In an international comparison, people in germany continue to shoulder an above-average tax and contribution burden. On average, single people with average incomes pay 49.5 percent of so-called labor costs to the government.
This is including the employer’s share of social security contributions. That’s according to a 2018 industry report released today by the OECD. The OECD defines labor costs as gross wages and employers’ social security contributions.
Among the 36 industrialized countries represented at the OECD, only belgium (52.7 percent) is ahead of germany in this category. The OECD average is 36.1 percent. The lowest tax and social security burden is in chile (7 percent) and new zealand (18.4 percent). For all other types of households, the burden in germany is also above the OECD average.
The situation is better for families in germany, where there are subsidies such as child benefits and tax advantages. This is especially true when only one partner is working. In this case, 34.4 percent of labor costs in germany are taxed (OECD: 26.6 percent). The situation is different if both partners are gainfully employed. According to experts, a family with two earners and two children pays 42.6 percent (OECD: 30.8 percent) of labor costs to the state in germany. In this case, the controversial spousal splitting in germany has an effect in favor of married couples and the non-contributory co-insurance of family members.
Marital splitting was introduced decades ago to reduce the tax burden on married couples. At the time, this was in line with the traditional family image of a single-earner husband and a wife who takes care of the children and the household. The higher-income earners can pass on part of their tax burden to their partner, thus relieving the burden on the couple. OECD experts have often criticized these tax rules as reducing incentives to take up a job. High taxes and charges for second earners discourage women in particular from becoming gainfully employed.
On average, single people with an average income in germany can take home 60.3 percent of their salary – so the average tax rate including social security contributions is 39.7 percent. Unlike the labor costs, the employer’s share of social security contributions is not included here. The OECD average is 25.5 percent. Here, too, germany is second only to belgium.