While the OECD average tax wedge is 36.1 percent for 2018, Ireland records a tax wedge of 32.7 percent according to the OECD’s Taxing Wages 2019 report. The “tax wedge” is a measure of total taxes on labour paid by employees and employers, minus family benefits, as a percentage of the labour cost incurred by the employer. Overall, there is a fall of 0.16 percentage points in the OECD average tax wedge from 2017.
The decline between 2017 and 2018 was caused by large decreases in four countries: Estonia (2.54 percentage points), the United States (2.19 percentage points), Hungary (1.11 percentage points) and Belgium (1.09 percentage points). Even though the tax wedge on the average worker across the OECD declined between 2017 and 2018, small increases in the tax wedge were actually observed in 22 countries, or nearly two-thirds of the OECD. At the same time, small decreases in the tax wedge were observed in the remaining 10 OECD countries.
In the four countries where the largest decreases in the average tax wedge were observed, these reductions resulted from major reforms. In Estonia and the United States, the decreases were due to income tax reforms, whereas in Hungary and Belgium they resulted from reductions in employer social security contributions.