Taxpayers in Spain pay more than the OECD average

The Organisation for Economic Co-operation and Development global policy forum estimates that 40.2% of gross wages are spent on tax and other contributions compared to the average of 34.8%

José María Camarero

Madrid

Sunday, 28 April 2024, 08:40

The OECD (Organisation for Economic Co-operation and Development) global forum has revealed how much of salaries in Spain go to taxes and social security contributions. The organisation, which brings together the world's most developed countries, estimates that each taxpayer has 40.2% of their gross salary deducted from their pay to cover these two items: one goes to the Treasury and the other to Social Security. In comparison, the OECD average is 34.8%, i.e. almost six points lower. That said among the main economic powers, Spain still ranks below Germany and France in terms of tax and social security costs.

This updated classification by the OECD comes just days after the president of the employers' association, Antonio Garamendi, called for companies to pay the full wage to workers and for workers to pay their own social security contributions. To add to the controversy, First Vice-President and Minister of Finance, María Jesús Montero, held a tense debate with José María Figaredo MP on the IRPF (Spain's income tax) paid by those who earn the minimum wage.

The OECD data - the result of their 2023 data-gathering exercise - also revealed that the tax burden on labour costs increased by an average of 0.13 percentage points compared to 2022. For Spain the increase was noted to be 0.62 percentage points compared to the previous year.

The 40.2% big slice of taxes and more borne by the gross salary of single, childless workers in Spain in 2023 reflects a personal income tax burden of 12% of gross salary, compared to 13.3% of the OECD average, placing Spain in 21st position among the 38 countries analysed.

Meanwhile, social security contributions paid by companies accounted for 23.3% and 4.9% was paid by workers, while the average for OECD members from developed countries was 13.1% and 8.4% respectively. As a result, Spain was the sixth country with the highest contribution from companies, behind only France (26.6%), Estonia and the Czech Republic (25.3%), Italy (24%) and Sweden (23.9%).

If we were to draw up a ranking of these labour costs, Spain would rank 14th in tax deductions, one place higher than in 2022. This ranking is still led by Belgium, where single, childless workers have 52.7% of their salary withheld. In fact, Belgian workers are the only ones who have to transfer more of their gross salary to government and social security than they receive in net income.

Behind Belgium, the countries with the highest difference between gross and net salary are Germany, where 47.9% is withheld, Austria (47.2%), France (46.8%) and Italy (45.1%). By contrast, the OECD countries with the lowest tax slices taken in 2023 were Colombia (0%), Chile (7.1%), Mexico (20%) and New Zealand (21.1%).

In its analysis the OECD noted that tax deductions increased in 23 of the 38 member countries between 2022 and 2023, decreased in 13 and remained the same in Chile and Hungary. Last year the increases ranged from 0.03 percentage points in Switzerland to 2.14 in Australia. It was higher than 0.5 percentage points in six countries, while only Australia and Luxembourg recorded an increase of more than 1 percentage point.

On the other hand, the decreases seen in OECD countries in 2023 were all less than one percentage point, ranging from -0.01 in Canada to -0.98 percentage points in Mexico.

Burden of social security contributions

Turning to labour costs, the OECD data indicate that the average labour cost stood at 65,214 dollars (61,067 euros), with Switzerland being the country with the highest figure, amounting to 106,452 dollars (99,683 euros), while the lowest applied to Colombia, with 16,615 dollars (15,558 euros). Spain, with 63,683 dollars (59,633 euros), ranked 20th out of 38 countries.

Likewise, the average gross wage across OECD member nations reached 56,306 dollars (52,725 euros). Switzerland was the highest with 100,048 dollars (93,686 euros) and Colombia the lowest with 16,615 dollars (15,558 euros). Spain, at $48,836 (45,730 euros) ranked 23rd with an average gross salary 13% below the OECD average.

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