A model is presented for simulating the tax burden on highly skilled manpower. The effective average tax rate, defined as the relative wedge between total remuneration and disposable income, is computed. Income and payroll taxes and social security contributions not yielding an equivalent benefit are taken into account. The compensation package consists of cash payments and old-age provision. To integrate retirement benefits and their tax treatment, an inter-temporal approach is used. The results indicate that Germany and France have higher tax burdens than the UK and the USA, that Germany grants the strongest tax relief for families, and that occupational pension plans are favourable in all countries.

Elschner, Christina and Robert Schwager (2004), A Simulation Method to Measure the Tax Burden on Highly Skilled Manpower, ZEW Discussion Paper No. 04-59, Mannheim. Download


Elschner, Christina
Schwager, Robert


personal income tax, highly skilled employees, effective tax burden, pensions