Developed countries were busy cutting top rates of income tax in the run-up to the global recession, according to a paper from the Organisation for Economic Co-operation and Development (OECD) in Paris.

The paper looks at trends in personal income tax rates/thresholds and employee social security over the period 2000–2010.

Key points

• The most pronounced trend was a cut in top personal income tax rates. Top rates fell in most OECD countries – on average, from 46.5 per cent to 41.7 per cent – continuing the trend already seen in the 1980s and 1990s.
• This was accompanied by reductions in the threshold at which the top income tax rate applied. The threshold (expressed as a multiple of the average wage) decreased in 20 countries, increased in 11 and remained relatively stable in three.
• By the end of the period there was evidence that some countries were reversing these trends. The largest increase in the top statutory rate was observed in the UK, from 40 per cent to 50 per cent in 2010 – though this was applied at a much higher threshold than previously.

Source: Carolina Torres, Kirsti Mellbye and Bert Brys, Trends in Personal Income Tax and Employee Social Security Contribution Schedules, Taxation Working Paper 12, Organisation for Economic Co-operation and Development
Link: Paper