OECD: Greeks’ Real Wages Declined by 25.3% Due to Taxation

Posted by in Economy

The Organization for Economic Cooperation & Development (OECD) confirms what Greeks have been knowing since the last two years. That their incomes have suffered sharp decreases due to the increasing taxes. In its annual Taxing Wages report, the OECD writes about the raised taxes implemented by the Greek government in an effort to cut the budget deficit of the debt-ridden and recession-hit country:

Greece is one of the OECD countries with the highest tax burden on labour income for one-earner families with children; a tax wedge (income taxes plus employee and employer social security contributions minus cash transfers as a percentage of total labour costs) of 37.8% of total labour cost.

Between 2000 and 2011, the tax wedge increased for all family types analysed in the Taxing Wages Report, and the difference compared with the OECD average widened by more than 4 percentage points for all most of the family types over the 11 years.

In 2011, for single parents earning 67% of the average wage, the tax wedge was 19 percentage points higher than the OECD average. It was 12 percentage points above average for average one-earner couples with 2 children. For other family types the tax wedge was also higher than the OECD average but the differences were less significant.

                     Tax Wedge in % of labour costs for different wage levels
                           and household types, 2000 and 2010

 

The tax wedge increased over the 11 years for all family types. The tax wedge increased by 3.4 percentage points for high income single employees. On the other hand, the increases were marginal for single individuals with or without children at 67% of the average wage.

The tax burden on labour costs declined from 2010 to 2011 for most of the family types in the Taxing Wages report as a result of a decline in the average wage.

The tax wedge decreased the most for single taxpayers with earnings at 167% of the average wage; their tax wedge dropped by 1.1 percentage points to 42.6% of labour costs.

For the other family types, the tax wedge decreases ranged from 0.2 to 0.7 percentage points.

In contrast, single taxpayers without children with earnings at 67% of the average wage saw their tax wedge increase by 1.2 percentage points to 35.6% of labour costs mainly due the introduction of an additional lower tax bracket.

Single parents with low income also experienced a rise in their tax wedge by 0.6 percentage points to 35.0% of labour costs.

 The tax wedge in Taxing Wages is calculated on the basis of the average gross wage earnings of full-time employees in the private sector (including employees at management level). The corresponding 2011 annual average gross wage for Greece was EUR 15 729.

For the rest of the world, the OECD reports that 

 The average tax and social security burden on employment incomes increased in 26 out of 34 OECD countries in 2011 according to the new OECD Taxing Wages publication. Tax payers in Ireland, Luxembourg, Portugal and the Slovak Republic were among those hit with the largest increases. Those in New Zealand and the United States saw their tax burden fall. In Hungary, the average single worker without children was faced with the largest increase in the tax wedge, but for families with children, it fell.

FULL OECD REPORT incl DATA BY COUNTRY  HERE

PS I have to laugh again thinking of the EUROSTAT report on the Hourly Labour Cost in Greece.

I feel deeply overwhelmed by the Greek and International Statistics.