Sitting Pretty
According to the OECD’s report released on May 6, Korean workers’ average after-tax income added up to US$40,421 last year, the sixth-highest among those of OECD member countries. Switzerland recorded US$54,944, followed by Norway (US$42,243), Luxembourg (US$42,178), Australia (US$40,732), and the Netherlands (US$40,678).
Korea ranked 14th with US$46,664 when it comes to the average pre-tax income based on purchasing power parity. Japan took 13th place with US$46,884 and Sweden 15th with US$46,379, while the OECD average was US$40,770. Switzerland topped this list as well by recording an average of US$66,506, and was followed by Luxembourg (US$60,158), Norway (US$59,355), the Netherlands (US$59,280), Germany (US$57,628), Belgium (US$55,225), Australia (US$53,170), Denmark (US$52,161), Britain (US$50,865), Austria (US$50,373), the United States (US$50,075), Iceland (US$50,001), Finland (US$46,165), France (US$44,136), Italy (US$40,426), Canada (US$39,438), Spain (US$39,029), and Mexico (US$12,373).
Korea’s relatively narrow gap between pre-tax and after-tax incomes can be attributed to its lighter tax burden. The income tax-to-total wage ratio was 5 percent in Korea last year, with Chile being the only country to record a lower ratio, 0 percent to be specific.
Korea ranked low in the tax wedge, too. The tax wedge can be defined as the ratio of income tax and social security contributions to total wages. In 2014, Korea recorded a tax wedge of 21.5 percent, 30th out of the 34 OECD members. The percentage was 7.0 percent in Chile, 17.2 percent in New Zealand, 19.5 percent in Mexico, 20.5 percent in Israel, 55.6 percent in Belgium, 49.4 percent in Austria, 49.3 percent in Germany, 49.0 percent in Hungary, 48.2 percent in Italy, 31.5 percent in the United States, 31.1 percent in Britain, and 31.9 percent in Japan.