Tax Rates in Developed Economies are Too High

June 20, 2011 International Tax Cooperation

Tax ratesThe difference in personal tax rates in developed economies and emerging economies has been found to be notably significant, differing in some cases by well over 100 percent.

Earlier this month the international association of independent accounting firms UHY released a new study, highlighting the disparities in personal tax rates faced by taxpayers in major economies around the world. According to the published results, the tax burden placed on high earning individuals can vary by as much as two and half times between the highest and lowest taxing countries surveyed.

The study examined the taxpayers’ net incomes after tax and social security contributions. The results were divided between individuals with an income equivalent to USD 20 thousand, and those with USD 200 thousand. The study was also split between two groups, one to examine the tax rates of G8 nations, and another to examine the G8 nations alongside key emerging economies.

For the G8-only examination, low paid workers in Germany were the worst off, taking home only 72.6 percent of all income earned. Taxpayers in Japan were the best off, retaining 90.8 percent of their incomes. Amongst high earning individuals, Italy was the highest taxing nation, with workers only taking a net 54.1 percent of their incomes. Russia was deemed to be the least taxing nation, with taxpayers enjoying a total of 87 percent of their salaries.

The chairman of UHY John Wolfgang commented on the findings in the report, saying a clear pattern appears when the examinations of the tax obligation in G8 nations are compared to those in the world’s key emerging economies. The chairman said that the countries with the lightest tax liabilities were largely emerging nations, with the exception of the USA and Japan. As an example he pointed out that high earning taxpayers in Egypt, Estonia and Brazil will see a net income of 80.4 percent, 76.3 percent, and 74 percent of their salaries respectively.

Photo by Bryan Bruchman