OECD - Labour market disruption & COVID-19 support measures contribute to widespread falls in taxes on wages in 2020

29 April 2021 |

The COVID-19 crisis has resulted in the largest decrease in taxes on wages since the global financial crisis of 2008-09, according to a new OECD report.

The report highlights record falls across the OECD during 2020 in the tax wedge – the total taxes on labour paid by both employees and employers, minus family benefits, as a percentage of the labour cost to the employer.

 The tax wedge for a single worker at the average wage was 34.6% in 2020, a decrease of 0.39 percentage points from the previous year. This is a significant fall, but is smaller than the decreases seen in the global financial crisis – 0.48 percentage point in 2008, and 0.52 percentage points in 2009. The tax wedge increased in 7 of the 37 OECD countries over the 2019-20 period and fell in 29, mainly due to lower income taxes.

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