributions (as % of gross wage), 2004......Page 14
Chart I.1. Percentage of gross wage earnings paid in income tax and employees social security contributions, 2004......Page 15
Chart I.2. Income tax plus employee contributions less cash benefits, by family-type (as % of gross wage), 2004......Page 17
Table I.3. Income tax plus employees’ and employers’ social security contributions (as % of labour costs), 2004......Page 18
3. Results for 2003......Page 23
4. Historical trends......Page 25
Evolution of the tax burden, 1996 to 2004......Page 26
Historical data, 1979 to 2004......Page 30
About the present definition of the average worker......Page 33
The move to base the definition of the average worker on a broadened industry coverage......Page 35
Illustrations of the effects of a broadened industry coverage for the average worker......Page 36
Table I.5. Potential effects on earnings levels of a broadened definition of the average worker......Page 37
Table I.6. Illustrations of the potential impact of a broadened definition of the average worker on average and marginal tax wedges......Page 39
Table I.7. Illustrations of the impact of a 10 per cent increase in the earnings measure on average and marginal tax wedges......Page 40
Conclusions......Page 41
Notes......Page 42
Part II. Comparative Tables and Charts......Page 43
Table II.1. Income tax, by family-type and wage level (as % of gross wage), 2004......Page 44
Table II.2. Employee contributions, by family-type and wage level (as % of gross wage), 2004......Page 45
Table II.3. Income tax plus employee contributions, by family-type and wage level (as % of gross wage), 2004......Page 46
Table II.4. In come tax plus employee contributions less cash benefits, by family-type and wage level (as % of gross wage), 2004......Page 47
Table II.5. Income tax plus employee and employer contributions less cash benefits, by family-type and wage level (as % of labour costs), 2004......Page 48
Table II.6. Marginal rate of income tax plus employee contributions less cash benefits, by family-type and wage level (as % of gross wage), 2004......Page 49
Table II.7. Marginal rate of income tax plus employee and employer contributions less cash benefits, by family-type and wage level (as % of labour costs), 2004......Page 50
Table II.8. Increase in net income after 1% increase in gross wage, by family-type and wage level (%), 2004......Page 51
Table II.9. Increase in net income after 1% increase in labour costs, by family-type and wage level (%), 2004......Page 52
Table II.10. Annual gross wage and net income, by family-type and wage level (in US dollars), 2004......Page 53
Table II.11. Annual labour costs and net income, by family-type and wage level (in US dollars), 2004......Page 55
Table II.12. Income tax, by family-type and wage level (as % of gross wage), 2003......Page 57
Table II.13. Employee contributions, by family-type and wage level (as % of gross wage), 2003......Page 58
Table II.14. Income tax plus employee contributions, by family-type and wage level (as % of gross wage), 2003......Page 59
Table II.15. Income tax plus employee contributions less cash benefits, by family-type and wage level (as % of gross wage), 2003......Page 60
Table II.16. Income tax plus employee and employer contributions, less cash benefits, by family-type and wage level (as % of labour costs), 2003......Page 61
Table II.17. Marginal rate of income tax plus employee contributions less cash benefits, by family- type and wage level (as % of gross wage), 2003......Page 62
Table II.18. Marginal rate of income tax plus employee and employer contributions less cash benefits, by family-type and wage level (as % of labour costs), 2003......Page 63
Table II.19. Increase in net income after 1% increase in gross wage, by family-type and wage level (%), 2003......Page 64
Table II.20. Increase in net income after 1% increase in labour costs, by family-type and wage level (%), 2003......Page 65
Table II.21. Annual gross wage and net income, by family-type and wage level (in US dollars), 2003......Page 66
Table II.22. Annual labour costs and net income, by family-type and wage level (in US dollars), 2003......Page 68
Chart II.1. Income tax, by family-type (as % of gross wage), 2004......Page 70
Chart II.2. Employee contributions, by family-type (as % of gross wage), 2004......Page 71
Chart II.3. Income tax plus employee contributions less cash benefits, by family-type (as % of gross wage), 2004......Page 72
Chart II.4. Income tax plus employee and employer contributions less cash benefits, by family-type (as % of labour costs), 2004......Page 73
Chart II.5. Marginal rate of income tax plus employee contributions less cash benefits, by family-type (as % of gross wage), 2004......Page 74
Chart II.6. Marginal rate of income tax plus employee and employer contributions less cash benefits, by family-type (as % of labour costs), 2004......Page 75
Part III. Historical Trends 1979-2004......Page 77
Table III.1a. Evolution of the tax burden, 1996-2004. Single persons without children at 67% of average earnings. Income tax as a % of gross earnings......Page 78
Table III.1b. Evolution of the tax burden, 1996-2004. Single persons without children at 67% of average earnings. Income tax plus employee contributions less cash benefits as a % of gross earnings......Page 79
Table III.1c. Evolution of the tax burden, 1996-2004. Single persons without children at 67% of average earnings. Income tax plus employee and employer contributions less cash benefits as a % of gross earnings......Page 80
Table III.2a. Evolution of the tax burden, 1996-2004. Single persons without children at 100% of average earnings…......Page 81
Table III.2b. Evolution of the tax burden, 1996-2004. Single persons without children at 100% of average earnings…......Page 82
Table III.2c. Evolution of the tax burden, 1996-2004. Single persons without children at 100% of average earnings…......Page 83
Table III.3a. Evolution of the tax burden, 1996-2004. Single persons without children at 167% of average earnings…......Page 84
Table III.3b. Evolution of the tax burden, 1996-2004. Single persons without children at 167% of average earnings…......Page 85
Table III.3c. Evolution of the tax burden, 1996-2004. Single persons without children at 167% of average earnings…......Page 86
Table III.4a. Evolution of the tax burden, 1996-2004. Single parent with two children at 67% of average earnings…......Page 87
Table III.4b. Evolution of the tax burden, 1996-2004. Single parent with two children at 67% of average earnings…......Page 88
Table III.4c. Evolution of the tax burden, 1996-2004. Single parent with two children at 67% of average earnings…......Page 89
Table III.5a. Evolution of the tax burden, 1996-2004. One-earner married couple with two children at 100% of average earnings…......Page 90
Table III.5b. Evolution of the tax burden, 1996-2004. One-earner married couple with two children at 100% of average earnings…......Page 91
Table III.5c. Evolution of the tax burden, 1996-2004. One-earner married couple with two children at 100% of average earnings…......Page 92
Table III.6a. Evolution of the tax burden, 1996-2004. Income tax as a % of gross earnings. Two earner married couple, one at 100% of average earnings and the other at 33%…......Page 93
Table III.6b. Evolution of the tax burden, 1996-2004. Two earner married couple, one at 100% of average earnings and the other at 33%…......Page 94
Table III.6c. Evolution of the tax burden, 1996-2004. Two earner married couple, one at 100% of average earnings and the other at 33%…......Page 95
Table III.7a. Evolution of the tax burden, 1996-2004. Two-earner married couple, one at 100% of average earnings and the other at 67%…......Page 96
Table III.7b. Evolution of the tax burden, 1996-2004. Two-earner married couple, one at 100% of average earnings and the other at 67%…......Page 97
Table III.7c. Evolution of the tax burden, 1996-2004. Two-earner married couple, one at 100% of average earnings and the other at 67%…......Page 98
Table III.8a. Evolution of the tax burden, 1996-2004. Two-earner married couple, one at 100% average earnings and the other at 33%, with no children…......Page 99
Table III.8b. Evolution of the tax burden, 1996-2004. Two-earner married couple, one at 100% average earnings and the other at 33%, with no children…......Page 100
Table III.8c. Evolution of the tax burden, 1996-2004. Two-earner married couple, one at 100% average earnings and the other at 33%, with no children…......Page 101
Table III.9. Income tax (in % of gross wage), 1979-2004, single persons without children......Page 102
Table III.10. Income tax plus employee contributions (in % of gross wage), 1979-2004, single persons without children......Page 103
Table III.11. Income tax plus employee and employer contributions (as % of labour costs), 1979-2004, single persons without children......Page 104
Table III.12. Income tax (as % of gross wage), 1979-2004, one-earner family with two children......Page 105
Table III.13. Income tax plus employee contributions less cash benefits (as % of gross wage), 1979-2004, one-earner family with two children......Page 106
Table III.14. Income tax plus employee and employer contributions less cash benefits (as % of labour costs), 1979-2004, one-earner family with two children......Page 107
Part IV. Country Details 2004......Page 109
Australia – 2004-2005 Income Tax Year......Page 111
1.1. Federal government income tax......Page 114
2.1. Employees’ contributions......Page 116
4.2. Transfers related to dependent children......Page 117
5.2. Cash transfers related to dependent children......Page 118
6.1. Identification of an average production worker......Page 119
Notes......Page 120
2004 Parameter values......Page 121
2004 Tax equations......Page 122
Austria......Page 125
1.1. Central government income tax......Page 128
2.2. Payroll taxes......Page 130
4. Main changes in tax/benefit systems since 1994......Page 131
5.1. Calculation of earnings data......Page 132
2004 Parameter values......Page 133
2004 Tax equations......Page 134
Belgium......Page 137
1.1. Impôt sur le revenu perçu par l’administration centrale......Page 140
2.1. Taux et plafond......Page 142
2.2. Déduction selon la situation de famille ou le sexe......Page 143
4. Principales modifications apportées au système fiscal......Page 144
2004 Parameter values......Page 145
2004 Tax equations......Page 146
Canada......Page 147
1.1. Central/federal government income taxes......Page 150
1.2. State and local income taxes......Page 152
2004 Provincial income tax rates......Page 153
The Ontario health premium......Page 155
2.2. Employers’ contributions......Page 156
4. Main changes in the tax/benefit system since 1999......Page 157
Notes......Page 158
2004 Parameter values......Page 159
2004 Tax equations......Page 161
Czech Republic......Page 163
1.1. Central government income taxes......Page 166
3.1. Transfers related to marital status......Page 167
3.3. Additional transfers......Page 168
5.2. Employers’ contributions to private pension, health and related schemes......Page 169
2004 Parameter values......Page 170
2004 Tax equations......Page 171
Denmark......Page 173
1.1. Tax allowances and tax credits......Page 176
1.2. Central government income taxes......Page 177
2.1. Employees’ contributions......Page 178
4. Main changes in tax/benefit systems......Page 179
5.2. Employers’ contribution to private schemes......Page 180
2004 Parameter values......Page 181
2004 Tax equations......Page 182
Finland......Page 183
1.1. Central government income taxes......Page 186
3.1. Amount for marriage......Page 187
5.2. Employer contributions to private pension and health schemes......Page 188
2004 Parameter values......Page 189
2004 Tax equations......Page 190
France......Page 191
1.1. Impôt sur les revenus 2003 perçus par l’administration centrale......Page 194
1.4. Contribution au remboursement de la dette sociale (CRDS)......Page 196
2.2. Cotisations patronales (au 01/01/2004)......Page 197
3.1. Principales prestations familiales (au titre des enfants à charge)......Page 198
5. Rubrique pour mémoire......Page 199
2004 Parameter values......Page 200
2004 Tax equations......Page 202
Germany......Page 205
1.1. Central/federal government income taxes......Page 208
1.2. State and local income taxes......Page 209
2.2. Employers’ contributions......Page 210
5.2. Employer’s contributions to private pension, etc. schemes......Page 211
2004 Parameter values......Page 212
2004 Tax equations......Page 213
Greece......Page 215
1.1. Central government income tax......Page 218
2. Compulsory social security contributions to schemes operate within the government sector......Page 219
5.1. Identification of an APW and method of calculations used......Page 220
5.3. Effect on taxes and subsidies when the wife is gainfully employed......Page 221
2004 Parameter values......Page 222
2004 Tax equations......Page 223
Hungary......Page 225
1.1. Central/federal government income taxes......Page 228
2.1. Employees’ contributions......Page 229
3.2. Transfers for dependent children......Page 230
5.2. Employer contributions to private social security arrangements......Page 231
2004 Parameter values......Page 232
2004 Tax equations......Page 233
Iceland......Page 235
1.1. Central government income taxes......Page 238
3.1. Marital status related transfers......Page 239
4.3. A special tax on higher income......Page 240
5.2. Employer contributions to private pension funds, health and related schemes......Page 241
2004 Parameter values......Page 242
2004 Tax equations......Page 243
Ireland......Page 245
1.1. Central/federal government income taxes......Page 248
3.2. Transfers for dependent children......Page 250
5.2. Employer contributions to private social security arrangements......Page 251
2004 Parameter values......Page 252
2004 Tax equations......Page 253
Italy......Page 255
Total tax credit allowed to parent with dependent children......Page 258
1.2. State and local taxes......Page 260
4. Main changes......Page 261
5.2. Contributions by employers to private pension, health, etc. schemes......Page 262
2004 Parameter values......Page 263
2004 Tax equations......Page 265
Japan......Page 267
1.1. Central government income tax......Page 270
1.2. State and local income taxes......Page 273
3.2. Transfers for dependent children......Page 274
5.2. Employer contributions to private pension and health schemes......Page 275
2004 Parameter values......Page 276
2004 Tax equations......Page 277
Korea......Page 279
1.1. Central government income tax system......Page 282
1.2. Local income tax......Page 284
3. Universal cash transfers......Page 285
5.3. Employer’s reserve for employee’s retirement payment......Page 286
2004 Parameter values......Page 287
2004 Tax equations......Page 288
Luxembourg......Page 289
1.1. Impôts perçus par l’administration centrale......Page 292
3.1. Pour les personnes mariées......Page 294
5.1. Identification de l’ouvrier moyen......Page 295
2004 Parameter values......Page 296
2004 Tax equations......Page 297
Mexico......Page 299
1.1. Central government income tax......Page 302
4. Main changes in the tax/benefit system since 1995......Page 304
Notes......Page 305
2004 Parameter values......Page 306
2004 Tax equations......Page 307
Netherlands......Page 309
1.1. Central government income tax......Page 312
2.1. Employees’ contributions......Page 314
5.1. Identification of the APW and calculation of the APW’s gross earnings......Page 315
5.3. Wage-cost-reduction for employers......Page 316
2004 Parameter values......Page 317
2004 Tax equations......Page 318
New Zealand – 2004-2005 Income Tax Year......Page 321
1.2. State and local income taxes......Page 324
4. Main changes in tax/benefit systems since 2002 (year ended 31st March 2003)......Page 325
5.2. Employer’s contributions to private pension, health schemes, etc.......Page 326
2004 Parameter values......Page 327
2004 Tax equations......Page 328
Norway......Page 329
1.2. Local government income tax......Page 332
2.1. Contributions to the national insurance scheme......Page 333
4. Main changes in tax/benefit systems since 2002......Page 334
5.2. Employers’ contributions to private health and pension schemes......Page 335
2004 Parameter values......Page 336
2004 Tax equations......Page 337
Poland......Page 339
1.1. Central government income tax......Page 342
3.2. Transfers for dependent children......Page 345
5.2. Employers’ contributions to private pension, health and related schemes......Page 346
2004 Parameter values......Page 347
2004 Tax equations......Page 348
Portugal......Page 349
1.1. Impôt sur le revenu perçu par l’administration centrale......Page 352
3.1. Prestations au titre des enfants à charge......Page 356
5.1. Méthode suivie pour l’identification et le calcul des gains bruts de l’ouvrier moyen......Page 357
5.2. Description des principales cotisations patronales à des régimes privés de retraite, d’assurance maladie, etc.......Page 358
2004 Parameter values......Page 359
2004 Tax equations......Page 360
Slovak Republic......Page 361
1.1. Central government income taxes......Page 364
3.2. Transfers for dependent children......Page 365
4. Main changes in tax/benefit systems since 2003......Page 366
5.1. Identification of APW and valuation of earnings......Page 367
2004 Parameter values......Page 368
2004 Tax equations......Page 369
Spain......Page 371
1.1. Central government income tax......Page 374
3.2. Transfers for dependent children......Page 376
5.1. Identification of an APW and calculation of earnings......Page 377
2004 Parameter values......Page 378
2004 Tax equations......Page 379
Sweden......Page 381
1.1. Central government income taxes......Page 384
1.2. Local government income taxes......Page 385
3.2. Transfers for dependent children......Page 386
5.2. Employer contributions to private health, pension, etc. schemes......Page 387
2004 Parameter values......Page 388
2004 Tax equations......Page 389
Switzerland......Page 391
1.1. Impôt sur le revenu perçu par l’administration fédérale (Confédération)......Page 394
1.2. Impôts des collectivités décentralisées (Canton et commune de Zurich)......Page 396
2.1. Cotisation des salariés......Page 398
4. Principales modifications apportées au système fiscal et au régime des prestations sociales depuis 1998......Page 399
5.2. Méthode de calcul utilisée......Page 400
2004 Parameter values......Page 401
2004 Tax equations......Page 403
Turkey......Page 405
1.1. Central government income tax......Page 408
2.2. Employers’ contributions......Page 409
5.3. Saving premium and employer contribution......Page 410
2004 Parameter values......Page 411
2004 Tax equations......Page 412
United Kingdom – 2004-2005 Income Tax Year......Page 413
1.1. Central government income taxes......Page 416
2.2. Employers’ contributions......Page 417
4.2. Employers’ contributions to private pension, health etc. schemes......Page 418
2004 Parameter values......Page 419
2004 Tax equations......Page 420
United States......Page 421
1.1. Central/federal government income taxes......Page 424
1.2. State and local income taxes......Page 426
4. Principal changes since 2003......Page 427
5.2. Employer contributions to private social security arrangements......Page 428
2004 Parameter values......Page 429
2004 Tax equations......Page 430
Part V. Methodology and Limitations......Page 431
Methodology......Page 433
Sector covered......Page 434
Type of worker......Page 435
Table V.2. Identification of an average production worker and number of employees in the manufacturing sector, 2003......Page 436
The treatment of fringe benefits......Page 437
Table V.3. Method used to calculate average earnings......Page 438
3. Estimating gross wage earnings in 2004......Page 439
4. Coverage of taxes and benefits......Page 440
5. Taxpayer characteristics......Page 441
6. Calculation of personal income taxes......Page 442
Table V.6. Main non-standard income tax reliefs received by an APW......Page 444
7. State and local income taxes......Page 443
Table V.7. State and local personal income taxes, 2003......Page 447
9. Payroll taxes......Page 448
11. Family cash benefits from general government......Page 449
12. Non-wastable tax credits......Page 450
Notes......Page 451
Limitations......Page 453
2. Some specific limitations on the income tax calculation......Page 454
3. Limitations to time-series comparisons......Page 455
4. Limitations to marginal rates......Page 456
A Note on the Tax Equations......Page 459
Annex A. Overall Tax Levels and Tax Structures in OECD Member Countries, 1990-2002......Page 463
Table A. Tax revenues expressed as a percentage of GDP at market prices, 1990-2002......Page 464
Table B. Tax revenues from personal income taxes as a percentage of GDP and total taxation, 1990-2002......Page 465
Annex B. Source of Earnings Data......Page 466
Annex C. Exchange Rates and Purchasing Power Parities of National Currencies, 2004......Page 467