Luxembourg taxes single people more and more
An OECD report shows that labor tax rates rebounded in 2021 following the Covid-19 pandemic. In Luxembourg, single people are still particularly affected.
To be less taxed, it is better to be in a couple and married than single. If it’s no secret, this statement is repeated even more with the latest OECD report on taxation. The Organization for Economic Co-operation and Development has scrutinized the labor taxation of its 38 members and shows that it has been on the rise since 2020.
If the pandemic had led to lower labor taxes in many OECD countries between 2019 and 2020, it has since picked up again between 2020 and 2021. In Luxembourg the situation is even less favourable, labor taxation was not slowed down by Covid-19 in 2020 and continued to increase in 2021. It is thus the country where the worker’s tax wedge (see box) single person increased the most in 2 years: + 1.75%.
40% of the salary paid to the State
In fact, this puts Luxembourg in 13th place in the OECD in terms of tax burden for single people on the average salary and without children. The latter pay 40.2% of their salary to the State (17.23% for income tax, 10.82% for employee contributions and 12.16% for employer contributions). Belgium occupies first place in the ranking with a share of 52.6%, followed by Germany (48.1%), Austria (47.82%), France (47%) and Italy (46.5%).
The countries that tax labor the least are Colombia (0% of wages), Chile (7%) and New Zealand (19.44%). The OECD average is 34.6%.
Families who tire better
Other types of households, especially families, fare better. According to the OECD, couples with two children pay 34% of their salary compared to 19.7% when only one of the parents works. The share even drops to 12.9% when a single person with 2 children earns 68% of the average wage.
Unequal between workers who were to continue as long as no tax reform will be acquired. In 2021, the former Minister of Finance Pierre Gramegna had declared on RTL that this one would not take place before 2023.
What is the tax wedge?
Expressed as a percentage, the tax wedge makes it possible to measure the share of labor income paid by an employee and his employer to the State in the form of compulsory levies (taxes and social security contributions). The greater the public and social expenditure financed by labor income, the greater the tax wedge. This indicator thus makes it possible to compare each country despite the differences in their social protection systems and their financing methods.