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Economic recession cuts labor taxes: OECD

05-12-2010 08:48 BJT Special Report: Europe's Debt Crisis |

PARIS, May 11 (Xinhua) -- The economic recession has reduced taxes on the workers' earnings in most developed countries, the Paris-based Organization of Economic Cooperation and Development (OECD) said Tuesday in a report.

Due to government stimulus packages and guarantee measures after the worst global depression since the Second World War, "average tax and social security burdens on employment incomes fell slightly in 24 out of 30 OECD countries last year," the OECD reported.

According to the OECD's annual Taxing Wages report, New Zealand, which already imposed relatively low taxes on labour incomes, recorded the biggest falls. Turkey and Sweden also recorded big declines.

OECD said last year many countries cut income taxes, some reduced employer social security contributions and others, including Germany, Japan and the United States, recorded lower wage tax due to lower average wages after the economic crisis.

Hungary, Greece and France were the highest-tax countries for one-earner married couples with two children earning the average wage. The difference between the total cost of employing a person and their net take-home pay, or "tax wedge," was 43.7 percent in Hungary and 41.7 percent in Greece and France, well above the OECD average level of 26 percent, the report said.

For single workers, Belgium, Hungary and Germany recorded the highest "tax wedges" at 55.2 percent, 53.4 percent and 50.9 percent, respectively. At the other end of the scale, Mexico, New Zealand and South Korea took only 15.3 percent, 18.4 percent and 19.7 percent, respectively. This scale's average reading for OECD countries was 36.4 percent.

The wage taxes, including both employer and employee social security contributions, is regarded by OECD as a significant factor affecting "companies' hiring decisions and individuals' attitudes to work," and changes indirectly indicate employment trends.

OECD Secretary-General Angel Gurria said "lower taxes on labour can help to boost recovery," but he also reminded that governments need to "move to a more sustainable fiscal path," given the still fragile recovery and big pressure on public budgets.

Editor:Zhang Jingya |Source: Xinhua

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