Tax rates on wages have reached their highest level in almost a decade across rich countries for a typical single worker, as governments turn to labour income as an “easy” way to raise revenues.
However, according to figures published by the Organisation for Economic Co-operation and Development (OECD) on Wednesday, Ireland is bucking the trend, with the personal average tax rate of a single worker without children falling by 3 per cent.
Ireland is one of just 13 countries among the 38 developed nations that are members of the Paris-based OECD to see personal tax rates fall. Only three – Australia, Latvia and Italy – saw more dramatic reductions in average personal tax rates.
The annual examination of tax on wages says gross wages in Ireland were 3.8 per cent higher last year than in 2024. Allowing for inflation of 2 per cent, that meant these single workers without children were, on average, 1.8 per cent better off before tax.
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Across the OECD, the data showed a single worker with no children earning an average national wage faced a total tax burden equal to 35.1 per cent of employment costs on average across its 38 – mostly industrialised – member countries in 2025.
This figure, which includes employee and employer social security contributions as well as income tax and subtracts any cash benefits received by working families, was up from an average of 34.9 per cent in 2024 and at its highest level since 2016.
The gap between employers’ labour costs andworkers’ actual take-home pay – or tax wedge – increased in 24 of the 38 OECD countries last year for a typical single worker, including in Germany, Israel and Estonia. The UK recorded the largest year-on-year rise.
For most households, including those with children, the average tax wedge was at its highest level last year since before the Covid-19 pandemic.
Alexander Pick, head of the tax data and statistical analysis unit at the OECD, said employment taxes remained “in focus” as strains on public finances forced many OECD countries to increase revenues. On average, about half of tax revenues in those economies already come from labour taxation.
However, higher labour tax burdens tend to weaken incentives to work and hire by reducing take-home pay and raising employers’ labour costs.
Taxing labour is “easy,” compared with taxing capital, argued Riccardo Marcelli Fabiani, an economist at the consultancy Oxford Economics.
He added that “there is a need for more fiscal space” after many governments spent more during the pandemic. Many economies are now also facing higher defence spending needs and ageing populations, Fabiani added.
Governments are also bracing for the economic impact of the war in the Middle East, which has pushed up prices and is expected to weigh on growth.
The OECD data showed that the tax wedge for households with children across the 38 member countries increased more, on average, than for single workers.
The tax wedge in Ireland for a couple with children where both parents are working is, at 25.7 per cent, below the OECD average of 29.8 per cent. For a family with one parent working and earning the national average wage, the tax wedge was 19 per cent, rising to 32.6 per cent for a single worker on the national average wage with no children.
That compares with OECD averages of 26.2 per cent and 35.1 per cent, respectively.
The tax wedge for a one-earner couple on the average wage with two children increased in 22 countries and rose by 0.46 percentage points on average across OECD countries to 26.2 per cent.
Similarly, the average rate for a married couple with children, where both adults earn the average wage, rose in 22 countries and increased by 0.26 percentage points on average across the OECD to 32 per cent.
European countries continued to show the highest levels of employment taxation for the typical single worker with no children, with Belgium at 52.5 per cent, Germany at 49.2 per cent and France at 47.2 per cent.
The OECD found that tax systems have become more progressive – with higher-income households paying higher taxes – in member countries since 2000.
– Copyright The Financial Times Limited 2026
