Income tax in Iceland lower than OECD average

Photo: Iceland Monitor/Golli

Tax on labour income in Iceland is around 34%, lower than the OECD average and all other Nordic countries.

“Taxes on labour income for the average worker across the OECD remained stable at 35.9% in 2015,” reads a summary of the new Taxing Wages 2016 report on the OECD website.

This figure refers to the total tax burden paid by a single person with no children working full-time on the average wage of the country in questions. Iceland has just the 22nd highest tax rate of the 34 OECD countries studied.

The study measure the ‘tax wedge’ for various categories of worker – this is defined as “the total taxes paid by employees and employers, minus family benefits received as a percentage of the total labour costs of the employer”.

This ‘tax wedge’ ranges from 7% in Chile to over 55% in Belgium. Iceland has considerably lower income tax than its Nordic counterparts (Denmark (36.4%), Finland (43.9%), Norway 36.6%), Sweden (42.7%)), but a higher rate than both the United Kingdom (30.8%) and the United States (31.7%).

You can find the full range of data underpinning the report here:




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