Canada’s wealthy benefit most from tax cuts, OECD finds
OTTAWA -- The tax burden on wages has eased in most of the world's industrial countries this decade, including here, but Canada is among a minority where most of the relief has gone to high-income earners and the least to lower-income workers, according to the Organization for Economic Co-operation and Development.
"Across the OECD, tax-burden changes have tended to favour low-wage earners," the Paris-based organization said in a report on changes in the tax burden on wages in its 30 member countries.
"But in a significant minority of countries, tax reforms have mainly benefited high-income groups," it said in the report, citing Canada, and a handful of other industrial nations, including the U.S..
"In Australia, Germany, Iceland, Ireland and Luxembourg, and, to a lesser extent in Canada and Norway, tax reforms tended to reduce the progressivity of the tax structure with high-earning employees benefiting the most from significantly higher tax reductions than those in the middle and bottom parts of the earnings range," it said in the report. "Tax reductions ... also tended to mainly benefit high-income earners in the United States."
The report shows the tax burden on wages or so-called tax wedge, which is the difference between total labour costs to an employer and the net take-home pay of workers, eased by 1.3% in Canada between 2000 and 2006, which is significantly more than the 0.1% average reduction across the 30 industrial countries over that period.
However, in Canada most of that relief went to the highest income workers and the least to lower income workers, it said.
It noted, for example, that in Canada the drop in the tax burden for single workers ranged from a hefty 2.3% for those earning 150% to 200% of the average wage to a 1.6% reduction for those earning 100 to 150% of the average wage to just 1.0% for those earning between two-thirds and 100% of the average wage and to only 1.1% for those earning one-third to two-thirds of the national average wage.
The report shows that the tax-cutting agenda of governments is contributing to what other studies, including by Statistics Canada, have shown is a growing gap between rich and poor in Canada, said Armine Yalnizyan, senior economist with the Canadian Centre for Policy Alternatives, an Ottawa-based economic think-tank.
"Those earning up to twice as much as the average wage are getting more of the benefits than those making half the average wage," she noted.
Further, the report deals with the 2000-2006 period, and tax changes since, including the tax-free savings account in the latest federal budget, are tilted even more in favour of better off Canadians.
In contrast, the OECD reported that a half-dozen countries, including France, Belgium, Hungary, Italy, the Netherlands, and Portugal have implemented targeted tax cuts this decade which have provided the most relief to employees whose wages were less than two thirds of the national average.
...
http://www.financialpost.com/story.html?id=396698
Stumble It!