Social Policy in Ontario

Canadians pay less tax on income than most in developed countries: OECD

Posted on May 15, 2011 in Governance Policy Context

Source: National Post — Authors: Peter O'Neil

NationalPost.com – business.financialpost.com
May 11, 2011.  By Peter O’Neil, Postmedia News Europe Correspondent, Paris

Canada was among a minority of western developed countries that didn’t experience an increased tax burden on workers last year, a report from the Organization for Economic Co-operation and Development said Wednesday.

“Canada is among the OECD countries with a relatively low tax and social security burden on labour income,” said the report from the Paris-based social and economic policy think-tank.

The burden of taxes and social-security charges paid by employers and employees “is lower than the OECD average for every family type (considered in the study) and the difference with the OECD average has widened over the past 11 years.”

Low-income single parents in Canada with two children actually receive more government transfers than they pay in taxes, bringing their payroll tax 24 percentage points below the OECD average and making it the fourth-lowest among the organization’s 34 member countries.

The increase among the majority of OECD members reverses a downward trend in recent years, prompting the Paris-based agency to urge governments to keep payroll charges down.

“Taxes on wages, including both employer and employee social-security charges, are a key factor in companies’ hiring decisions and individuals’ incentives to work,” the OECD said.

Governments trying to cut deficits while spurring growth should shift away from payroll taxes and higher personal income taxes and instead boost revenues from property taxes and value-added levies such as Canada’s GST or HST, the OECD advised.

Canada was one of only 11 of the 34 members of the OECD, a group of advanced industrialized economies, that in 2010 enjoyed a reduction in the total burden of taxes plus employee and employer social-security contributions.

Chile’s remained the same, while 22 other countries, including the U.S., recorded increases.

Canada’s overall total tax burden, including social-security charges, was 30.3% of wages for a single person without children.

Only the United States, Ireland, Australia, Switzerland, Israel, Korea, New Zealand, Mexico and Chile had lower burdens, though the U.S. rate — at 29.7%, up slightly from 2009 during a time when Canada’s shrank by about a third of a percentage point — was just behind Canada’s.

Western European countries, needing to fund far more generous social programs, had by far the highest payroll costs. Belgium led the way last year at 55.4%, followed by France at 49.3% and Germany at 49.1%. The lowest was Chile’s, at 7%, while Mexico’s was second-last at 15.5%.

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Tags: budget, economy, globalization, standard of living, tax

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