KEY POINTS:
New Zealand may be in the bottom third of the developed countries' league table for wages, but workers get to take home a higher share than almost anywhere.
The Organisation of Economic Co-operation and Development's Taxing Wages report out yesterday shows the average gross wage earnings of a single person in New Zealand last year were 11.6 per cent below the unweighted average for the 30-nation group. Only eight countries, mainly in eastern Europe, were lower.
But the gap between what it costs to employ someone and that person's take-home pay is narrower than in any other OECD country except Korea and Mexico.
So the net wage for a single person on the average gross wage is only 3.8 per cent lower than the OECD average.
The gap, called the tax wedge, is unusually narrow because New Zealand funds superannuation, health care, unemployment benefits and the like from general taxation rather than the "social security" taxes on labour that are common elsewhere. The gap of 20.9 per cent gap between wage costs and net wages is all income tax.
In most European countries the wedge is more than 40 per cent and in France, Germany, Belgium and Hungary it is more than 50 per cent, which means that employees take home less than half of what it costs their employers to employ them.
The comparison with Australia is less comforting, however.
New Zealand's gross average wage last year was 73.7 per cent of Australia's and the net wage 76.4 per cent. The average single Australian's take-home pay was 31 per cent higher than their New Zealand counterpart's.
There was a net outflow of 21,500 permanent and long-term migrants to Australia in the year ended January, equal to 0.5 per cent of the population.
The report shows that the Working for Families scheme has substantially improved the position of families with children and average incomes.
A couple with two children, with one partner on the average wage and the other earning a third of the average wage, effectively pays 11.2 per cent tax (after income tax, Family Support and other tax credits and the in-work payment).
If the secondary earner is on two-thirds of the average wage, that rises to 17.2 per cent. If there is only one wage-earner, the rate is only 2.6 per cent.
These rates are way below the OECD averages of 29.8 per cent, 32.5 per cent and 27.5 per cent respectively.
They are also an improvement from the effective tax rates they would have faced in 2005, which were 19.5 per cent, 19.8 per cent and 14.4 per cent respectively.
But the flipside is higher marginal tax rates, that is, more of every extra dollar of income is lost in tax and reduced entitlements.
The OECD puts the marginal tax rate at 53c in the dollar at the average wage, regardless of whether the partner earns one-third or two-thirds of the average wage. A year ago the marginal rate was 33 per cent in both cases. In Australia it is 35.4 per cent.
Meanwhile revenue figures from the Treasury yesterday showed that in the seven months to the end of January the PAYE tax take was 6.5 per cent higher than in the same period of the previous fiscal year.
When the self-employed and fringe benefits tax are included the increase was 6 per cent.
But the company tax take was only 1.1 per cent higher than in the previous comparable period, rising to 4.3 per cent when non-resident withholding tax is included.
Indirect taxes (mainly GST) were running 3.8 per cent ahead of a year ago seven months into the year.
