Tax wedge in Croatia, Italy, Ireland, the Netherlands and Spain
MAJA CUNDIĆ, mag. math*
Preliminary communication** JEL: H21, H24, J38 doi: 10.3326/fintp.40.2.3
* The author would like to thank two anonymous referees for their useful comments and suggestions. This article belongs to a special issue of Financial Theory and Practice, which is devoted to the comparison of tax wedge on labour income in Croatia and other EU countries. The articles in this issue have arisen from the students’ research project, undertaken in 2015. The Preface to the special issue (Urban, 2016) outlines the motivation behind the research project, explains the most important methodological issues, and reviews the literature on the measurement of tax wedge in Croatia. The views expressed in this paper are solely those of the author and do not necessarily represent those of the institution in which she is employed. ** Received: February 10, 2016 Accepted: April 6, 2016
Maja CUNDIĆ Croatian Financial Services Supervisory Agency, Miramarska 24b, 10000 Zagreb, Croatia e-mail: [email protected]
introduction One of the determinants of each modern country is its tax system. The efficiency of efficiency The system. tax its is country modern each of determinants the of One the tax system can have a significant effect on the economy, economic- develop unemploy- and employment the population, the of structure income level, ment generally acceptedThere is no satisfaction level. ment rates, as well as the citizens’ tax system is unique. EU country’s way of collecting taxes; for instance, each and Croatia in income on labour burden tax the analyse is to paper of this aim The – and compare Spain, Ireland and the Netherlands EU countries – Italy, selected burden indicators. tax basis of certain burdens in 2013 on the tax respective their and constitutes methodology Wages Taxing is based on the analysis parallel This in Urban (2016). a part of the research project described with gross wage, burden correlate tax is: how does the question principal The establish to aims paper this addition, In of children? number the and type, family the and systems (PIT) tax income personal the in differences and similarities the in selected EU countries. social insurance contribution (SIC) payments from of income level on the depends indeed wedge tax the that show results The and it differs proportional to the number of children, it is inversely employment, Furthermore, looking at dif- countries. in different types among the same family coun- among differ amounts contributions the that is evident gross wages, it ferent and employer the between burden is distributed contributions the and that tries wedge tax final the on impact an have also can which ways, different in employee amount. In section 2 of the paper, the relevant terms are defined, the model according to which indicators are calculated are outlined, and the basic tenets are introduced. Section 3 contains an overview of labour income taxation per country, first des cribing the general taxation structure in a certain country and then showing Abstract - re of components number a comprising tax system, a unique country has Each to is paper this of aim The country. a of policy economic and taxation the flecting Spain, Italy, in Croatia, income on labour burden tax the and compare analyse Ireland and the Netherlands while observing various family types and gross wa tax highest has the observed, Italy countries show that, of all the ges. The results tax workers’ and single observed families’ most of the comes to When it wedge. for hav- stands out Ireland while middle, the in somewhere falls Croatia wedges, low tax wedge. ing a relatively tax average net wedge, tax progressivity, income, labour of taxation Keywords: the Netherlands Spain, Ireland, Italy, rate, Croatia, 1 The results are compared in section 4, followed by the the calculations for 2013. conclusion.
financial theory and maja cundić practice tax wedge in croatia, italy, ireland, the netherlands and spain 40 (2) 201-230 (2016) 202 financial theory and maja cundić practice tax wedge in croatia, italy, ireland, the netherlands and spain
203 40 (2) 201-230 (2016) - - - - – – – – 1/3 x 100 2/3 x 100 1/3 x 100 Spouse II Unemployed (% of AGW) 100 100 100 100 100 Spouse I 2/3 x 100 5/3 x 100 2/3 x 100 (% of AGW) 0 2 2 2 2 0 0 0 children umber of of Number (SICs), unlike taxes, are dedicated public revenue. public dedicated are taxes, (SICs), unlike S R NDICATO AND I Adults Couple Couple Couple Couple Single worker Single worker Single worker Single worker contributions , SICs gross wage and employer the sum of the labour cost denotes 1 employee SICs and personal income net wage means the gross wage minus employee el model Y: HODOLOG Met able 2A-100/33-NC 2A-100/67-2C 2A-100/33-2C 2A-100/0-2C 1A-67-2C 1A-167-NC 1A-100-NC Designation 1A-67-NC dren; 2C – 2 children. 2C – 2 children. dren; OECD (2014). Source: Social insurance Social In line with OECD (2014), the family is assumed to have no income source other source no income have to is assumed family (2014), the OECD with In line amounts of annual gross wage. Different adult members’ employed than full-time gross wage (AGW) are included in the analysis. theMore model,specifically, as AGW of (67%), and 5/3 AGW of (33%), 2/3 AGW uses 1/3 of well as this paper, used in this research. amounts AGW 2 presents Table (167%) (see Urban, 2016). The amounts refer to 2013. while Note: The symbols stand for the following: AGW – average gross wage; A – adult; NC – no chil NC – no – adult; A wage; gross – average AGW following: the for stand symbols The Note: both paid are they and insurance pension and health to made are SICs payments ques- in country by the determined manner the in employees and by employers The tion. term tax (PIT). T units Characteristics of observed hypothetical 2 indicators tax burden of the calculation paper for in this used The methodology OECD publica is based on the calculation necessary for their variables and other The four observed family types are: single workers, couples without children, children, without workers, couples single are: types family observed four The In this context, and single parents with two children. couples with two children sex, while of either without a partner, living worker” means an individual “single with two chil worker or single For a couple couple. a married means a “couple” tion Taxing Wages (OECD, 2014). Even though the tax systems differ from one from differ systems tax the though Even (OECD, 2014). Wages Taxing tion This paper indicators. certain compare to directly it is possible another, country to across differ indicators those compare used to model the and tenets the describes ent countries. inclusive, and with- assumed to be between six and eleven, dren, the children are defined are units hypothetical eight (2014), OECD to According income. own out are shown in table 1. and their characteristics - - - -
personal AGW 12,303 29,704 26,027 32,381 48,109 (in EUR) pillar are general are pillar st 1 1 1 1 Exchange rate HRK/EUR = 7.5735 HRK/EUR : unlike personal tax allowances, tax credits : unlike personal tax pillar contributions, though mandatory, are though mandatory, contributions, pillar nd . Employee SICs paid into the 1 the into SICs paid . Employee nd expressed expressed granted by all levels of government. EUR 29,704 EUR 26,027 EUR 32,381 EUR 48,109 HRK 93,180 AGW in national currency in national and the 2 the and represents the taxable amount; in some countries, the in amount; represents the taxable st is deducted from the income to get the tax base. Personal allowance can allowance base. Personal tax the to get income from the is deducted income (or tax wedge) is the share of all taxes and SICs, net Net average tax wedge (or tax wedge) is the share of all taxes 2 able Croatia Italy Spain Ireland Netherlands allowance etc. for dependents, allowance allowance, child allowance, basic the comprise is tax credit relief Another type of tax rates, and can also comprise dif- of tax after the application are reductions made grantedis credit Tax etc. children, for credit tax credit, tax basic components: ferent Apart from the above, the analysis also Croatia. in all observed countries except covers cash family benefits the sum of total per Net average tax rate is the term used to denote the share of sonal income taxes and employee SICs, net of cash family benefits, in the gross wage. (Urban, 2016). of cash family benefits, in the labour cost from employ only to income is applied in this paper calculation wedge tax The ment, specifically on The wages. taxation of other types of income from employ has not been and second income, self-employment from ment, such as income taken into account. the that apply a progressive tax schedule, meaning All of the observed countries increases income grows as their on an individual imposed rate tax average net taxes, such as local other taxes can be levied, Apart from the PIT, 2016). (IJF, municipal taxes, city taxes, etc. the to exclusively SICs refer employer and employee that note to important is It paid to other funds are as contributions government, made to the general payments rests on pension system Croatian the For instance, analysis. the in included not 1 the pillars: two The term Source: (1) AGW – for Croatia: author’s calculation as per AGW (1) CBS – Source: (2016) author’s for and Croatia: Urban (2016); for CNB (2016). (2014); (2) Exchange rate for Croatia: other countries: OECD T 2013 countries, in selected wages gross average Annual paid into private pension funds. Thus, the former plays a role in the tax burden paid into private pension funds. about this topic, see Ur and the latter does not. For more information calculation ban (2016), Blažić and Trošelj (2012), OECD (2014, 2015). Trošelj ban (2016), Blažić and government revenue, while the 2 revenue, government
financial theory and maja cundić practice tax wedge in croatia, italy, ireland, the netherlands and spain 40 (2) 201-230 (2016) 204 financial theory and maja cundić practice tax wedge in croatia, italy, ireland, the netherlands and spain
205 40 (2) 201-230 (2016) pillar, pillar, st 12 25 40 Rate (%) 3,486 1,744 1,744 2,441 3,487 4,882 6,626 Annual amount (EUR) 1.0 0.5 0.5 0.7 1.0 1.4 1.9 Factor pillar. Employer SICs, calculated and paid by the and paid calculated SICs, Employer pillar. nd RIES D COUNT ME IN SELECTE UR INCO LABO 4 3 asic components of labour income taxation in Croatia income taxation of labour Basic components Disability allowances also apply, but they have not been taken into account in account into taken been not have they but apply, also allowances Disability IA CROAT 1 ION OF TAXAT able able Up to 3,487 3,487 – 13,950 Over 13,950 Annual tax base (EUR) Personal allowance Basic personal allowance Adult dependent First child Second child Third child Fourth child Fifth child This paper does not take into account areas of special state concern and mountainous areas where special special where areas mountainous and concern state special of areas account into take not does paper This Taxpayers are granted a personal allowance in order to reduce the tax base (table in order to reduce the tax are granted a personal allowance Taxpayers 3). Personal income taxpayers are all individuals earning a personal income. Personal are all individuals earning a personal Personal income taxpayers self-employment, six sources: employment, from the following can come income Tax and other (Personal Income insurance rights, capital, property and property from em- only income that allows model applied the above, As noted Act, 2015). taken into account. ployment (wages) be employer, comprise health insurance contributions (13%), work-related injury (13%), work-related contributions insurance comprise health employer, adding up to 15.2% (1.7%), contributions (0.5%), and employment contributions Act, 2012). (Social Insurance Contributions of gross wage in 2013 personal allowance rates apply. this research. Source: Personal Income Tax Act (2012). Income Tax Personal Source: 1 T 2013) Annual tax bands and tax rates (Croatia, Source: Personal Income Tax Act (2012). Personal Income Tax Source: the taxpayer granted are the sum of all allowances personal allowances The total the income, the from is subtracted allowance personal tax When the to. is entitled applied progressively. tax base is obtained to which tax rates are Taxpayer personal allowance (Croatia, 2013) personal allowance (Croatia, Taxpayer T SICs comprise employee SICs, payable by employees, and employer SICs, paya- employer and by employees, SICs, payable employee SICs comprise 1 the to 15% is allocated is 20%: SIC rate employee The by employers. ble 3 3.1 3.1.1 while 5% is allocated to the 2 the to 5% is allocated while - - If the 3 The child benefit amount 2 ax wedge in Croatia T According to the Croatian State Budget Execution Act for 2013. According to the Croatian State Budget Execution For persons earning personal income from employment (employees), net personal income equals gross wage total net monthly personal income per family member does not exceed 16.33% of does not exceed member per family personal income net monthly total the budget basis, child benefit will amount to 9% of the budget basis per child; if household member is between 16.34% the total net monthly personal income per and 33.66% of the budget basis, the child benefithousehold willper income personal monthly net total the if child; per basis budget amount to 7.5% of the and 50% of the budget basis, the granted child falls between 33.67% member for benefit the Moreover, child. per basis budget the of 6% to equal be will benefit is increased by 15%. a child living in a one-parent household 2 3 3.1.2 calculate to was made 1) (table units hypothetical for model microsimulation A calcu to parameters uses set model The 2013. in Croatia for indicators burden tax late SICs, local PIT, government surtax and cash family benefits, as well as net average tax rate and net average tax wedge. the to gross wage in 2013, according monthly average shown above, As has been - Croatian Bureau of Statistics (CBS, 2014), was EUR 1,025, or EUR 12,303 annu of hypo- in the case used as a parameter AGW, It should be noted that 1/3 of ally. the with accordance in 2A-100/33-NC, is not 2A-100/33-2C and units thetical amounts to EUR 342, which is lower than AGW Act: 1/3 of Wage 2013 Minimum A progressive A tax schedule is applied, meaning that the final PIT equals the sum tax the relevant from resulting tax amounts band, these per tax amounts of tax amounts falling This means that (table 4). tax bands applied to relevant rates being fol- the 0.12, by multiplied are base tax the of 3,487 EUR to up band first the into EUR EUR 3,487 and between falling amounts base tax (i.e. EUR 10,463 lowing The by 0.4. are multiplied amount that exceeding 0.25, and tax bases 13,950) by products is PIT. sum of the that is a tax surtax, which government also pay local taxpayers Apart from PIT, Lo- introduce. not or may may municipalities) and (cities units government local by being determined (the percentage of PIT is a percentage cal government surtax assumes a lo- This paper Act, 2012). Tax (Personal Income the city/municipality) rate of 12%. cal government surtax Single parents and couples with children meeting specific conditions are entitled Insur Pension Croatian the to According benefit. child i.e. benefits, family cash to total their if benefit child to entitled is beneficiary a 2016), (HZMO, Institute ance household per year calendar previous the earned in income personal monthly is basis budget monthly The basis. budget the 50% of exceed not does member with the Croatian State Budget Execution accordance for each year in determined Thus, in 2013, the budget basis was EUR 439. Act. minus employee SICs and PIT (including local government surtax). minus employee SICs and PIT depends on the total net monthly personal income per household member. personal income net monthly depends on the total
financial theory and maja cundić practice tax wedge in croatia, italy, ireland, the netherlands and spain 40 (2) 201-230 (2016) 206 financial theory and maja cundić practice tax wedge in croatia, italy, ireland, the netherlands and spain
207 40 (2) 201-230 (2016) - - The tax wedge for single workers with two children earning gross wages amount earning two children workers with for single wedge tax The ing total payable taxes, spouses are treated as separate tax units: each spouse will tax units: each as separate taxes, spouses are treated payable ing total al- child the gross wages, while on their depending of PIT, amount pay a certain gross earns a higher annual spouse who to the be granted this case in will lowance the gross wage are the AGW). Final household outlays paid from wage (100% of outlays. sum of each partner’s ing to 67% of AGW (1A-67-2C) is 18.5% (figure 1), which is significantly less (1A- AGW children earning 67% of than the tax wedge of a single worker without lower: the tax wedge is notably The tax wedge for couples with children 67-NC). for a couple with two children earning gross to 100% and 33% wages amounting points lower than the tax wedge for a (2A-100/33-2C) is 5.1 percentage AGW of AGW) same gross wage (100% and 33% of the earning children without couple earning children worker without single of a wedge tax (2A-100/33-NC). If the one only with children with couple of a that (1A-100-NC) and AGW 100% of (2A-100/0-2C), are AGW 100% of to amounting also an income, spouse earning compared, it can be observed that the tax wedge of a taxpayer supporting a spouse tax personal in increase an to due points by 13 percentage falls two children and allowance and granted child benefit. The analysis of tax wedges for couples with and without children (table A2) shows and without children (table The analysis of tax wedges for couples with calculat When surtax. government local and PIT of amounts smaller significantly The progressive nature of personal income taxation is evident. The net average tax The net of personal income taxation is evident. The progressive nature of a that (1A-100-NC) exceeds AGW 100% of earning worker wedge for a single (1A-67-NC), but not the tax wedge of a single AGW single worker earning 67% of with parent single of a case the In (1A-167-NC). AGW 167% of worker earning lower is unit this of wedge tax the that seen be can it (1A-67-2C), children two gross wage (1A- same the earning children worker without single of a that than 67-NC). For a detailed calculation of tax burden indicators in Croatia in 2013, see tables indicators in Croatia in 2013, see of tax burden calculation For a detailed tax wedge and net average A2 in the annex. Figure 1 shows the net average A1 and hypothetical units. tax rate for all eight When calculating the amount of child benefit it is assumedthat the family’s net a for Therefore, the same as in 2013. year was in the preceding personal income of amount the (1A-67-2C), AGW of 67% earning children two with worker single and 632 EUR of amount basic the of (consisting year per 727 EUR is benefit child additional EUR 95 to which a beneficiary is entitled as a and the other is AGW single spouse earns 100% of where one with two children couple parent). For a to EUR 632. the yearly child benefit amounts without income (2A-100/0-2C), the minimum gross wage (2013 minimum gross wage amounted to EUR 394). to EUR wage amounted gross minimum (2013 gross wage the minimum hypothetical for the indicators of the calculation is used in amount this However, (2014) methodology. to meet the OECD units in order
C N 2A-100/33-
32.9
C 2 2A-100/67-
29.2
C 2 2A-100/33- )/95,000. (1)
27.8
C 2 2A-100/0-
Net average tax rate 22.2
C 2 1A-67- 18.5 asic personal credit Basic personal credit 1,840 max + 502 * (15,000 – taxable income)/7,000 max * (55,000 – taxable income)/40,000 0 (95,000 – taxable income
* C N 39.4 1A-167-
Net average tax wedge
C N 1A-100-
CTC1 = 950 35.2
C N 1A-67- Y 1 5 For families with more than one child, the amount of 95,000 in equation (1) all for amounts the first; the than other child each for 15,000 by increased is children are summed up. Tax credit for families with one child: Tax 30.6 asic components of labour income taxation in Italy Basic components of labour – – ITAL axable income able igure 0 T Up to 8,000 8,001 – 15,000 15,001 – 55,000 Over 55,000
Source: OECD (2014). OECD Source: The child tax credit is calculated as a function of taxable income, as follows: T 2013) in EUR (Italy, basic tax credit, Yearly Source: Author’s calculations. Author’s Source: 3.2 3.2.1 wages gross on 9.49% is Italy in SICs rate employee (2014), OECD to According EUR 45,530 and EUR 99,034, and up to EUR 45,530, 10.49% on wages between Em- amount. latter the exceeding wages on paid is 10,072 EUR of amount fixed a earnings For on wages up to EUR 99,034 annually. is 32.08% ployer SICs rate year. per 31,770 EUR of amount fixed a pays employer the amount that exceeding in the form of tax credits, the amounts of are available tax reliefs Personal income 5 and 6). which depend on income bands (tables 30 20 10 F (Croatia, units hypothetical rate for tax net average wedge and tax Net average 2013), in % 40
financial theory and maja cundić practice tax wedge in croatia, italy, ireland, the netherlands and spain 40 (2) 201-230 (2016) 208 financial theory and maja cundić practice tax wedge in croatia, italy, ireland, the netherlands and spain
209 40 (2) 201-230 (2016) 23 27 38 41 43 Rate (%) 0 690 700 710 720 710 700 690 1,338 1,338 1,348 1,358 1,368 1,378 1,363 1,338 ax credit ax credit T Maximum amount Maximum 800 – 110 * taxable income/15,000 800 – 110 690 * (80,000 – taxable income)/40,000 7 6 8 Families with more than 3 children are entitled to an additional tax credit of credit tax additional an to entitled are children 3 than more with Families 200 per child. EUR – axable income band axable income ax band (in EUR) axable income band 8,001 – 15,000 able able able T T Up to 15,000 15,001 – 29,000 29,001 – 29,200 29,201 – 34,700 34,701 – 35,000 35,001 – 35,100 35,101 – 35,200 35,201 – 40,000 40,001 – 80,000 Over 80,000 Up to 15,000 15,000 – 28,000 28,000 – 55,000 55,000 – 75,000 Over 75,000 T
15,001 – 23,000 23,001 – 24,000 24,001 – 25,000 25,001 – 26,000 26,001 – 27,000 27,001 – 28,000 28,001 – 55,000 Source: OECD (2014). OECD Source: T 2013) (Italy, bands and tax rates Tax A five-band system is in place in Italy, as shown in table 8. For instance, a 38% tax rate tax 38% a instance, For 8. table in shown as Italy, in place in is system five-band A EUR 28,000 and EUR 55,000 per year. is applied to the portion of tax base between Source: OECD (2014). Source: T 2013) for a dependent spouse, in EUR (Italy, tax credit Yearly Table 7 shows tax credit amounts for a dependent spouse and for different taxable taxable spouse and for different 7 shows amounts for a dependent credit tax Table income amounts. Source: OECD (2014). Source: T 2013), continued EUR (Italy, in tax credit, basic Yearly
- -
C N 2A-100/33-
44.7
C 2 2A-100/67-
42.9
C 2 2A-100/33-
40.2
C 2 2A-100/0-
Net average tax rate 38.2
C 2 1A-67-
28.4
C N 1A-167- 53.2
Net average tax wedge
C N 1A-100-
47.8
C N 1A-67- 2 ax wedge in Italy ax wedge 44.7 T igure 0 Source: Author’s calculations based on OECD (2014). Author’s Source: 50 40 30 20 10 F units (Italy, tax rate for hypothetical Net average tax wedge and net average 2013), in % 60 Regional and local taxes also apply. Their amount is a percentage of taxable in- taxable of percentage a is amount Their apply. also taxes local and Regional region. on the depending come, 3.2.2 to and 0.9%, corresponding of 1.73% rates tax and local uses regional model The the applica after is the sum of PIT tax total Therefore, in Rome. rates applied the personal spouses’ to 2.63%. Both amounting tax local and total credits of tax tion incomes are taxed separately. of tax burden indica calculation a detailed A4 in the annex present A3 and Tables tax tax wedge and net average Figure 2 shows the net average tors in Italy in 2013. units. rate for all eight hypothetical (1A-167-NC) AGW 167% of workers earning on single imposed burden tax The (1A-67-2C) the tax wedge for a single parent However, A3). is a high 53.2% (table is significantly smaller (28.4%): apart from receiving tax credit for two children, is also entitled to cash family benefits. this hypothetical unit If the data on hypothetical units with children and those without children (figure 2) are compared, the impact of tax reliefs and cash family benefits on the tax wedge factthe to pointing wage, gross the with increases wedge tax The evident. becomes units 1A-67-NC, 1A-100-NC and 1A- that the tax system is progressive (compare 2A-100/33-2C and 2A-100/67-2C). 167-NC; also compare units 2A-100/0-2C,
financial theory and maja cundić practice tax wedge in croatia, italy, ireland, the netherlands and spain 40 (2) 201-230 (2016) 210 financial theory and maja cundić practice tax wedge in croatia, italy, ireland, the netherlands and spain
211 40 (2) 201-230 (2016) - (2) 12.75 16.00 21.50 25.50 27.50 29.50 30.50 Rate (%) – 9,180). (net income * WRE = 4,080 – 0.35 9 AIN asic components of labour income taxation in Spain taxation income of labour Basic components – For income exceeding EUR 13,260: WRE = EUR 2,652. – For income exceeding EUR 13,260: – For income less than or equal to EUR 9,180 per year: WRE = EUR 4,080. or equal to EUR 9,180 per year: – For income less than EUR 9,180.01 and EUR 13,260: – For income between SP axable income (in EUR) able T Up to 17,707.20 17,707.20 – 33,007.20 33,007.20 – 53,407.20 53,407.20 – 120,000.20 120,000.20 – 175,000.20 175,000.20 – 300,000.20 Over 300,000.20 Tables 9 and 10 show tax bands and relevant PIT and regional tax rates. bands and relevant PIT 9 and 10 show tax Tables Apart from the standard personal income taxes, regional taxes are also applied. Apart from the standard personal income The exempt income is EUR 5,151, the same amount being granted for individuals granted being same amount 5,151, the income is EUR The exempt and families Allowancefiling of jointly. EUR 1,836 is granted for the first child between shared equally are allowances Child second. and EUR 2,040 for the spouses when their incomes are taxed separately. Source: OECD (2014). OECD Source: Family cash benefits are granted for dependent children: EUR 291 for families 2 with EUR 582 for families and EUR 11,490.43, below AGW and child one with below EUR 13,213.99. AGW children and with Tax bands and tax rates (Spain, 2013) Tax T 3.3 SICs in Spain (2014), employee al. Adiego et and OECD (2014) to According unemploy and sick leave, pension to old age dedicated gross wage) are (6.35% of Spanish spouses can choose how they prefer to be taxed: by imposing taxes on taxes by imposing taxed: be to prefer they how choose spouses can Spanish taxed Couples separately. income partner’s or on each income household total claim may a single parent of EUR 3,400, while a tax allowance may claim jointly income from deducted be also can expenses (WRE) Work-related 2,150. EUR employee SICs) as follows: (gross wage minus ment and professional training schemes, while employer SICs (29.9%) comprise SICs (29.9%) employer schemes, while training and professional ment - wages fund, and profes work-related accidents, and sick leave, old age pension taken (EUR 41,108.40) are ceiling 9,036) and upper lower (EUR A sional training. SICs rates. into account when assessing 3.1.1
C N 2A-100/33- 37.5
12.00 14.00 18.50 21.50
C 2 Rate (%) 2A-100/67-
37.6
C 2 2A-100/33-
36.4
C 2 2A-100/0-
Net average tax rate 34.8
C 2 1A-67-
30.3
C N 1A-167- 44.3
Net average tax wedge
C N 1A-100-
40.7
C N 1A-67- 3 10 ax wedge in Spain 37.2 T axable income (in EUR) axable income able igure 0 T Up to 17,707.20 33,007.20 17,707.20 – 53,407.20 33,007.20 – Over 53,407.20 Source: Author’s calculations based on OECD (2014). Author’s Source: F (Spain, units hypothetical for rate tax average net and wedge tax average Net 2013), in % In the OECD (2014) model, each spouse’s income is taxed separately, apart from apart separately, is taxed income spouse’s each (2014) model, OECD In the a tax is granted this couple that amounts to 0, meaning income where one spouse’s is granted a tax relief of single parent, moreover, A per year. relief of EUR 3,400 - ac into taken been not have reliefs tax Any non-standard year. EUR 2,150 per count. of tax burden indicators calculation A6 in the annex show a detailed A5 and Tables in Spain in 2013. Figure 3 shows wedge and net average tax the net average tax rate for all eight hypothetical units. Similarly to the first two countries, Croatia and Italy, the tax burden in Spain is the tax wedge of a single Moreover, a higher income. earning higher for taxpayers AGW to 67% of a gross wage amounting earning and parent with two children points lower than the tax wedge of a single worker (1A-67-2C) is 6.9 percentage (1A-67-NC). AGW earning 67% of Source: OECD (2014). Source: 3.2.2 T 2013) tax rates (Spain, and tax bands Regional 50 40 30 20 10
financial theory and maja cundić practice tax wedge in croatia, italy, ireland, the netherlands and spain 40 (2) 201-230 (2016) 212 financial theory and maja cundić practice tax wedge in croatia, italy, ireland, the netherlands and spain
213 40 (2) 201-230 (2016) - 20 40 Rate (%) Up to 36,800 Single parent threshold of (two incomes) Married couple (41,800 + lower Up to a minimum income) and 65,600 axable income (in EUR) T
4 Up to 41,800 Married couple (single income) 11 asic components of labour income taxation in Ireland income taxation of labour Basic components – On income up to EUR 10,036 per year: at 2%. – On income up to EUR 10,036 per year: EUR 16,016: at 4%. – On income between EUR 10,036 and at 7%. – On income exceeding EUR 16,016: IRELAND able Single worker Up to 32,800 Other See also: Anon (2016). See also: (USC), similar to healthcare contribu- to healthcare (USC), similar Universal Social Charge Apart from PIT, The USC rate is income-tested: tion, is levied at a certain rate. 4 ried couple receiving only one wage capped at an annual EUR 41,800, and a sin- an annual at only one wage capped couple receiving ried for no set limit is there while to EUR 36,800 per year, limited income parent’s gle couple married a for band tax first the of threshold the incomes: two with couple a where both spouses earn a wage is either EUR 65,600 or the lesser income plus Table 11 shows the tax rates applicable to different tax bands. A 20% rate is ap- 20% rate A tax bands. to different tax rates applicable shows the 11 Table of a mar the income up to EUR 32,800 per year, income to single workers’ plied Source: OECD (2014). Source: T 2013) bands and tax rates (Ireland, Tax It could be said that the Irish tax system was somewhat different from the tax different the Irish tax system was somewhat It could be said that while cash fam- is taxable, amount gross wage far: the total systems observed so unique a has Ireland Moreover, high. relatively be cases, some in can, benefits ily - employees and em all to almost Insurance (PRSI) applicable Social Pay Related therefore shall The employee social insurance. to the national ployers and payable pay benefits amounting to 4% of gross wage unless the gross wage is under the of 10.75%. total a pay shall employer the while EUR 18,304 threshold, annual the on depending categories, several of one into fall can contributions PRSI These and see OECD, 2014 details, (for more amount work and income of type O’Donoghue, 2014). 3.4 Evidently, supports for children in Spain, unlike in the case of Croatia and Italy, and Italy, Croatia of case the in unlike in Spain, for children supports Evidently, with couple a for wedge tax the between difference the example, for high: not are low, very is 2A-100/33-NC children without couple a and 2A-100/67-2C children 3). points (figure only 1.1 percentage 3.4.1
C N 2A-100/33-
20.1
C 2 2A-100/67-
19.2
C 2 2A-100/33-
13.5
C 2 2A-100/0-
6.8
Net average tax rate
C 2 1A-67- (3) (31,304 – income) * -24.9
B, amounting to: C N 1A-167- B = 0.6 38.5
Net average tax wedge
C N 1A-100-
26.6
C N 1A-67- 4 21.0 ax wedge in Ireland T igure 0 30 20 10 40 Source: Author’s calculations based on OECD (2014). Author’s Source: -10 -20 -30 -40 Net average tax wedge and net average tax rate for hypothetical units (Ireland, units (Ireland, tax rate for hypothetical Net average tax wedge and net average 2013), in % F Tables A7 and A8 in the annex show a detailed calculation of tax burden indicators calculation A8 in the annex show a detailed A7 and Tables in Ireland in 2013. Figure 4 shows wedge and net average tax the net average tax rate for all eight hypothetical units. basis of the on the expected be could what than lower burden 4 shows a tax Figure the fact that the tax base com- analysis of the Irish tax system. Notwithstanding average net the high, are rates tax the that and amount, gross wage entire the prises in those than lower significantly are Ireland in rate tax average net and wedge tax high amounts This is due to tax credits and relatively the countries observed so far. total taxes under certain conditions. of cash benefits which can even exceed 3.4.2 EUR 41,800, whichever is lower. Any income exceeding these amounts is taxable is taxable amounts these exceeding income Any is lower. 41,800, whichever EUR of 40%. at a rate amount, that or double per year, is EUR 1,650 individual for an tax credit The basic ad- to an worker is entitled every Moreover, couple. for a married i.e. EUR 3,300, EUR 1,650 an extra claim can parent 1,650, and a single credit of EUR tax ditional house- by claimed be can 180 EUR of credit tax special A above. the to addition in of children, care taking while spouse does not earn an income holds in which one another family member (OECD, 2014). an elderly person, or fam- Low-income yearly. child per 1.560 EUR to amounts benefit child Universal would children two with family A benefit. cash income-tested claim also can ilies benefit, thus be entitled to a
financial theory and maja cundić practice tax wedge in croatia, italy, ireland, the netherlands and spain 40 (2) 201-230 (2016) 214 financial theory and maja cundić practice tax wedge in croatia, italy, ireland, the netherlands and spain
215 40 (2) 201-230 (2016) - (4) – – and is calcu is and C 31.15 31.15 Contributions rate (%) – 26,147) 5.85 10.85 42 52 (taxable income * ax rate (%) T C = 1,553 – 0.076 12 asic components of labour income taxation in the Netherlands income taxation in the labour Basic components of S THE NETHERLAND axable income (in EUR) able Up to 19,645 19,645 – 33,363 33,363 – 55,991 Over 55,991 T Source: OECD (2014). OECD Source: Cash benefits for families with two children comprise two components: a basic benefit of EUR 1,861 and an additional allowance which equals lated as follows: Tax bands and tax rates (the Netherlands, 2013) Tax T Tax credit is partially deducted from PIT and partially from contributions. Gen- contributions. from and partially from PIT deducted is partially credit Tax to 17.1% amounts and work credit to EUR 2,001 per year, amounts credit tax eral - an ad and is capped at EUR 1,723; a single parent can claim income of taxable 2014). Agostini, de and Vos de ditional EUR 947 of credit (OECD, 2014; The Dutch tax system is specificin some of its features. Employee SICs to the fund are 0% for gross EUR wages between general unemployment and 17,501 and unemployment employees’ for their premium a pay EUR 50,853. Employers employee will pay EUR 1.250 per year for basic health insurance to An disability. is not this contribution however, insurance company; health a self-chosen private because it represents a non- of tax burden indicators considered in the calculation rate Urban, 2016). Old age pension contribution (see tax compulsory payment EUR 33,363 to equal or less is income this if income of taxable 17.9% at stands Otherwise, the contribution is fixedper andyear. amounts to EUR 5,972. For an- can pay unemployment, EUR 50,853, an employer gross wages lower than nual and similar contributions at a rate of up to 17.9% of gross wage. disability, 3.5 The case of a single parent with two children earning a gross wage amounting to amounting wage gross a earning two children with parent single of a case The 67% AGW (1A-67-2C, of figure 4) is particularly interesting. The applicable tax earning a gross children a taxpayer without lower than that of wedge is drastically unusual negative This it is as low as -24.9%. (1A-67-NC): AGW of wage of 67% family is due to cash so far, observed countries for the is not typical which rate, benefits andtotal tax credits. Thenet average tax rate is markedly lowand nega- smaller a and payments USC are outlays only The -38.3%. to amounting tive, SICs. amount for employee 4 also shows Figure that a couple with two children where one couple A children. without couple burden than a a lower tax have will (2A-100/0-2C) is also AGW and the other earns 100% of spouse is a dependent entitled to higher state supports, leading to significantly lower total tax and a tax wedge of only 6.8%. 3.5.1
-
C N 2A-100/33- 33.5
C 2 2A-100/67-
30.5
C 2 2A-100/33-
28.7
C 2 2A-100/0-
Net average tax rate 30.8
C 2 1A-67-
is not granted to families with two children with two to families granted C is not
11.0
C N 1A-167- 41.9
Net average tax wedge
C N 1A-100-
36.9
C N 1A-67- 5 32.1 ax wedge in the Netherlands ax wedge T igure 0 40 30 20 10 Source: Author’s calculations based on OECD (2014). Author’s Source: F tax rate for hypothetical units Net average tax wedge and net average (the Netherlands, 2013), in % 50 Additional allowance amounting to amounting allowance Additional per year. 46,581 EUR income exceeds taxable whose 3.5.2 indica of tax burden calculation a detailed annex show A10 in the A9 and Tables Figure 5 shows Netherlands in 2013. tors in the tax wedge and net the net average units. rate for all eight hypothetical average tax workers show expected wedge for single tax average net and rate tax Net average earn- children two with parents single for lower significantly are They tendencies. as 21.1 by as many wedge is lower tax (1A-67-2C), where the AGW ing 67% of without with the tax wedge of a single worker points when compared percentage the is again This difference (1A-67-NC). gross wage same the earning children tax unexpected somewhat 5 shows figure However, benefits. family cash of result to gross wages amounting annual and two children with couple a trends: wedge almost high tax burden, a relatively (2A-100/0-2C) bears AGW 100% and 0% of and gross wages amounting with two children of a couple burden tax the to equal are they benefits cash the Moreover, (2A-100/33-2C). AGW of 33% and 100% to burden than tax 2A-100/0-2C bears a higher Therefore, similar. are granted than couples with annual gross wages 2A-100/33-2C, but also a higher burden (2A-100/67-2C). AGW amounting to 100% and 67% of
financial theory and maja cundić practice tax wedge in croatia, italy, ireland, the netherlands and spain 40 (2) 201-230 (2016) 216 financial theory and maja cundić practice tax wedge in croatia, italy, ireland, the netherlands and spain
217 40 (2) 201-230 (2016) 11.0 33.5 20.1 37.5 44.7 32.9 18.5 28.4 30.3 -24.9 1A-67-2C 2A-100/33-BD
30.5 19.2 37.6 42.9 41.9 29.2 39.4 53.2 44.3 38.5 1A-167-NC 2A-100/67-2C 28.7 13.5 36.4 40.2 36.9 27.8 35.2 47.8 40.7 26.6 1A-100-NC 2A-100/33-2C 30.8 6.8 34.8 38.2 32.1 22.2 30.6 44.7 37.2 21.0 NCO ME UR I EN ON LABO BURD TAX
1A-67-NC 2A-100/0-2C OF ARISON 14 13 COMP ES COUNTRI D IN SELECTE able able Netherlands Ireland Spain Italy Netherlands Croatia Croatia Italy Spain Ireland Source: Author’s calculations based on OECD (2014). Author’s Source: Comparison of the net average tax wedge for hypothetical units: couples (as %), 2013 %), (as couples units: hypothetical for wedge tax average net the of Comparison T T units: single workers for hypothetical Comparison of the net average tax wedge (as %), 2013 The results show that Italy has the highest share of taxes and SICs in total labour labour total in SICs and of taxes share highest has the Italy show that results The all observed family types and all has the highest tax wedge for cost. Italy certainly earn- two children with parents of single case from the apart gross wage amounts, the case of hypothetical (1A-67-2C). In AGW ing an annual gross of wage of 67% found in Spain (30.3%), followed by Italy unit 1A-67-2C, the highest tax wedge is Netherlands the in found is wedge tax smallest The (18.5%). Croatia and (28.4%) wedge. Spain takes tax with a negative and Ireland, which stands out as a country Therefore, all cases, while Ireland always takes the last. in almost the second place some- placed are Netherlands the and Croatia Spain, and Italy up after coming stands out wedge. Ireland size of the tax comes to the where in the middle when it sometimes even negative, tax wedge. with a very low, The results of net average tax wedge calculation are summarized in tables 13 and are summarized tax wedge calculation The results of net average worker units and couple units. 14, separately for single 4 their countries, observed the systems of tax the in differences numerous Despite SICs, and PITs cash family benefits are based on similar principles. Progressive the in with a difference of the observed countries, are applied in all tax schedules SICs tax rates; employee bands and in the relevant thresholds of tax number and comprise SICs employer while contributions, pension age old always include health insurance benefits, with a in difference the way in which contributions are 2013). ways the rates are applied (Čok et al., determined and in the Source: Author’s calculations based on OECD (2014). Author’s Source:
40 figure 9) that the that 9) figure Net average tax wedge 30 Employer SICs 20 Employee SICs 10 PITMFB 0 6 Italy Spain Ireland Croatia igure Netherlands Source: Author’s calculations based on OECD (2014). Author’s Source: F Decomposition of net average tax wedge for hypothetical unit 1A-67-NC, 2013, in % Charts 6 to 13 show a comparative analysis of the net average tax wedge for all wedge for tax net average of the analysis show a comparative 6 to 13 Charts and decomposing unit separately every hypothetical showing countries, selected minus shares of: (a) PIT represent the which into three elements, the tax wedge SICs. and (c) employer (b) employee SICs, benefits (PITMFB), cash family for single-worker tax wedge decompositions of 9 show a comparison Charts 6 to earning a worker without children it comes to a single When units. hypothetical gross wage (1A-67-NC, AGW amounting figureto 6)67% andof a singleparent with two children and the same gross wage (1A-67-2C, figure 7), significant dif- so in Ire- of PITMFB ferences in the share in labour costs are found, especially above that been noted as well. It has and Croatia Italy land, but in the Netherlands, as of credits, as well and tax in personal allowances of differences this is the result in cash family benefits. differences gross different earning children without units hypothetical If PITMFB shares for its to wedge tax high owes its Italy that evident becomes it compared, wages are (1A-167-NC; case observed last the in only is It PITMFB share. SICs it comes to employee When PITMFB share is the highest. Netherlands’s share in labour cost, Croatia comes first (13%) for almost all gross wage levels. 24.3%. Next comes is highest in Italy, Employer SICs share in total labour cost SICs Employer AGW. 167% of earning Spain with 23%, i.e. 22.1% for taxpayers 9.7% in Ireland, and it varies in the Neth- share amounts to 13.2% in Croatia and depending on wage. erlands – it is always under 9%, but varies
financial theory and maja cundić practice tax wedge in croatia, italy, ireland, the netherlands and spain 40 (2) 201-230 (2016) 218 financial theory and maja cundić practice tax wedge in croatia, italy, ireland, the netherlands and spain
219 40 (2) 201-230 (2016) 40 50 30 40 Net average tax wedge Net average tax wedge 20 10 30 Employer SICs 0 Employer SICs 20 -10 Employee SICs Employee SICs -20 10 -30 PITMFB PITMFB 0 -40 8 7 Italy Italy Spain Spain Ireland Ireland Croatia Croatia igure igure Netherlands Netherlands Source: Author’s calculations based on OECD (2014). Author’s Source: F Decomposition of net average tax wedge for hypothetical unit 1A-100-NC, 2013, in % Source: Author’s calculations based on OECD (2014). Author’s Source: F Decomposition of net average tax wedge for hypothetical unit 1A-67-2C, 2013, in % 60 50 Net average tax wedge 40 Employer SICs 30 20 Employee SICs 10 PITMFB 0 9 Italy Spain Ireland Croatia igure Netherlands Source: Author’s calculations based on OECD (2014). Author’s Source: for wedge tax average net of decompositions show comparative 13 to 10 Charts hypothetical units – couples. If couples with two children (figures 10,11 and 12) are2A-100/0-2C observed, from apart Italy, found in is again wedge tax the of PITMFB in share the greatest (figure 10), where the Netherlands comes first withof PITMFB for 2A-100/67- share The third. comes Italy and second comes Spain 10.4%. For 2A-100/0-2C, 2C (figure 11) is lowest in Croatia, only highest the with 3%, followedItaly, and respectively), 9.7%, and (8.2% Spain and Netherlands by Ireland (5.8%), the Croatia, highest in are still contributions Employee to 11.5%. share amounting low- the with country the as Ireland and Spain, Italy, Netherlands, the by followed Employer SICs share is still highest in Italy est share of employee contributions. 13.2%. with place third the is in Croatia up second. coming Spain (24.3%), with employer SICs, under 10%. The Netherlands and Ireland have lower children without couple and a two children with 13 show a couple Figures 12 and earning the same gross 2A-100/33-NC, respectively), wages (2A-100/33-2C and would children without couple wedge for the tax the that where one would expect points is observed in of 6.6 percentage The greatest difference always be higher. points, while a of 5.2 percentage with a difference Ireland, followed by Croatia of only 1.1 percentage points was found in Spain. difference the tax that by the fact from other observed countries differs The Netherlands 100 and 0% of earning wedge falls from 30.8% for couples with two children 100 and earning to 28.7% for couples with two children (2A-100/0-2C) AGW F Decomposition of net average tax wedge for hypothetical unit 1A-167-NC, 2013, in %
financial theory and maja cundić practice tax wedge in croatia, italy, ireland, the netherlands and spain 40 (2) 201-230 (2016) 220 financial theory and maja cundić practice tax wedge in croatia, italy, ireland, the netherlands and spain
221 40 (2) 201-230 (2016) 40 40 30 Net average tax wedge Net average tax wedge 30 20 Employer SICs Employer SICs 20 10 Employee SICs Employee SICs 10 0 PITMFB PITMFB 0 -10 11 10 Italy Italy Spain Spain Ireland Ireland Croatia Croatia igure igure Netherlands Netherlands Source: Author’s calculations based on OECD (2014). Author’s Source: F Decomposition of net average tax wedge for hypothetical 2013, in % unit 2A-100/67-2C, Source: Author’s calculations based on OECD (2014). Author’s Source: F 2013, 2A-100/0-2C, unit hypothetical for wedge tax average net of Decomposition in % The tax wedge for almost all observed wages is highest in Italy, and lowest in lowest and Italy, in highest is wages observed all for almost wedge tax The middle. cases, comes in the Croatia, in most Ireland, while 33% of AGW (2A-100/33-2C) and then rises again to 30.5% for couples with two two with couples for 30.5% to again rises then and (2A-100/33-2C) AGW of 33% (2A-100/67-2C). AGW 67% of 100 and earning children 50 50 40 40 Net average tax wedge Net average tax wedge 30 30 Employer SICs Employer SICs 20 20 Employee SICs Employee SICs 10 10 PITMFB PITMFB 0 0 13 12 Italy Italy Spain Spain Ireland Ireland Croatia Croatia igure igure Netherlands Netherlands Source: Author’s calculations based on OECD (2014). Author’s Source: Source: Author’s calculations based on OECD (2014). Author’s Source: F unit for hypothetical wedge tax average of net decomposition Comparative 2A-100/33-NC, 2013, in % F Decomposition of net average tax wedge for hypothetical 2013, in % unit 2A-100/33-2C,
financial theory and maja cundić practice tax wedge in croatia, italy, ireland, the netherlands and spain 40 (2) 201-230 (2016) 222 financial theory and maja cundić practice tax wedge in croatia, italy, ireland, the netherlands and spain
223 40 (2) 201-230 (2016) USION CONCL Lower net average tax rates and lower tax wedge may imply a healthier economy a healthier wedge may imply average tax rates and lower tax Lower net Of course, a on its citizens. tax a higher imposing with a country when compared can citizens satisfaction; not a necessary condition for citizen lower tax wedge is be satisfied even if they pay highertaxes, under the condition that they are pro- The public services and goods vided with satisfactory from the state in return. - de country certain a of individuals on imposed levies other and taxes of amount their of more if happier be will citizens most but factors, of number a on pends private However, levies. state-imposed on than spending private on spent is wage revenue from other taxes. lead to an increase in government spending will again is optimal. remains what amount of tax wedge The question therefore 5 family for different income labour on burden tax the compared paper has This show that results The Netherlands. the and Ireland Spain, Italy, Croatia, in types family observed for almost all a doubt, the highest tax wedge is, without Italy’s characterized of Europe are in the northwest and Ireland The Netherlands types. so. wedges, Ireland especially by low tax - - - - - Finan-
Newsletter, No. 88. Newsletter, . [online] Available at: RENCES REFE 1. 9. 10. 11. 12. OECD, 2014. 13. 14. 15. 16. 5. 6. 7. 8. 2. 3. 4. financial theory and maja cundić practice tax wedge in croatia, italy, ireland, the netherlands and spain 40 (2) 201-230 (2016) 224 financial theory and maja cundić practice tax wedge in croatia, italy, ireland, the netherlands and spain 225 40 (2) 201-230 (2016) nd – – 0 0 – 0 0 0 6.1 410 727 410 18.5 8,202 1,247 1,640 6,562 7,671 6,562 9,449 2,887 1,750 1,230 1A-67-2C – – – 0 333 30.2 39.4 3,117 3,110 4,101 1,025 3,486 2,776 2,776 9,303 1,025 3,076 20,505 16,404 12,918 13,294 23,622 10,327 1A-167-NC – – – 0 615 136 615 25.3 35.2 1,870 2,461 9,842 3,486 6,357 1,136 1,136 1,272 8,570 5,603 4,987 1,845 12,303 14,173 1A-100-NC – – – 0 44 410 369 369 413 410 20.0 30.6 8,202 1,247 1,640 6,562 3,486 3,076 6,148 9,449 3,300 2,890 1,230 1A-67-NC pension pension st nd units ical r hypothet rs fo cato en indi burd tax of Paid into the 1 insurance pillar Paid into the 2 insurance pillar A1 Gross wage (in EUR) Employer SICs Employee SICs Personal income Personal allowance PIT Local taxes (12% local government surtax) Cash family benefits Net wage Labour cost Net average tax rate (%) Net average tax wedge (%) 3.1. 3.2. Work-related Work-related expenses Tax Tax relief Tax Tax base Tax Tax credit Total Total taxes Total taxes and contributions Total PIT after tax credit after PIT 17.1. Tax levies 17.1. Tax 17.2. Non-tax payments 1. 2. 3. 4. 5. 6. 7. 8. 9. able 10. 11. 11. 12. 13. 14. 15. 16. 17. 18. 19. pension insurance pillar are not tax payments. Item no. 17 is therefore divided into tax (17.1.) and (17.1.) tax into divided therefore is 17 no. Item payments. tax not are pillar insurance pension calculation. indicators burden tax in included are payments tax only and (17.2.), payments non-tax calculations. Author’s Source: Note: According to the Taxing Wages methodology (OECD, 2014), employee SICs paid into the 2 the into paid SICs employee 2014), (OECD, methodology Wages Taxing the to According Note: (Croatia, 2013) (Croatia, Calculation of tax burden indicators for hypothetical units: single workers units: single indicators for hypothetical of tax burden Calculation a i Croat T ANNEX ion ulat Calc d countries in selecte – – – 0 820 136 820 22.8 32.9 2,493 3,281 6,972 6,357 1,136 1,136 1,272 7,047 6,226 2,461 11,851 33-NC 16,404 13,123 18,897 2A-100/ – – – 0 76 630 630 706 18.4 29.2 3,117 4,101 1,025 5,249 7,923 6,899 1,025 3,076 67-2C 11,155 20,505 16,404 15,698 24,161 2A-100/ – – – 0 31 820 261 261 292 820 16.8 27.8 2,493 3,281 2,174 6,066 5,246 2,461 33-2C 11,155 16,404 13,123 12,831 18,897 2A-100/ – – – 6 52 52 58 615 431 632 615 10.3 22.2 1,870 2,461 9,842 9,412 9,785 3,756 3,141 1,845 0-2C 12,303 14,173 2A-100/ pension pension nd st Non-tax payments Paid into the 1 insurance pillar Paid into the 2 insurance pillar A2 Gross wage (in EUR) Gross wage Employer SICs Employee SICs Employee Personal income Personal allowance PIT Local taxes (12% local government surtax) Cash family benefits Net wage Labour cost Net average tax rate (%) Net average tax wedge (%) 3.1. 3.2. Work-related Work-related expenses Tax Tax relief Tax Tax base Tax Tax credit Total Total taxes Total taxes and contributions Total PIT after tax credit after PIT 17.1. Tax payments 17.1. Tax 17.2. 1. 2. 3. 4. 5. 6. 7. 8. 9. able 10. 11. 11. 12. 13. 14. 15. 16. 17. 18. 19. Note: See note under table A1. Note: See note under table calculations. Author’s Source: T 2013) (Croatia, couples units: hypothetical for indicators burden tax of Calculation financial theory and maja cundić practice tax wedge in croatia, italy, ireland, the netherlands and spain 40 (2) 201-230 (2016) 226 financial theory and maja cundić practice tax wedge in croatia, italy, ireland, the netherlands and spain 227 40 (2) 201-230 (2016) – – – – – – 0 5.5 471 943 28.4 27.0 44.7 6,353 1,879 4,239 2,831 1,409 1,880 2,671 3,758 8,720 2,740 5,980 6,923 10,112 33-NC 19,802 17,923 17,923 18,714 26,155 39,605 12,705 35,846 35,846 28,923 52,310 23,387 2A-100/ 1A-67-2C – – – 0 – – – 342 861 38.2 53.2 24.6 42.9 4,738 1,177 4,698 3,722 7,176 1,178 8,354 67-2C 49,506 15,882 44,768 44,768 13,332 12,990 14,167 30,601 65,388 34,787 49,506 15,882 44,808 44,808 10,898 37,314 65,388 28,934 2A-100/ 1A-167-NC – – – 0 – – – 969 707 943 932 31.0 47.8 21.0 40.2 9,529 2,819 6,659 5,690 6,397 3,758 8,720 4,175 4,545 5,488 33-2C 29,704 26,885 26,885 20,487 39,233 18,745 39,605 12,705 35,846 35,846 31,290 52,310 21,951 2A-100/ 1A-100-NC – – – 0 – – – 471 707 27.0 44.7 18.3 38.2 6,353 1,879 4,239 1,240 2,999 3,470 9,529 2,819 6,659 3,094 3,565 4,272 1,644 0-2C 11,453 11,703 19,802 17,923 17,923 26,155 29,704 26,885 26,885 24,257 39,233 16,620 2A-100/ 1A-67-NC A4 A3 y Gross wage (in EUR) Gross wage Employer SICs Employee SICs Personal income Personal allowance PIT Local taxes Cash family benefits Net wage Labour cost Net average tax rate (%) Net average tax wedge (%) Gross wage (in EUR) Employer SICs Employee SICs Personal income Personal allowance PIT Local taxes Cash family benefits Net wage Labour cost Net average tax rate (%) Net average tax wedge (%) Work-related Work-related expenses Tax Tax relief Tax Tax base Tax Tax credit Total Total taxes Total taxes and contributions Total Work-related Work-related expenses Tax Tax relief Tax Tax base Tax Tax credit Total Total taxes Total taxes and contributions Total PIT after tax credit PIT PIT after tax credit PIT 1. 2. 3. 4. 5. 6. 7. 8. 9. 1. 2. 3. 4. 5. 6. 7. 8. 9. able able 10. 11. 11. 12. 13. 14. 15. 16. 17. 18. 19. 10. 11. 11. 12. 13. 14. 15. 16. 17. 18. 19. Source: Author’s calculations based on OECD (2014). Author’s Source: T 2013) for hypothetical units: couples (Italy, indicators Calculation of tax burden Source: Author’s calculations based on OECD (2014). Author’s Source: Ital T workers units: single indicators for hypothetical of tax burden Calculation (Italy, 2013) (Italy, – – 0 0 – – 0 9.5 543 543 30.3 18.8 37.5 5,188 1,102 2,652 2,150 2,833 2,289 6,834 2,204 6,732 6,588 2,276 4,312 4,312 11,447 11,447 33-NC 17,351 15,706 22,539 34,703 10,376 25,767 25,767 28,187 45,079 16,892 2A-100/ 1A-67-2C 0 – – 0 0 – – 0 28.5 44.3 18.9 37.6 2,610 2,652 1,275 9,741 9,741 2,755 5,304 8,952 3,509 5,443 5,443 67-2C 38,116 38,116 11,016 43,378 12,291 31,027 55,670 24,643 43,378 12,970 35,320 35,320 35,180 56,348 21,168 2A-100/ 1A-167-NC 0 – – 0 0 – – 0 22.9 40.7 17.4 36.4 7,782 1,653 2,652 5,587 1,275 4,312 4,312 2,204 6,732 6,588 2,756 3,832 3,832 33-2C 26,027 21,722 21,722 20,062 33,809 13,747 34,703 10,376 25,767 25,767 28,666 45,079 16,412 2A-100/ 1A-100-NC 0 – – 0 – – 0 18.4 37.2 15.3 34.8 5,188 1,102 2,652 3,365 1,275 2,091 2,091 8,380 7,782 1,653 2,652 3,400 4,567 2,234 2,333 2,333 0-2C 11,768 17,351 13,597 13,597 14,159 22,539 26,027 18,322 18,322 22,041 33,809 2A-100/ 1A-67-NC A6 A5 Gross wage (in EUR) Gross wage Employer SICs Employee SICs Personal income Personal allowance PIT Local taxes Cash family benefits Net wage Labour cost Net average tax rate (%) Net average tax wedge (%) Gross wage (in EUR) Employer SICs Employee SICs Personal income Personal allowance PIT Local taxes Cash family benefits Net wage Labour cost Net average tax rate (%) Net average tax wedge (%) Work-related Work-related expenses Tax Tax relief Tax Tax base Tax Tax credit Total Total taxes Total taxes and contributions Total Work-related Work-related expenses Tax Tax relief Tax Tax base Tax Tax credit Total Total taxes Total taxes and contributions Total PIT after tax credit PIT PIT after tax credit PIT ain 1. 2. 3. 4. 5. 6. 7. 8. 9. 1. 2. 3. 4. 5. 6. 7. 8. 9. able able 10. 11. 11. 12. 13. 14. 15. 16. 17. 18. 19. 10. 11. 11. 12. 13. 14. 15. 16. 17. 18. 19. Source: Author’s calculations based on OECD (2014). Author’s Source: T 2013) (Spain, couples units: hypothetical for indicators burden tax of Calculation Source: Author’s calculations based on OECD (2014). Author’s Source: Sp T workers units: single indicators for hypothetical of tax burden Calculation (Spain, 2013) financial theory and maja cundić practice tax wedge in croatia, italy, ireland, the netherlands and spain 40 (2) 201-230 (2016) 228 financial theory and maja cundić practice tax wedge in croatia, italy, ireland, the netherlands and spain 229 40 (2) 201-230 (2016) – – – 0 – – – 0 863 830 830 11.9 20.1 -38.3 -24.9 2,321 4,317 4,950 9,966 4,014 4,398 1,295 8,635 6,600 2,035 1,816 3,851 9,544 33-NC 21,587 21,587 21,587 29,860 23,908 43,175 43,175 43,175 38,028 47,573 2A-100/ 1A-67-2C – – – 0 – – – 31.9 38.5 10.5 19.2 5,802 2,159 3,300 3,097 5,802 2,159 6,600 4,194 2,415 6,609 3,120 67-2C 11,939 53,968 53,968 53,968 15,239 15,036 36,774 59,770 22,996 53,968 53,968 53,968 10,794 48,320 59,770 14,569 2A-100/ 1A-167-NC – – – 0 – – – 4.7 18.7 26.6 13.5 3,481 1,295 6,476 3,176 1,585 3,300 4,762 9,538 4,398 1,295 8,635 2,035 1,816 3,120 6,600 3,851 9,544 33-2C 32,381 32,381 26,324 35,862 32,381 43,175 43,175 41,148 47,573 43,175 2A-100/ 1A-100-NC – – – 0 – – – 21 6.8 863 830 716 -3.2 12.6 2,321 4,317 1,017 3,300 1,847 5,031 3,481 1,295 6,476 1,585 4,632 5,760 2,302 7,078 0-2C 21,587 21,587 18,876 23,908 21,587 32,381 32,381 33,416 35,862 32,381 2A-100/ 1A-67-NC A8 A7 Gross wage (in EUR) Gross wage Employer SICs Employee SICs Personal income Personal allowance PIT Local taxes (USC) Cash family benefits Net wage Labour cost Net average tax rate (%) Net average tax wedge (%) Gross wage (in EUR) Employer SICs Employee SICs Personal income Personal allowance PIT Local taxes Cash family benefits Net wage Labour cost Net average tax rate (%) Net average tax wedge (%) Work-related Work-related expenses Tax relief Tax base Tax credit Total taxes taxes and contributions Total Work-related Work-related expenses Tax relief Tax base Tax credit Total taxes taxes and contributions Total PIT after tax credit PIT PIT after tax credit PIT 1. 2. 3. 4. 5. 6. 7. 8. 9. 1. 2. 3. 4. 5. 6. 7. 8. 9. able able 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. Source: Author’s calculations based on OECD (2014). Author’s Source: T 2013) (Ireland, couples units: hypothetical for indicators burden tax of Calculation Source: Author’s calculations based on OECD (2014). Author’s Source: d Irelan T workers units: single indicators for hypothetical of tax burden Calculation (Ireland, 2013) (Ireland, 0 – – – – – – 3.1 11.0 33.5 27.5 6,887 3,035 1,040 7,951 1,040 7,951 1,355 1,064 2,395 9,015 2,413 4,825 2,985 9,689 2,862 5,751 33-NC 23,391 34,935 69,897 31,083 46,505 31,129 62,258 31,129 62,258 32,073 64,146 2A-100/ 1A-67-2C 0 – – – – – – 403 41.9 30.5 38.4 24.2 9,011 9,011 1,861 1,467 3,941 6,003 8,245 4,864 7,267 67-2C 35,630 28,553 85,046 87,449 49,416 60,757 22,521 22,521 22,924 10,478 76,727 77,457 76,727 77,457 12,275 80,182 80,182 2A-100/ 1A-167-NC 0 – – – – – – 550 36.9 28.7 31.2 22.3 1,861 7,533 7,719 7,533 7,719 1,296 8,083 9,015 3,590 4,825 7,462 8,453 4,405 5,751 33-2C 33,114 19,400 21,923 52,514 69,897 49,835 46,328 62,258 46,328 62,258 48,109 64,146 2A-100/ 1A-100-NC 0 – – – – – – 589 761 32.1 30.8 26.1 24.5 1,880 1,806 7,322 1,806 7,322 2,395 8,083 2,413 3,590 6,562 6,339 2,862 4,405 0-2C 11,230 18,066 34,935 52,514 23,705 36,328 31,129 46,328 31,129 46,328 32,073 48,109 2A-100/ 1A-67-NC A10 A9 s rland Nethe Net average tax wedge (%) Net average tax rate (%) Labour cost Net wage Cash family benefits Local taxes PIT Personal allowance Personal income Employee SICs Employer SICs Gross wage (in EUR) Gross wage Total taxes and contributions Total Total Total taxes Tax Tax credit Tax Tax base Tax Tax relief Work-related Work-related expenses PIT after tax credit PIT Net average tax wedge (%) Net average tax rate (%) Labour cost Net wage Cash family benefits Local taxes PIT Personal allowance Personal income Employee SICs Employer SICs Gross wage (in EUR) Total taxes and contributions Total Total Total taxes Tax Tax credit Tax Tax base Tax Tax relief Work-related Work-related expenses PIT after tax credit PIT 9. 8. 7. 6. 5. 4. 3. 2. 1. able able 9. 8. 7. 6. 5. 4. 3. 2. 1. 19. 18. 17. 16. 15. 14. 13. 12. 11. 11. 10. 19. 18. 17. 16. 15. 14. 13. 12. 11. 11. 10. Source: Author’s calculations based on OECD (2014). Author’s Source: Source: Author’s calculations based on OECD (2014). Author’s Source: T for hypothetical units: couples indicators Calculation of tax burden (the Netherlands, 2013) The T workers units: single indicators for hypothetical of tax burden Calculation 2013) (the Netherlands, financial theory and maja cundić practice tax wedge in croatia, italy, ireland, the netherlands and spain 40 (2) 201-230 (2016) 230