OECD – TAX DATABASE. UPDATE JUNE 2019. The average tax wedge for all four family types varied significantly between 2000 and 2018. Since 2000, all four family types experienced a continuous decrease in their tax wedge, reaching a temporary low during the financial crisis in 2009. In the three years following the crisis, the tax wedge rose again for all four family types. However, the tax wedge of all four family types is now lower than in 2000. The average tax wedge measures the effective tax rate on labour costs as the difference between the labour costs to the employer and the corresponding net take-home pay of the employee. It equals the sum of personal income tax, employee and employer social security contributions (SSCs) plus any payroll taxes, minus any cash benefits received by the employee, expressed as a percentage of labour costs (gross wages plus employer SSCs and payroll taxes). The tax wedge of the average worker is the highest throughout the observed period, now stabilising at 36%, which is close to but slightly below the level of 2000. A similar trend can be observed for the tax wedge of the two-earner married couple and the tax wedge of the one-earner married couple, which are now at 30.8% and 26.6% respectively. The average tax wedge of the single person with two children earning 67% of the average wage is the lowest of all four family types throughout the whole period. After experiencing a short increase between 2009 and 2013, it has now reached an all-time low of 16.0% of total labour costs.
