Taxes in Europe Are Rising Faster Than Wages: An OECD Overview

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Tax burdens across Europe are increasing at a faster pace than wage growth, according to the Organisation for Economic Co‑operation and Development’s Taxing Wages 2025 report. In certain countries, real incomes after taxes and social contributions have actually fallen despite rising nominal wages. The worst-affected countries include Italy, Estonia, Czechia, France, Greece, Belgium and Spain.

In 2024, taxes and social contributions in EU countries rose by an average of 1.6 percentage points, while real wages increased by only 1.3%. Notably, in those same countries the tax hikes outpaced wage growth, leading to a reduction in net income for childless workers by around 1–2% on average.

Italy: Nominal wage growth of 3.9% and declining inflation (-1.2%) should have improved the picture, but due to a combined increase in income tax and social contributions by 7.5 pp, net income remained almost flat.

Estonia & Czechia: Tax rises were largely driven by elimination of benefit regimes (Estonia) and increased pension-fund contributions (Czechia); wages did not keep up, resulting in shrinking take-home pay.

France: Wage growth of merely 0.7% was paired with a tax burden increase of 1.7 pp — partially explained by “bracket creep,” where nominal wage increases push workers into higher tax brackets despite unchanged real income. OECD estimates this effect accounts for up to half of the tax-burden growth in developed European economies.

In Greece and Spain, governments increased direct tax burdens in the post-pandemic recovery phase by cutting reliefs and hiking contributions to pension and healthcare systems. In Belgium, the average tax burden for a single worker reached 52%, among the highest in the OECD. Analysts warn that such high labour-income taxation can trigger structural consumption slowdowns, especially when productivity growth is weak.

However, not all countries follow this trend. In Germany, indexation of tax thresholds helped reduce the effective labour tax burden by 1.1 pp. In Portugal, the introduction of progressive reliefs for low-income earners offset inflation-driven cost rises. In the Netherlands, cutting employer social contributions produced similar effects. These cases demonstrate that automatic tax-adjustment mechanisms can curb hidden tax hikes without hurting public revenue.

The OECD cautions that the growing gap between wage growth and tax increases may weaken labour-market stability and intensify pressure on wage negotiations. Meanwhile, an EU report indicates that the overall tax-revenue to GDP ratio in EU countries has fallen to 39% — a 14-year low — while governments shift from labour taxes to property, capital and digital-economy taxes.

With ageing populations and rising social-security costs, EU states are urged to restructure revenue bases: increase property, inheritance and capital taxes, and invest in digital tax-administration tools. For instance, closer to €105 billion in additional revenue was collected across Europe in one year thanks to digital-audit expansions. Looking ahead, policy makers are prioritising tax systems that support growth and maintain social stability in high-debt, low-growth environments.