Taxing Wages 2023
Indexation of Labour Taxation and Benefits in OECD Countries
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This annual publication provides details of taxes paid on wages in OECD countries. This year’s edition focuses on the impact of recent inflation on labour taxation in the OECD and how countries adjust their tax systems in response. For the year 2022, the report also examines 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.
Also available in: French
Special feature: Indexation of labour taxation and benefits in OECD countries
Inflation rose sharply across the OECD in 2021 and 2022. In almost all OECD countries, nominal wage growth did not keep up with inflation, causing real wages to fall. This special feature examines how labour tax policy in OECD countries responds to inflation, largely focusing on indexation, the mechanism through the absolute value of thresholds, brackets, credits, and in-work benefits in a tax system are adjusted to reflect changes in prices, wages and (less frequently) other macroeconomic variables. These adjustments offset fiscal drag – the phenomenon whereby increases in wages result in larger tax burdens. The analysis in this chapter is based on the results of a questionnaire circulated to OECD countries in 2022 and refers primarily to the tax systems in that year.
Also available in: French
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