Friday, January 18, 2013

Global Personal Tax Rates - How Do You Compare?

With the never-ending deficit and debt shenanigans in Washington and the fact that both sides of the political spectrum are firmly entrenched in their spending cuts or no tax increase philosophy, I wanted to take a look at how American taxes compare to those in other nations around the world.  Fortunately, KMPG has done all of the heavy lifting.

Overall, between 2003 and 2009, KPMG noted a gradual decline in the income tax rates for top earners with a rise in 2010, a fall in 2011 and a rise again in 2012 as governments around the world became increasingly concerned about mounting debts and deficits.  The 2012 average personal tax rate for the highest income earners for all 114 nations in the study was 28.9 percent, up from 28.6 percent in 2011 but down from 30.1 percent in 2004.  The prize for the highest average overall tax rate is held by Western Europe with an average rate of 46.1 percent.  Northern Europe has average tax rates of 36.5 percent and Eastern Europe has average tax rates of a measly 16.7 percent.  By comparison, the highest Federal tax rate for Americans was 35 percent when the Bush tax cuts were taken into consideration and Canada's highest average personal income tax rate was 48 percent.  The average personal tax rate for the highest income earners in Australia was 45 percent.  Interestingly, six nations in the Middle East have 0 percent personal taxes on high income earners; Kuwait, Bahrain, Oman, Qatar, the United Arab Emirates and Saudi Arabia.  In addition, the Bahamas, the Cayman Islands and oil-rich Brunei share the same low, low personal tax rate on high incomes.

Let's open by looking at the effective income tax and social security rates on $300,000 of gross income for many of the nations in the study with the income tax rate in green and the employee portion of the social security rate in blue:

Coming in number one is France with total taxes of 54 percent followed by Belgium at 53.4 percent and Italy at 51.8 percent.  The United Kingdom is in the uppermost quarter at 42.3 percent.  Canada is in the upper third at 40.8 percent, Australia is just below Canada at 38.7 percent and the United States is in the bottom third at 30.5 percent.  The top ten places are taken up by European nations with total taxes ranging between 47 and 54 percent.  Lucky them.  

Let's now look the effective income tax and social security rates on $100,000 of gross income for many of the nations in the study for comparison's sake, with the same colour scheme as before:

Belgium is number one with total taxes of 47 percent followed by Greece at 46.5 percent and Croatia at 46.3 percent.  The United Kingdom and Canada are now in the middle of the pack with total taxes of 31.4 percent and 30.5 percent respectively, Australia is in the lower third at 26.4 percent and the United States is right below Australia at 26 percent.

In closing, here is the taxable income threshold where the highest rate of personal income taxes take effect by country:

The United States has the second-highest high income threshold, coming in at a whopping $388,350, superseded only by Spain which comes in at $394,380.  United Kingdom residents can earn up to $242,760 before they are pushed into paying personal taxes at the highest rate, putting them in sixth place overall.  Once Australians have earned more than $185,166, they will pay taxes at the highest personal rate, putting them in ninth place overall.  Canadians, while in sixteenth place, can only earn $134,247 before they are thrust into the highest tax bracket, just about one-third of what Americans can earn before they pay the highest rate of personal tax. 

While it has been interesting to watch American politicians quibble about where the threshold should be for the highest personal tax bracket, taxpayers in most developed economies around the world, save Spain, would be very pleased to be able to earn nearly $400,000 before they got hit with an even higher tax bill than they are already paying.  I guess it's all in your perspective.


  1. Excellent article. It is interesting to put one's position in perspective, something the U.S. according to the screaming doesn't do often enough.

  2. It's also interesting to put Canada's tax rate into perspective, isn't it?

  3. There is an apples/oranges problem here. Canadian tax rates cited are the combined federal/provincial rate, whereas the US rates are federal only. I don't know which rate is quoted for the other federal states, but the rates cited for Australia suggest that those are also combined rates.

  4. Hello Political junkie, I wanted to point out that your RSS Feed isn't working for me anymore, I use google reader and the last update from your website appears as Sept 5, 2011

  5. Add the Candian health service to the list of citizen benefits & US is not only the most taxed but provides the worst return of investment on the taxed amount.

  6. The poorest among us pay 17.4% of their income in taxes based on all taxes (not just federal). The wealthiest Americans pay about 29%. This article is misleading and lazy journalism.

  7. be interesting to see what countries, per head of capita, giveaway their citizens taxes to other countries, in particular countries with bad human rights records!!

  8. The Authority american taxes
    has announced that it will be increasing the top tax rate to 15%. The increase will take effect in 2018. A number of states have already raised their taxes by 1 percent or more. In addition, several states have passed laws that require businesses to collect and report sales and use taxes on all products sold. These laws can lead to higher sales taxes for businesses that do not collect these taxes themselves.