Income tax, a means of capital generation for the government, is imposed on the income generated by individuals and businesses. Vital for the growth of any economy, tax revenue helps in funding public services, offering goods for citizens, and paying government obligations.
Notably, the income tax rate varies from country to country. Additionally, different countries categorise taxpayers into different brackets considering their income level, marital status, and the number of dependents. Read on to learn about the countries with highest taxes.
Global Tax Competitiveness
The tax code structure of any country is vital for determining its economic performance. Well-structured tax codes not only offer an easy gateway for taxpayers to adhere to tax regulations, but also promote economic development.
Further, most of the Organisation for Economic Co-operation and Development (OECD) countries majorly generate revenue from broad-based taxes, including value-added taxes (VAT) and payroll taxes. As per the Tax Foundation’s International Tax Competitiveness Index, Estonia holds the number one position amongst OECD countries with the best tax code for a straight tenth year. Then comes Latvia which has an efficient taxing system for labour income.
Besides, New Zealand, Luxembourg, Switzerland, Czech Republic, and Turkey are amongst the top countries with the most efficient and competitive tax systems. On the other hand, Colombia, France, Italy, and Chile have the least competitive tax systems.
| Country | Competitive Tax Score |
| Estonia | 100 |
| Latvia | 88.5 |
| New Zealand | 86.1 |
| Switzerland | 84.7 |
| Czech Republic | 81.2 |
| Luxembourg | 78.9 |
| Turkey | 78.6 |
| Colombia | 46.4 |
| Italy | 48.4 |
| France | 49.1 |
| Chile | 50.5 |
Tax Haven
A country where an employee or a business owner is able to reduce his/her tax burden or avoid paying taxes altogether is nothing short of a tax haven. And, the British Virgin Islands, Bermuda, Cayman Islands, Luxembourg, and Jersey are the classic examples of tax haven countries.
Highest Income Tax Countries
Some countries enforce higher taxes compared to others in order to drive government initiatives and fuel growth. According to NASDAQ, these are the top countries with the highest income tax rate in the world.
- With a GDP per capita of $74,960, Denmark has the highest tax rate in the world, which stands at 56%.
- With a cost of living of $1,003.64, Finland has a tax rate of 55%. Also, Austria - a social market economy – taxes its citizens at a rate of 55% and has a GDP per capita of $69,070.
- With an income tax rate of 51%, Luxembourg stands in the fourth position.
- Slovenia, Israel and Belgium impose a 50% personal income tax. This brings them on the list of highest income tax countries.
Besides, Sweden - one of the richest economies in the region - has a GDP per capita of $66,210 and is counted amongst the countries with a high income tax rate. With a GDP per capita of $52,120, Japan - one of the largest economies in the world - imposes high income tax on its citizens.
Notably, European countries dominate the list of countries with highest taxes.
Conclusion
In a nutshell, the income tax rate differs from country to country. And, Denmark, Finland, Austria, Sweden and Japan are amongst the countries with highest taxes imposed on their citizens in the world. This is because every country offers different levels of benefits to its citizens. Also, every country has a different rate at which it funds various social insurance programmes like healthcare and old-age pensions.
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