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Modelling the Tax Burden on Labour Income in Brazil, China, India, Indonesia and South Africa

Author

Listed:
  • Luca Gandullia

    (University of Genoa)

  • Nicola Iacobone

    (University of Genoa)

  • Alastair Thomas

    (OECD)

Abstract

This paper examines the taxation of labour income in five key emerging economies: Brazil, China, India, Indonesia and South Africa (the “BIICS” countries). The paper highlights the key features of the taxation of labour income in these countries, and then uses this information to model the tax burdens on labour income in each country following the OECD's Taxing Wages methodology. Average and marginal tax wedges in Brazil and China (Shanghai) are found to be similar in size in 2010 to those of many OECD countries. In contrast, India, Indonesia and South Africa (as well as rural China) impose very low average and marginal tax wedges compared to the vast majority of OECD countries. These relatively low tax wedge results are not altogether surprising given that these countries also currently have lower tax-to-GDP ratios than the OECD average. However, the results suggest that, in the long-term, reforms will be necessary in most of the BIICS countries if the labour income base is to significantly contribute to funding the substantial increases in public expenditure, particularly on infrastructure and social insurance, that will inevitably come as these countries continue to grow. Modéliser la charge fiscale pesant sur les revenus du travail en Afrique du Sud, au Brésil, en Chine, en Inde et en Indonésie Ce document propose un examen de la taxation des revenus du travail dans cinq grandes économies émergentes, à savoir l’Afrique du Sud, le Brésil, la Chine, l’Inde et l’Indonésie. Il met l’accent sur les principales caractéristiques des régimes d’imposition en vigueur dans ces pays, les informations correspondantes étant ensuite utilisées pour modéliser la charge fiscale pesant sur les revenus du travail dans chaque pays à l’aide de la même méthodologie que celle suivie par l’OCDE pour sa publication intitulée Les impôts sur les salaires. Il apparaît qu’au Brésil et en Chine (Shanghai), les coins fiscaux moyens et marginaux sont du même ordre que ceux d’un grand nombre de pays de l’OCDE en 2010. En Afrique du Sud, en Inde et en Indonésie (ainsi qu’en Chine rurale) en revanche, les coins fiscaux moyens et marginaux sont très faibles en comparaison de ceux de la grande majorité des pays de l’OCDE. Le niveau relativement bas de ces chiffres n’est pas vraiment surprenant étant donné que ces pays affichent actuellement des rapports impôt/PIB inférieurs à la moyenne de l’OCDE. Il donne cependant à penser que, sur le long terme, des réformes seront nécessaires dans la plupart de ces économies si la taxation des revenus du travail doit apporter une contribution notable au financement des hausses considérables des dépenses publiques, en particulier dans les domaines des infrastructures et de la sécurité sociale, qu’elles devront inévitablement assumer à mesure qu’elles continueront à croître.

Suggested Citation

  • Luca Gandullia & Nicola Iacobone & Alastair Thomas, 2012. "Modelling the Tax Burden on Labour Income in Brazil, China, India, Indonesia and South Africa," OECD Taxation Working Papers 14, OECD Publishing.
  • Handle: RePEc:oec:ctpaaa:14-en
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    File URL: http://dx.doi.org/10.1787/5k8x9b1sw437-en
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    Cited by:

    1. Emilio Espino & Martín González Rozada, 2015. "On the Implications of Taxation for Investment, Savings and Growth: Evidence from Brazil, Chile and Mexico," IDB Publications (Working Papers) 89116, Inter-American Development Bank.
    2. Isabelle Joumard & Urban Sila & Hermes Morgavi, 2015. "Challenges and Opportunities of India's Manufacturing Sector," OECD Economics Department Working Papers 1183, OECD Publishing.

    More about this item

    Keywords

    coin fiscal; cotisations de sécurité sociale; impôt sur le revenu des personnes physiques; labour income; personal income tax; revenus du travail; social security contributions; tax wedge;

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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