Canada's Tax Burden On Labour Is Surprisingly Low, But Growing

Posted: Updated:
TAXES
The OECD has some good news and some bad news on Canadians' taxes. | Getty Images/Vetta

With this year's tax deadline approaching rapidly, many people's thoughts are turning to the shell-shocking amount of money the government routinely takes from our paycheques.

On that front, the Organization for Economic Cooperation and Development (OECD) has some good news and some bad news.

First, the bad news: Canadians’ taxes are going up. Despite the Harper government’s vocal championing of low tax policies, and some high-profile tax cuts, the total tax burden on labour in Canada has risen over the past three years, the OECD’s Taxing Wages study found.

Now the good news: Canadians pay low taxes compared to their peers in 33 other OECD countries, the study found. Yes, you read that correctly: Canada has low taxes.

The tax burden on labour is actually slightly higher in the U.S. than it is in Canada: 31.3 per cent in the U.S., compared to 31.1 per cent in Canada. The OECD average is 35.9 per cent.

The study measures each country’s “tax wedge” -- the difference between an employer’s cost of labour and the employee’s take-home pay.

Overall, Canada has the ninth-lowest tax burden of the 34 wealthy countries that make up the OECD, with the U.S. one rung below in tenth place.

But Canada, like many other OECD countries, is seeing taxes on labour rising. The total burden on labour went up 0.7 percentage points between 2010 and 2013, the study found.

For both the U.S. and the OECD as a whole, tax burdens went up 0.8 percentage points during that period. The largest tax hike -- four percentage points -- was seen in debt-riddled Portgual, followed by Mexico (3.7 percentage points) and the Slovak Republic (3.2 percentage points).

Story continues below

Who's Got The Highest Taxes?
of
Share
Tweet
Advertisement
Share this
close
Current Slide

Though the Harper government has long touted its record on cutting taxes, critics say it has hiked taxes by the back door in recent years, such as through increased Employment Insurance premiums and higher tariffs on a range of consumer goods.

Former Liberal finance minister Ralph Goodale blogged last year that the Harper government raised the net tax burden on Canadians in each of the previous four years.

Canada’s tax burden has been slowly shifting towards individual taxpayers and away from other sources of revenue, such as tariffs and corporate taxes, for at least a decade.

A series of aggressive cuts to the corporate tax rate starting around 2000 means that, for the first time ever, this year more than half of Canada’s total tax burden will fall on individual income taxpayers, according to an analysis from economist Toby Sanger.

Around the Web

OECD: Income taxes rise for third straight year

OECD report highlights steep tax burden on Greek salary workers

Total Taxes on Wages Are Rising

Traditional families shouldering heavier tax burden than global average

Canada Freezes Online Tax Filing Due to Heartbleed Bug

When do Canadians owe taxes to the US?: Roseman

Tax season 2014: Where in Canada do you pay the most tax?

When Is Tax Deadline Day For 2014 In Canada?