Wage and tax corner

The wage corner and the socialo-tax corner (or fiscalo-social corner , this last being sometimes incorrectly called tax corner ) are two close measurements used to calculate the total degree of tax on the incomes of the Travail.

The level of these corners has an influence on the Unemployment rate and the Taux of employment within a country.

Definitions

The socialo-tax corner evaluates the total costs of a worker for the company, compared to the net salary which this employee receives. It is composed of the tax corner (cost of VAT and the income tax compared to the net salary) and of the social corner (cost of the wage and employers' National insurance contributions).

The wage corner measurement the variation enters the total costs of a worker for the company and the Purchasing power real preserved after Taxes and social security deduction by this worker.

The two concepts are thus very close, the difference between wage corner and socialo-tax corner is due to the taking into account of the terms of trade interior (or “foreign exchange rate interns”) between the company and the employee, i.e. the difference between the Price the consumer and the producer prices.

These concepts also take account of the monetary transfers granted within the framework of the public programs of social security (negative Impôt on the income, for example Prime for employment in France).

Calculation

In practice, the tax corner is calculated by expressing the sum of the income tax of the natural persons, the wage and employers' contributions of social security and of the possible wages taxes, decreased by the services, expressed as a percentage by the costs of labor.

One can express this calcul.
more formally Are:

$W$ , the gross salary of a worker determined by his work contract;
$c_p$ , the rate of the employer contributions;
$c_e$ , the rate of the contributions of social security of the worker;
$t_e$ , the average rate of imposition of the Income tax of the natural persons;
$t_c$ , the rate of the tax on consumption;
$P_p$ , the price index to the production;
$P_c$ , the consumer price index.

The total costs of a worker for the company are given (in real, and not nominal term) by:

$CT= \ frac {W (1+c_p)}{P_p}$ .

The total purchasing power of the worker in real term is given by:

$PA= \ frac {W (1-c_e) (1-t_e)}{P_c (1+t_c)}$ .

The wage corner is then given by:

$\ rho_s= \ frac {CT} {Pa} = \ frac {\ frac {W (1+c_p)}{P_p}} {\ frac {W (1-c_e) (1-t_e)}{P_c (1+t_c)}} = \ frac {(1+c_p) (1+t_c)}{(1-c_e) (1-t_e)}\ left (\ frac {P_c} {P_p} \ right)$ .

And the socialo-tax corner, which does not take into account the influence of the prices, is given by:

$\ rho_f= \ frac {W (1+c_p)}{\ frac {W (1-c_e) (1-t_e)}{1+t_c}} = \ frac {(1+c_p) (1+t_c)}{(1-c_e) (1-t_e)}$ .

The term $\ left (\ frac {P_c} {P_p} \ right)$ represents the terms of trade and constitutes a relatively volatile component of the wage corner. The socialo-tax corner is more stable than the wage corner. In the literature, one generally finds the corner tax presented in the form: $(\ rho_f-1) *100$ , and of the same the wage corner in the form $(\ rho_s-1) *100$ .

In practice

The public authorities decreased the wage corners during the Années 2000 in the majority of the countries of OECD, partly because of the tax Concurrence, but also by will to insert more people in the Active population so as to compensate for the effects of the ageing of the populations on the production and the national wealth.

The wage corner for the married couples is very high in France compared to the others developed Pays of OECD.

For the people alone, the wage corner in France dropped much with the courses of the years 2000-2005, and is located above the average of OECD and the European Union.

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