The tax wedge in Greece fell at a faster rate in 2021 compared with other OECD countries due to a lowering of social insurance contributions, the Organization for Economic Cooperation and Development said on Tuesday.
The Paris-based organization reported that the tax burden for a single worker in Greece fell by 2.2 percentage points to 36.7% in 2021 from 38.9% in 2020, while the average decline in the OECD was 0.06 percentage points to 34.6%.
Effective tax rates on labor rebounded in 2021 as the global economy recovered and many countries began withdrawing or scaling back measures implemented in response to the Covid-19 pandemic, the OECD said. Its Taxing Wages 2022 report showed that rising household incomes in 2021 coupled with the reversal of many tax and benefit policies linked to the pandemic drove increases in effective taxes on wages across the OECD.
The report pointed to an increase in the tax wedge in a majority of OECD countries during 2021, as many countries withdrew or scaled back measures introduced to support households during the pandemic.
In spite of these increases, the average tax wedge across the OECD declined slightly as relatively large decreases in the tax wedge were observed in a small number of countries where new Covid-19 support measures were introduced in 2021.
In most countries, increases in the tax wedge in 2021 have more than offset the sharp declines of 2020 for a number of household types, and have seen the tax wedge rebound to higher levels than in 2019 before the pandemic.
Between 2020 and 2021, the tax wedge for the single worker increased in 24 of 38 countries, fell in 12 and remained the same in two.
The report is a confirmation of the efficiency and the social focus of the government’s economic policy through a significant drop in tax and social security burdens, Finance Minister Christos Staikouras stated. He added that this policy included dozens of tax and contribution cuts.
“We continue working with a plan focusing on the same direction, to further support citizens’ available income, creating new jobs and enhancing social cohesion,” the minister said.