Tax Relief for Families in Europe

July 25, 2019

Many countries provide targeted tax relief for families with children, typically through targeted tax breaks that lower income taxes. As today’s map shows, the extent to which such tax relief is granted varies substantially across European countries.

One way to measure targeted tax relief for families is to compare the tax burdens on labor of a family with one earner and two children and a single worker without children, both earning the same pretax income.

The tax burden on labor, or “tax wedge,” is defined as the difference between an employer’s total labor cost of an employee and the employee’s net disposable income. In other words, it is the sum of income taxes and payroll taxes of a worker earning the average wage in a country, divided by the total labor cost of this worker.

Tax Relief for families, family tax relief in Europe

In the European countries covered, a family with one earner and two children faced on average a tax burden of 29.9 percent in 2018. The average tax burden a single worker without children faced was 40.2 percent, 10.3 percentage-points higher than a family.

Luxembourg had the largest disparity between the two tax wedges of all countries covered, with a 21.2 percentage-point difference between its 38.2 percent wedge for single workers and 17 percent wedge for families.

Turkey had the smallest gap with tax burdens of 37.2 percent on families and 38.9 percent on singles, a difference of only 1.7 percentage-points.

Table 1. Tax Burden on Labor of Families and Single Workers, 2018

Source: OECD, “Taxing Wages,”

  Single person earning a nation’s average wage, no child One-earner married couple earning a nation’s average wage, 2 children Percentage-Point Difference
Austria 47.6% 37.4% 10.2
Belgium 52.7% 37.3% 15.4
Czech Republic 43.7% 25.5% 18.2
Denmark 35.7% 25.2% 10.5
Estonia 36.5% 26.6% 9.9
Finland 42.3% 37.8% 4.5
France 47.6% 39.4% 8.2
Germany 49.5% 34.4% 15.1
Greece 40.9% 37.9% 3.0
Hungary 45.0% 30.3% 14.7
Iceland 33.2% 21.5% 11.7
Ireland 32.7% 17.3% 15.4
Italy 47.9% 39.1% 8.8
Latvia 42.3% 32.3% 10.0
Lithuania 40.6% 33.2% 7.4
Luxembourg 38.2% 17.0% 21.2
Netherlands 37.7% 32.6% 5.1
Norway 35.8% 32.4% 3.4
Poland 35.8% 20.9% 14.9
Portugal 40.7% 29.0% 11.7
Slovak Republic 41.7% 30.3% 11.4
Slovenia 43.3% 25.2% 18.1
Spain 39.4% 33.9% 5.5
Sweden 43.1% 37.9% 5.2
Switzerland 22.2% 9.8% 12.4
Turkey 38.9% 37.2% 1.7
United Kingdom 30.9% 26.2% 4.7
Average 40.2% 29.9% 10.3

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A tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities.

A tax wedge is the difference between total labor costs to the employer and the corresponding net take-home pay of the employee. It is also an economic term that refers to the economic inefficiency resulting from taxes.

A payroll tax is a tax paid on the wages and salaries of employees to finance social insurance programs like Social Security, Medicare, and unemployment insurance. Payroll taxes are social insurance taxes that comprise 24.8 percent of combined federal, state, and local government revenue, the second largest source of that combined tax revenue.