How much is our work taxed compared to other countries?

The Organisation for Economic Cooperation and Development (OECD) recently released its latest Taxing Wages 2022 report, and it’s interesting to see where New Zealand falls compared to other developed nations when it comes to tax. One of the purposes of this particular paper was to look at the impact of Covid-19 on how workers were taxed across 38 different nations.

New Zealand’s ‘tax wedge’ is very low

The ‘tax wedge’ is the gap between what the employer pays for labour and what the worker takes home, and there’s an enormous range between nations. In Belgium, workers lose 52.6% of their income to taxes, while in Colombia it’s zero.

Here in Aotearoa, the tax wedge in 2021 was 19.4%. This was much lower than the OECD average of 34.6% and we had the third lowest tax wedge – only Chile on 7% and Colombia on 0 were lower. Here are a few countries for comparison:

2021 tax wedge by country

  • Belgium – 52.6%
  • France – 47%
  • Netherlands – 35.3%
  • OECD average – 34.6%
  • United Kingdom – 31.3%
  • United States – 28.4%
  • Australia – 27.1%
  • New Zealand – 19.4%
  • Colombia – 0%

You can see the full table here.

Children get a tax advantage

Across all 38 nations analysed, families with children pay a lower tax wedge than single earners without children. The average was 24.6% for single-earner families with children, compared to 28.8% for double-earner families with children and 34.6% for individuals without children.

In New Zealand, the gap was much larger. The single-earner family tax wedge was 6.5%, while the double-earner family was 17.3% and the single person tax wedge was 19.4%.

Are you paying the right amount of tax?

If you think that you may not be paying the right amount of tax, give us a call or send us an email. We can talk to you about how to structure your business and personal assets, and ways to help you only pay the tax you need to pay.

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