Tax: who pays what?

How much you pay in tax depends on personal allowances, tax rates and brackets, social security contributions and benefits; the numbers can start to get confusing.

One way to cut through the muddle is to think in terms of the tax wedge. In basic terms, this is the difference between the net earnings that a worker takes home at the end of the year and what it costs to employ that worker. On the employer’s side, this cost includes the worker’s salary as well as employer contributions for social security (e.g. healthcare, pensions); on the worker’s side, the negatives are income tax and employee social security payments, while the positives include the salary and, possibly, cash benefits, for instance.

The tax wedge ranges from just over 15% in Mexico for a single worker on an average wage, to just over 55% in Belgium.

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Working 9 to 4.30

People in OECD countries are working slightly shorter hours than they used to. In 1998, they worked 1,821 a year; a decade later, that had fallen to 1,764. Over a 40-hour week, that amounts to a cut of just under 90 minutes. The reasons for the fall vary, but they can reflect factors like policies that promote flexible working for parents.

The longest hours worked are in the Czech Republic, Greece, Hungary, Korea and Portugal; the shortest are in France, Germany, Luxembourg, the Netherlands and Norway. Based on the headline numbers, the difference between the country with the longest hours, Korea, and that with the shortest, the Netherlands, is 867 hours – divide that by 52, and it’s about 16 hours a week. But an important note: International comparisons need to be treated with caution as the nature and reliability of data sources vary greatly between countries. 

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