Tax wedge has decreased for all families over the past 11 years
Canada has a relatively low tax and social security burden on labour income, according to the Organisation for Economic Co-operation and Development (OECD).
The average tax wedge, which is calculated by adding income taxes to employee and employer social security contributions and deducting cash transfers as a percentage of total labour costs, is lower than the OECD average for every family type, according to the organization’s Taxing Wages Report.
The difference between Canada’s tax wedge and the OECD average has increased in the past 11 years, the organization said.
Single parents with two children and a low income face a negative tax wedge. They receive more government transfers than the pay. Their tax wedge is the fourth lowest among OECD countries and is more than 24 percentage points below the OECD average, according to the report.
The tax wedge in the report is calculated using average gross wage earnings of full-time employees in the private sector, including those in management positions.
