This working paper presents novel analysis comparing in a consistent way the tax treatment
of labour and capital income across OECD countries, through stylised effective tax
rates (ETRs). It shows that dividend income and capital gains are generally subject
to lower ETRs than wage income at the personal level. In many countries, capital income
is also tax-favoured even when considering taxes paid by both firms and individuals,
although the gap between labour and capital income taxation tends to be smaller than
when considering only personal-level taxes. The gap between ETRs on labour and capital
income varies between countries and grows with income levels in some. The paper highlights
that differential tax treatment of labour and capital income can affect the efficiency
and equity of tax systems.