Labour taxes in OECD increase for second consecutive year: Report

The analysis revealed that in the majority of these nations, the hike in labour taxation was mainly due to increases in personal income taxes. Despite nominal wage increases in 37 out of 38 countries, real wages fell in 18 countries as inflation continued to exceed historical levels. The lack of automatic indexation in many tax systems has resulted in higher tax liabilities for workers, pushing them into higher tax brackets and diminishing the value of tax reliefs and cash benefits.

For 2023, the average tax wedge—the total tax on labour costs paid by employees and employers—was 34.8 per cent across the OECD. The wedge ranged significantly from a high of 53 per cent in Belgium to no taxation in Colombia. This represents a slight increase of 0.13 percentage points from the previous year, indicating a continued upward trend, as per the report.

Additionally, this year's report includes a special feature focusing on the disparity in taxation between first and second earners in households. It was found that second earners, predominantly women, face higher effective tax rates than single workers at equivalent wage levels in most OECD countries. This is particularly pronounced in countries where taxes are calculated at the household level or where individual tax reliefs are applied based on household income.

The report illustrates that a second earner in a couple without children who earns 67 per cent of the average wage faces a tax wedge of 34 per cent, compared to 31 per cent for a single worker at the same wage level.

Fibre2Fashion News Desk (DP)