Tax wedge in Greece fell in 2021 at a faster rate compared with other OECD countries due to a lowering of social insurance contributions, the Organization for Economic Cooperation and Development said on Tuesday.
In a report, the Paris-based organization said that the tax wedge for a single worker fell by 2.2 percentage points to 36.7% in 2021 from 38.9% in 2020, while the average decline in OECD was 0.06 percentage point to 34.6%.
More specifically, effective tax rates on labour rebounded in 2021 as the global economy recovered and many countries began withdrawing or scaling back measures implemented in response to the Covid-19 pandemic, the OECD said, adding that the tax wages 2022 showed that rising household incomes in 2021 coupled with the reversal of many tax and benefit policies linked to the pandemic drove increases in effective taxes on wages across the OECD.
The report points to an increase in the tax wedge in a majority of OECD countries during 2021, as many countries withdrew or scaled back measures introduced to support households during the pandemic. In spite of these increases, the average tax wedge across the OECD declined slightly as relatively large declines in the tax wedge were observed in a small number of countries where new COVID-19 support measures were introduced in 2021.
In most countries, increases to the tax wedge in 2021 have more than offset the sharp declines recorded in 2020 for a number of household types, and have seen the tax wedge rebound to higher levels than in 2019 before the pandemic. For a one-earner couple on 100% of the average wage with two children and for a single-parent household earning 67% of the average wage with two children, the tax wedge was larger in 2021 than it was in 2019 in 21 countries.
The average tax wedge for the one-earner couple on 100% of the average wage with two children declined by 1.2 percentage points over the 2019-21 period, while that of the single parent on 67% of the average wage with two children declined by 1 percentage point. Both falls were larger than the decline for the single worker without children, for whom the tax wedge fell by 0.3 percentage points to 34.6%.
Between 2020 and 2021, the tax wedge for the single worker increased in 24 of the 38 OECD countries, fell in 12 and remained the same in two. The gap between the OECD average tax wedge for the single worker and the one-earner couple with children widened by 0.36 percentage points between 2020 and 2021 to 10.2 percentage points.