Tax Relief for Families in Europe July 25, 2019 Elke Asen Elke Asen 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. 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,” https://stats.oecd.org/Index.aspx?DataSetCode=AWCOMP. 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 Stay informed on the tax policies impacting you. Subscribe to get insights from our trusted experts delivered straight to your inbox. Subscribe Share Tweet Share Email Topics Center for Global Tax Policy Data Global Tax Maps Individual and Consumption Taxes Individual Income and Payroll Taxes Tags Tax Burden
