According to a new OECD report, taxes on labour income for the average worker across the OECD continued to decrease for the third consecutive year during 2016, dropping to 36% of labour costs. Ireland had the 29th lowest tax wedge out of 35 OECD member countries considered in the report while the UK is ranked as having the 27th lowest tax wedge in 2016.
The report Taxing Wages 2017 measures the level of personal income tax and social security contributions made in each OECD country by calculating the ‘tax wedge’ - the total taxes on labour income paid by employees and employers, minus family benefits received, as a percentage of the labour costs of the employer. The decrease in the average tax wedge seen since 2013 is partly explained by reforms in some countries to reduce taxes on labour income. For example, in 2016 Belgium and Austria both experienced significant reductions in their tax wedges as a result of labour tax reforms.