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Measurement of Labour Taxation

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  • Jan Tecl

Abstract

Measurement of taxation of individuals is currently an interesting topic, as there is a number of people who can perform their job from any place in the world and their net income is one of the most important criteria on the basis of which their final decision is being made. Level of labour taxation is also important for international companies, which consider the location of their business and one of their important criteria is labour taxation. Provided the companies want to pay their employees equal net wage in each country, high labour taxation increases their costs. This also means that the labour taxation is related to the country's competitiveness. However, there is not just one way of measurement of labour taxation, because one can distinguish between nominal, average, effective and marginal tax rates on labour and there is also the tax wedge which could measure the labour taxation. The aim of this paper is to re-calculate numbers for the implicit tax rate (tax wedge) on labour in the EU countries for the newer period based on the Eurostat data according to the Mendoza et al. (1994) and Wolff (2005) methodology. These values will be in turn compared with data on the tax wedge measured by the Eurostat using their own methodology. One could expect that each methodology could give slightly different results, but these results should be similar. If there are differences between these values, the decision of individuals could be incorrectly affected by different values of labour taxation.

Suggested Citation

  • Jan Tecl, 2018. "Measurement of Labour Taxation," European Financial and Accounting Journal, Prague University of Economics and Business, vol. 2018(1), pages 5-18.
    • Handle: RePEc:prg:jnlefa:v:2018:y:2018:i:1:id:203:p:05-18
    DOI: 10.18267/j.efaj.203
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    References listed on IDEAS

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    1. Devereux, Michael P & Griffith, Rachel, 2003. "Evaluating Tax Policy for Location Decisions," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 10(2), pages 107-126, March.
    2. Jan Tecl, 2017. "Labor Taxes and Decision about FDI in the EU," European Financial and Accounting Journal, Prague University of Economics and Business, vol. 2017(2), pages 41-54.
    3. Mendoza, Enrique G. & Razin, Assaf & Tesar, Linda L., 1994. "Effective tax rates in macroeconomics: Cross-country estimates of tax rates on factor incomes and consumption," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 297-323, December.
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    5. Mitja Cok & Mateja Ana Grulja & Tomaz Turk, 2013. "Taxation of wages in the Alps-Adriatic region," Financial Theory and Practice, Institute of Public Finance, vol. 37(3), pages 259-277.
    6. Ivica Urban, 2016. "Tax wedge on labour income in Croatia and the European Union : Preface to the special issue of Financial Theory and Practice," Financial Theory and Practice, Institute of Public Finance, vol. 40(2), pages 157-168.
    7. Guntram B. Wolff, 2006. "Measuring Tax Burdens in Europe," Aussenwirtschaft, University of St. Gallen, School of Economics and Political Science, Swiss Institute for International Economics and Applied Economics Research, vol. 61(03), pages 299-328, September.
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    More about this item

    Keywords

    Labour taxation; Implicit tax rate; Eurostat;
    All these keywords.

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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