Tax Burden on Salaries-OECD Countries

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Periklis Dr. Periklis Gogas is an Associate Professor of Economics, International Economics Department, Democritus University of Thrace, Greece Matthaiou

Ms. Maria Matthaiou is a PhD Candidate in Economics, Democritus University of Thrace, Greece

For a typical family, the net salary is usually the main source of its income. Therefore, it determines their ability to consume or save. In the following table we present the net salary in 27 OECD countries. Net salary is the take-home pay that is left after we deduct the income tax and employee’s social security benefits for retirement and health insurance from the gross salary payed by the employer. More specifically: Net salary = Average gross salary for a family with 2 children – Income tax – Insurance contributions + state benefits Thus, we then calculate the government burden in employee’s income and rank the 27 countries according to this burden. Greece is in the first place with 40%. The net payroll burden for Denmark is in second place with 37%. Other developed countries (mainly Scandinavian) have also a significant percentage. Nonetheless, these direct taxes are used in very different ways in Greece and the other developed countries. In Greece, these taxes mainly finance the government deficit and the short-term cash flow needs. On the contrary, in the other developed countries, these taxes are used for the implementation of social policy and welfare and thus, they finance the learning of foreign languages, public schools, daycare, etc. At the same time, the benefits to the unemployed, retirees, pregnant and women with small children and other vulnerable groups, are generous.

Country Payroll Burden Gross Salary Income Tax Social Security Benefits Net Salary
Greece 40% 24,201.50 3,079.02 3,872.24 17,250.24
Danmark 37% 39,748.38 12,558.23 1,101.30 2,840.40 28,929.25
Turkey 35% 28,370.00 3,042.38 4,255.50 21,072.12
Netherlands 33% 48,855.70 7,670.88 6,398.11 1,862.00 36,648.71
Finland 32% 42,909.72 9,709.61 3,445.36 2,631.84 32,386.59
Norway 31% 54,238.60 10,563.25 4,447.57 2,328.00 41,555.79
Germany 30% 45,952.05 412 9,270.83 35,269.23
Belgium 30% 46,464.41 7,921.64 6,505.26 3,773.04 35,810.55
Austria 26% 42,573.25 6,183.70 7,687.51 4,964.00 33,666.04
U.K. 23% 35,632.64 5,126.53 3,321.20 1,775.46 28,960.38
USA 23% 56,067.00 2,596.67 3,830.75 45,582.00
Poland 22% 42,360.01 170.21 7,551.04 34,638.77
Sweden 22% 40,797.45 7,087.30 2,860.00 2,700.00 33,550.15
Hungary 19% 30,092.84 2,414.85 5,567.18 3,192.00 25,302.81
Spain 18% 26,161.81 2,370.75 1,661.27 22,129.78
Japan 18% 48,819.94 3,002.73 6,892.89 2,400.00 41,324.32
Iceland 17% 68,561.00 13,187.65 279.59 3,627.39 58,721.15
Italy 17% 41,462.67 4,623.87 2,890.91 1,592.04 35,539.93
Portugal 15% 17,435.71 1,078.10 1,917.93 700.56 15,140.25
Slovenia 12% 17,851.28 492.86 3,945.13 2,469.24 15,882.53
Estonia 11% 12,435.95 1,470.68 248.72 460.32 11,176.87
France 10% 38,427.35 2,941.79 5,258.54 1,549.74 34,776.75
Slovakia 6% 10,342.10 257.42 1,385.84 564.48 9,778.16
Luxemburg 5% 54,560.39 3,328.67 6,712.09 7,521.72 52,041.36
Switzerland 4% 90,521.98 4,133.16 5,657.62 6,000.00 86,731.20
Czech Rep. 2% 31,208.38 1,375.92 3,432.92 1,464.00 30,615.38
Ireland 0% 34,465.85 2,864.58 1,378.63 4,160.00 34,382.63

 

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