International Comparisons 2015

This is CARE's tenth annual international review of the taxation of families. It compares both the tax burdens and effective marginal tax rates (EMTRs) of various household types in the UK with those of similar households in other developed countries in the calendar year 2015. It considers not only households with an ‘average wage’ but also those with incomes above and below this figure. 

This review uses statistics published by the OECD in Taxing Wages to make comparisons between the UK and other developed countries. It examines tax burdens on households at various income points. Following established OECD practice, ‘tax’ is defined as income tax plus employee social security contributions less cash benefits. The UK tax rates take account of tax credits and child benefit but not housing benefit or council tax support.

International comparisons for 2015 show that tax burdens on one-earner families on the average wage are significantly greater than OECD averages.

At the OECD average wage for the UK of £36,017, the tax burden is 20% greater than the OECD average on single parents with two children, and 26% greater on one-earner married couples with two children. The unfavourable position of these one-earner families results mainly from the fact that UK income tax does not take account of marriage or family responsibilities.

By contrast with the position of one-earner families, the tax burden on single people without family responsibilities is less than international averages. At the OECD average wage for the UK, it is 8% less than the OECD average, 21% less than the EU(15) average, and 19% less than the EU(21) average.

It is possible to make international comparisons for two-earner couples at only two income points (133% and 167% of the OECD average wage). At these points the UK tax burden on couples without children and on couples with two children is less than international averages.

Although the UK tax system is not more burdensome in general than the tax systems of other developed countries, its treatment of one-earner families on the average wage is clearly unfavourable by international standards. At the average wage, the tax burden on a one-earner married couple with two children is 78.7% of that on a single person without children, much greater than the OECD average of 57.3%.

UK tax credits compensate low income families for the heavy income tax burden, such that their overall tax rate is low by international standards. However, the withdrawal of UK tax credits as incomes rise is largely responsible for high effective marginal tax rates (EMTRs) across a wide income range.

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Don Draper