Wikipedia definition of tax wedge references a document, which makes following claim:

Europe's comparatively high tax burden has created big marginal effects and tax wedges. For example a 2007 report by a right-wing thinktank, Timbro, calculated the amount going to the service worker's wallet is approximately 10% in Belgium, 15% in Sweden, 30% in Ireland and the UK, compared to 50% in the United States.

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    Timbro, in turn, references: N Karlson, D Johansson, R Johnsson, Skatter och värdighet (2004) - (translates to Taxes and Dignity), which is in Swedish and tricky to find.
    – Oddthinking
    Apr 14, 2014 at 12:51
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    @Oddthinking: actually I was hoping for sources newer than the original paper, which is now a decade old.
    – vartec
    Apr 14, 2014 at 13:02
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    Sorry, @vartec, wasn't supposed to be an answer. I should have been clearer. Just that was where I reached a dead-end. I confess I find the Wikipedia/Timbro claim (including the extracted table from Karlson et al) unintelligible (which does not imply it is wrong), and I hoped by chasing it back I could find the original claim with more concrete detail of what it meant. The Swedish stopped me; maybe someone else will get further.
    – Oddthinking
    Apr 14, 2014 at 13:25
  • From a german perspective the numbers are bogus: income tax in Germany is between 0 and 45%. Even if you include social security, you won't get higher than ca. 60%. Apr 18, 2014 at 18:48
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    @MartinSchröder: you're thinking of what employee pays in taxes, not the total payed by employer. Also you're not taking in account that every euro spent is taxed with VAT.
    – vartec
    May 4, 2014 at 13:30

1 Answer 1


These are not the standard calculations of tax wedges as measured internationally, as well as being over a decade out of date.

A better source might be the OECD's publication Taxing Wages. The 2016 report (page 19) includes the following numbers for tax wedges as a % of labour costs in 2015 for a single person (no family) on average wages:

           Total tax wedge  Income tax  Social Security Employee   Social Security Employer 

Belgium          55.3%         21.6%              10.8%                    22.9%          
Sweden           42.7%         13.5%               5.3%                    23.9%
USA              31.7%         16.5%               7.0%                     8.1% 
UK               30.8%         12.8%               8.4%                     9.7%
Ireland          27.5%         14.2%               3.6%                     9.7%

The rest of the 500+ page report goes into more detail, for example on second earners, or families with children, or different wage levels. On page 548, among the limitations of the report, it says

Employers' contributions to private pension, family allowance or health and life insurance schemes are excluded though the amounts involved can be significant. In the United States, for example, these contributions can account for more than 5% of the earnings of employees.

I suspect it also excludes employees' private contributions, but does not see these as potentially part of a wedge between gross labour costs and net pay. So a country which funds these through taxes or social security might be expected to have a higher tax wedge than one which does not.

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    You're providing numbers based on wages, while us I understand the concept of the document in claim, it's based on what end client pays for the service. So if client pays €100 for a service in Belgium, service provider gets only €82 because of VAT. Then at least 55.3% of these €82 go to taxes. So even if the company providing service would pay no additional taxes besides VAT, that would be totaling 63% tax burden.
    – vartec
    Oct 4, 2016 at 20:51
  • Basing the "tax wedge" on wages is the international standard - The Economist in 2000 "The difference between workers' take-home pay and what it costs to employ them—the so-called “tax wedge”—consists of income tax and the social-security contributions of employees and employers". I suppose you could throw in the buyer's and the seller's income taxes and choose something facing VAT in Europe but not sales tax in parts of the US if you wanted to make a political point. Why not corporation tax too?
    – Henry
    Oct 4, 2016 at 20:56
  • CIT is paid on profit rather than revenue of the company, so not relevant here.
    – vartec
    Oct 4, 2016 at 21:05
  • What about pension and health care costs? If the employer has to pay for these things then that should be considered part of the "wedge" as it is a cost of employment that doesn't go into the take-home pay. Oct 4, 2016 at 21:19
  • @PaulJohnson - the OECD would acknowledge your point (it already does) but say that private health and pensions were not part of a tax wedge
    – Henry
    Oct 4, 2016 at 21:21

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