2023-04-26 12:39:29
High inflation has shrunk disposable income, canceling out raises. The tax burden is also higher for those with children
High inflation has caused a double blow to Greece’s employees, according to an OECD report (Taxing Wages). The findings shatter the government’s narrative by revealing that disposable income shrank due to a significant decline in real wages, as nominal wage increases were lower than inflation, causing an indirect reduction in earnings.
In addition, disposable income was also reduced due to the higher overall tax burden (tax wedge), as there was no indexation of personal income tax scales and income thresholds for child benefit, resulting in some wage earners being taxed at a higher rate or lose benefits.
In Greece, the decline in real wages last year amounted to 7.4% and was the fourth largest among OECD countries, following Estonia (10%), Turkey (8.8%) and the Netherlands (8.3%). ). The average nominal gross wage in Greece rose by 1.5% to 19,912 euros from 19,614 euros in 2021, but inflation rose 9.7% and thus left a big “black hole” in the purchasing power of wage earners.
Furthermore, Greece and Japan were the only OECD countries in which the nominal wage decreased marginally in the 2019-2022 three-year period, while in all other countries it increased. As regards the tax burden – which the OECD defines as the amount of income tax and social security contributions of employees and employers less benefits, which is then calculated as a percentage of the total labor costs for employers -, this it decreased marginally (by 0.02 percentage points) for single employees without children with an average income to 37.1%. This development resulted mainly from the decrease in employee and employer contributions for supplementary insurance – which reduced the tax wedge by 0.11 and 0.10 pp, respectively – which overshadowed the increase in income taxation by 0, 6 p.m. For all OECD countries, the average rate for the above category of households also remained unchanged at 34.6%.
In contrast, the total tax burden in Greece increased by 1.52 percentage points, to 35.7%, for married couples with two children, one of whom has an average wage and the other 67% of the average wage.
As the OECD notes, the increase in the burden is due to the fact that households in this category were not entitled to child benefits due to the increase in the average salary. In the OECD countries the average increase in the tax wedge for this category was 0.45 pp. to 29.4%, with Greece recording the third highest increase following Chile (15.95 p.m.) and the USA (6.94 p.m.).
Marginally increased by 0.03 p.m., to 33.7%, last year was the tax wedge for couples with two children and a worker with an average salary. In the OECD, the corresponding increase was 1.05 p.m., to 25.6%.
As can be seen from the above figures, the tax burden in Greece remains significantly higher than the average of the OECD countries, with the difference being greater in the cases of married employees with children.
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