Think Canadians pay some of highest income taxes in the world? Think again

Canadian workers are often made to feel that they pay some of the highest income taxes in the world, particularly in  comparison with our neighbours to the south.

But a new report finds there are plenty of other industrialized nations that may face a higher income tax burden.

The OECD, the Organisation for Economic Co-operation and Development, reports in its annual Taxing Wages report that Belgium workers had the highest tax burden -- the so-called "tax wedge" -- last year. Their rate stood at 55.8 per cent.

The tax wedge is the difference between what businesses pay to employ a worker, and the net take-home pay of the employee’s after income taxes, employee-plus-employer social security contributions, and minus benefits.

Germany came in second, with a tax burden at 49.3 per cent.

Canada, meanwhile, is ranked 26th among the 31 OECD nations, with a 31.1 per cent tax wedge. The U.S. ranked 25th, with a slightly higher tax wedge of 31.3 per cent.

Across all the OECD nations, the average tax burden on income was 35.9 per cent last year. That’s up from 35.7 per cent in 2012. The report found the tax wedge rose in 21 out of 34 countries, fell in 12, and remained unchanged in one.

In most countries, the increase in the tax wedge was almost entirely due to higher income taxes. But in Canada, higher employee and employer social security contributions (such as to CPP) accounted for virtually all of the increased tax wedge.

Social security contributions increased the most in the United States, though that was in large part because a temporary reduction in pension contribution rate ended in 2013.

A special chapter of the report also found that low-income households across the OECD, particularly poorer households with children, benefited by progressive taxation changes. These changes included more targeted tax credits, or “make-work-pay” provisions for low-income workers, as well as increased child benefits for low-income households.

But there has been little change in progressive taxation for single workers without children or for those at higher income levels, the report found.

Ireland, Sweden and Slovenia report the greatest rise in progressive taxation for single taxpayers without children, while the largest decreases in progressivity for single taxpayers without children were seen in Germany, Hungary and Israel.