Belgium, the country with the heaviest tax system

8 years ago - Published in Finance, Fundamental Analysis

The Organization for Economic Cooperation and Development (OECD) reported on Tuesday that Belgium has the highest tax rate when comparing 35 developed countries around the world while Germany (49.4%), Hungary (48.2 %) and France (48.1%) are also close to the 50 per cent mark. Switzerland is in the end of the ranking, with 21.8%. The lowest were in Chile (7%), New Zealand (17.9%) and Mexico (20.1%). 

The OECD calculated each country’s tax wedge – the gap between what employers take home in pay and what it costs to employ them, including personal income tax and social security contributions. 

Meanwhile the OECD average for singles was 36 percent. According to the report Taxing Wages 2017, taxes on labour income for the average worker across the OECD decreased for the third consecutive year during 2016, dropping to 36% of labour costs. 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.

Between 2015 and 2016, the largest increase in the tax wedge for one earner families with children was in New Zealand (1.24%). The largest decreases were in Austria (2.68%), Portugal (2.50%), Belgium (1.73%), Hungary (1.60%) and Ireland (1.03%). 

The 2017 edition of Taxing Wages contains a special feature examining the impact of tax on the incentives for workers to invest in their skills. For a typical worker undertaking a short course of training, the combined impact of personal income taxes and employee social security contributions reduces the incentive to invest in skills training, lowering the value of a skills investment by 24.9% on average across the OECD.
 
“Taxes on labour income for the average worker across the OECD are still falling slightly, although this decline is partly driven by reforms in a handful of countries,” said Pascal Saint-Amans, Director of the OECD’s Centre for Tax Policy and Administration.  “Boosting the work incentives of low and middle income earners by reducing the tax wedge on labour incomes continues to be an important way of encouraging inclusive growth.”