In which countries do high earners pay the most tax? And where do average earners pay the most?
Income tax has been a political hot potato for decades.
In 1966 The Beatles released their song Taxman as a protest against the 95% “supertax” rate introduced by Harold Wilson’s Labour government, which the band had to pay. The top rate of tax in the UK is less than half that now but it’s still a source of controversy.
In France, President Francois Hollande’s election campaign promise to tax salaries above one million euros (£830,000) at 75% was – not surprisingly – met with howls of protest by the rich, who Hollande once said he “didn’t like”. His policy was struck down by the courts in 2012 who ruled it unconstitutional but he amended it so that the employer became liable to pay it.
To put this in context, the football club Paris Saint-Germain have to pay nearly 35m euros (£29m) to the government on star striker Zlatan Ibrahimovic’s net annual salary of 11m euros.
Tax rates do vary dramatically depending on which country you live in. The accountancy firm PricewaterhouseCoopers (PWC) has crunched the numbers for the G20 nations.
For each country, they calculated how much a high earner on a salary of $400,000 (£240,000) in 2013, with a mortgage of $1.2m (£750,000), would have left after all income tax rates and social security contributions.
They assume this person is married with two children, one of them aged under six.
These are their findings. In each country, the wage earner takes home the following proportion of his or her salary.
- Italy – 50.59% (takes home $202,360 out of $400,000 salary)
- India – 54.90%
- United Kingdom – 57.28%
- France – 58.10%
- Canada – 58.13%
- Japan – 58.68%
- Australia – 59.30%
- United States – 60.45% (based on New York state tax)
- Germany – 60.61%
- South Africa – 61.78%
- China – 62.05%
- Argentina – 64.02%
- Turkey – 64.64%
- South Korea – 65.75%
- Indonesia – 69.78%
- Mexico – 70.60%
- Brazil – 73.32%
- Russia – 87%
- Saudi Arabia – 96.86% (so you take home $387,400 out of the $400,000 salary)
In most of these 19 rich countries (the 20th member is the EU) the take-home pay is between $230,000 – $280,000.
But one important thing to consider when comparing the top rate levels of tax is the threshold where the rate kicks in, because the differences are massive.
“In the UK, the 45% top rate of tax kicks in at an income level of around $250,000 (£151,000) compared to Italy where the top rate of 43% comes in at $125,000,” says Ben Wilkins, a tax partner at PWC.
Outside the G20, the Danish government taxes workers at 60% on all earnings over $60,000.
Most of us can only dream of earning a salary that would attract the top rate of tax, so what about ordinary earners?
It is difficult to compare tax rates. Income tax is only one tax – most of us will pay other kinds of tax, like social security, and those with children might get some tax relief.
The statisticians at the Organisation for Economic Cooperation and Development (OECD) have done some analysis of average salaries.
“At the top end of the distribution we have Belgium where single people pay 43% of earnings in income tax and social security contributions (or national insurance), followed by Germany with 39.9%,” says Maurice Nettley, head of tax statistics at the OECD. “The lowest rates are paid in Chile at 7% and Mexico at 9.5%.”
These tax rates apply to single people with no children, on an average salary for their country.
- Belgium – 42.80%
- Germany – 39.90%
- Denmark – 38.90%
- Hungary – 35%
- Austria – 34%
- Greece – 25.4%
- OECD Average – 25.10%
- UK – 24.90%
- USA – 22.70%
- New Zealand – 16.40%
- Israel – 15.50%
- Korea – 13%
- Mexico – 9.50%
- Chile – 7%
The following tax rates apply to married couples with two children.
- Denmark – 34.8%
- Austria – 31.9%
- Belgium – 31.8%
- Finland – 29.4%
- Netherlands – 28.7%
- Greece 26.7%
- UK – 24.9%
- Germany – 21.3%
- OECD average – 19.6%
- USA – 10.4%
- Korea – 10.2%
- Slovak Republic – 10%
- Mexico – 9.5%
- Chile – 7%
- Czech Republic – 5.6%
In Germany the rate drops from 39.9% to 21.3% because of generous child tax credits. Across the OECD, tax rates drop by an average of 5.5% for married couples with children. Greece is the only country where you pay more tax if you are married with children.
Of course, the point of paying taxes is that the government is supposed to provide services for that.
“In a lot of the European countries tax rates and social security contributions are high but the provision of benefits by the state tends to be very generous compared to countries in other parts of the world,” says Nettley.
“If you fall ill or become unemployed the state will contribute and there are also generous pension arrangements.”
Source: BBC News
I am pleased to be here for the signing of the agreement implementing the Foreign Account Tax Compliance Act with Minister Saccomanni. We welcome Italy’s commitment to intensifying our cooperation to improve international tax compliance. Today’s signing marks a significant step forward in both our countries’ efforts to work together towards a global standard to combat offshore tax evasion. These efforts benefit both our two countries.
This agreement also aligns with our mutual commitment in the G20 to develop a global model for automatic exchange of tax-relevant bank information.
The Foreign Account Tax Compliance Act, or FATCA, introduces reporting requirements for foreign financial institutions with respect to certain accounts held by U.S. taxpayers. Because access to information from other countries is critically important to the full and fair enforcement of domestic tax laws, information exchange is a top priority for the United States. As such, we have been a leader in the development of new international standards for greater transparency through full exchange of tax information. But we cannot do this alone.
Today, Italy is the 13th country to sign an intergovernmental agreement with the United States to Improve International Tax Compliance and Implement FATCA. By working together to detect, deter and discourage offshore tax abuses through increased transparency and enhanced reporting, we can help to build a stronger, more stable, and more accountable global financial system.
This FATCA agreement is yet one further example of the deep and substantial links between the Italian and U.S. economies. We look forward to continuing to work together to deepen these ties.
Now Available – 2014 Version of IRS2Go!
This new version of IRS2Go has a brand new look and feel with new added features. It is available in both English and Spanish.
You can check the status of your federal income tax refund using IRS2Go. Simply enter your Social Security number, which will be masked and encrypted for security purposes, then select your filing status and enter the amount of your anticipated refund from your 2013 tax return. A status tracker has been added so you can see where your tax return is in the process. If you filed your return electronically, you can check your refund status within a 24 hours after we receive your return. If you file a paper tax return, you will need to wait about four weeks to check your refund status because it takes longer to process a paper return.
You can request your tax return or account transcript using your smartphone. IRS2Go allows you to request this information, which will be mailed to you within several business days.
Free Tax Prep Providers
The IRS Volunteer Income Tax Assistance (VITA) and the Tax Counseling for the Elderly (TCE) Programs offer free tax help for taxpayers who qualify. You can use this brand new tool to help you find a VITA site right near your home. You simply enter your zip code and select a mileage range. To make it even more convenient if you click on the directions button within the results the maps application on your device will load with the address, making it easy to navigate to your desired location.
You can interact with the IRS by following us on Twitter, watching helpful videos on YouTube, sign up for email updates, or contact us.
Download the IRS2Go App
If you have an Apple iPhone or iTouch, you can download the free IRS2Go app by visiting the iTunes app store. If you have an Android device, you can visit Google Play to download the free IRS2Go app.
IRS2Go reflects IRS’ commitment to help you get the information you need — whenever you need it, wherever you are. The IRS shares the latest information on tax law changes, initiatives, products and services through various social media channels
We are experiencing an increasing wave of scam targeting non-resident aliens.
What you may receive is an e-mail fraudulently using the IRS name with an attached W8 BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding) and the request to fill in the form.
The scammer’s true email address is masked as a legitimate IRS account (firstname.lastname@example.org, for instance).
- Do not fall for this scam – the IRS does not initiate contact with taxpayers by email or social media to request personal or financial information.
And, most of all
- Do not open the attachment: the attachment contains a malicious code designed to gain access to your financial information in order to steal your identity and/or assets.
Following is the IRS web page on this topic:
Notice: Undefined variable: attr in /home/gcconsul/public_html/wp-content/plugins/dirtysuds-embed-pdf/embed.php on line 102
Governor Cuomo’s START-UP NY (SUNY Tax-free Areas to Revitalize and Transform UP-state NY) initiative is the game-changer that will transform SUNY campuses and university communities across the state into tax-free communities – including no income tax for employees, and no sales, property or business tax for 10 years.
START-UP NY will attract venture capital, start-ups, new business and investments from across the nation and around the globe to New York by offering new businesses the opportunity to operate completely tax-free, while also partnering with the world-class higher education institutions in the SUNY system.