Income tax rises across OECD

PERSONAL INCOME TAX has risen in 25 of the 34 OECD nations over the past three years, as countries reduce the value of tax-free allowances and tax credits and subject higher proportions of earnings to tax, the body has found.

The increases in tax burdens on labour income in 2013 were largest in Portugal as a result of higher statutory rates, Slovakia due to higher employer social security contributions and the US because of expiry of previous reductions in employee social security contributions.

The average tax burden on employment incomes across the OECD increased by 0.2 of a percentage point in 2013, to 35.9%, according to the report.
It increased in 21 out of 34 countries, fell in 12, and remained unchanged in one.

The 2013 rise follows a substantial increase in 2011 and a smaller one in 2012. Since 2010, the tax burden has increased in 21 OECD countries and fallen in nine, partially reversing the reductions seen between 2007 and 2010.

The design and interaction of personal income tax systems, social security contributions and benefit systems has become more progressive for low-income households across the OECD, particularly since the global economic crisis began in 2007, and notably for poorer households with children.

A significant factor for that, the OECD said, has been growth in targeted tax credits or “make-work-pay” provisions for low-income workers, as well as increased child benefits for low-income households.

Conversely, there has been little change in progressiveness of taxation for single workers without children or those at higher income levels, although wide differences exist between countries.

Ireland, Sweden and Slovenia reported the greatest rise in progressive taxation for single taxpayers without children, while the largest decreases in progressivity for single taxpayers without children were seen in Germany, Hungary and Israel.