OECD - Taxing Wages in Latin America and the Caribbean 2016

This new publication is jointly undertaken by the OECD Development Centre and the OECD Centre for Tax Policy and Administration, the Inter-American Center of Tax Administrations (CIAT) and the Inter-American Development Bank (IDB). It provides details of taxes paid on wages in 20 economies in Latin America and the Caribbean. The information contained in the Report covers the personal income tax and social security contributions paid by employees, the social security contributions and payroll taxes paid by their employers and cash benefits received by families. The objective of the Report is to illustrate how personal income taxes, social security contributions and payroll taxes are calculated and to examine how these levies and cash family benefits impact on net household incomes. The results also allow quantitative cross-country comparisons of labour cost levels and of the overall tax and benefit position of single persons and families.

The Report shows the amounts of taxes, social security contributions, payroll taxes and cash benefits for eight family-types, which differ by income level and household composition. It also presents the resulting average and marginal tax rates. Average tax rates show that part of gross wage earnings or total labour costs which are taken in personal income taxes (before and after cash benefits), social security contributions and payroll taxes. Marginal tax rates show the part of an increase of gross earnings or total labour costs that is paid in these levies. The average and marginal tax rates are also measured by income decile across the whole of the distribution of labour income for two types of family and in US dollar equivalents for a single person without children.

The focus of the Report is the presentation of new data on the tax/benefit position of employees in 2013. It uses household income survey data for each country to estimate the average wage of workers who reported being full-time employees within the formal sector of the economy. These data sources also enable the estimation of the labour income distribution by deciles for all the countries included in this publication.

The Report is structured as follows:

• contains an overview of the main results for 2013.

• is a special feature entitled A view on taxes, social protection and informality in Latin America using Taxing Wages modelling. It includes an analysis of the costs of formalisation for informal workers.

• presents a graphical exposition of the estimated tax burden on labour income in 2013 by income deciles across the whole of the distribution of labour income.

• contains individual country tables specifying the wage levels considered and the associated tax burdens for eight separate family types, together with descriptions of each tax/benefit system.

• The Annex describes the methodology and its limitations.

Taxing wages in Latin America and the Caribbean has been jointly produced by the Organisation for Economic Co-operation and Development (OECD) Centre for Tax Policy and Administration, the OECD Development Centre, the Inter-American Development Bank (IDB) and the Inter-American Center of Tax Administrations (CIAT). The staff from these organisations with responsibility for producing the publication were: Juan Carlos Bentez and Ren Orozco of the OECD Development Centre under the supervision of the Director Mario Pezzini and the Head of the Latin American and Caribbean Unit Angel Melguizo; Maurice Nettley and Dominique Paturot of the OECD Centre for Tax Policy and Administration under the Director Pascal Saint-Amans, Deputy Director Grace Prez-Navarro and the Head of the Tax Policy and Tax Statistics Division David Bradbury; Agnes Rojas under the supervision of Principal Technical Leader in Fiscal Economics, Alberto Barreix from the IDB, and Miguel Eduardo Pecho from the CIAT.