Taxing Wages in Turkey – OECD
According to the Taxing Wages report published by Organization for Economic Co-Operation and Development (OECD), the tax wedge is a measure of the tax on labour income, which includes the tax paid by both the employee and the employer in Turkey.
Single worker
The tax wedge for the average single worker in Turkey decreased by 0.1 percentage points from 39.0 in 2017 to 38.9 in 2018. The OECD average tax wedge in 2018 was 36.1 (2017, 36.2). In 2018 Turkey had the 17th highest tax wedge among the 36 OECD member countries, compared with the 18th in 2017.
In Turkey, income tax and employer social security contributions combine to account for 67% of the total tax wedge, compared with 77% of the total OECD average tax wedge.
One-earner married couple with two children
The tax wedge for a worker with children may be lower than for a worker on the same income without children, since most OECD countries provide benefits to families with children through cash transfers and preferential tax provisions.
Turkey had the 8th highest tax wedge in the OECD for an average married worker with two children at 37.2% in 2018, which compares with the OECD average of 26.6%. The country occupied the 7th highest position in 2017.
Child related benefits and tax provisions tend to reduce the tax wedge for workers with children compared with the average single worker. In Turkey in 2018, this reduction (1.7 percentage points) was less than the OECD average (9.5 percentage points).
Tax wedge trends between 2000 and 2018
In Turkey, the tax wedge for the average single worker decreased by 1.5 percentage points from 40.4% to 38.9% between 2000 and 2018. During the same period, the average tax wedge across the OECD decreased by 1.3 percentage points from 37.4% to 36.1%.
Since 2009, the tax wedge for the average single worker increased by 2.2 percentage points in Turkey. During this same period, the tax wedge for the average single worker across the OECD increased by 0.6 percentage points.
Employee tax on labour income
The employee net average tax rate is a measure of the net tax on labour income paid directly by the employee.
In Turkey, the average single worker faced a net average tax rate of 28.2% in 2018, compared with the OECD average of 25.5%. In other words, in Turkey the take-home pay of an average single worker, after tax and benefits, was 71.8% of their gross wage, compared with the OECD average of 74.5%.
Taking into account child related benefits and tax provisions, the employee net average tax rate for an average married worker with two children in Turkey was reduced to 26.2% in 2018, which is the highest in the OECD, and compares with 14.2% for the OECD average. This means that an average married worker with two children in Turkey had a take-home pay, after tax and family benefits, of 73.8% of their gross wage compared to 85.8% for the OECD average.
Source: Organization for Economic Co-Operation and Development (OECD) / link: http://www.oecd.org/tax/tax-policy/taxing-wages-turkey.pdf
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