Countries With The Highest And Lowest Taxes

By Marc Davis | October 28, 2011 AAA
Countries With The Highest And Lowest Taxes

Taxes have always been a major issue in American politics. In the late colonial era, when the revolution was about to erupt, anti-British sloganeers shouted, "No taxation without representation." Today, several major groups of tax proponents advocate different ways to handle America's taxes, in all its many varieties: income tax, capital gains tax, foreign revenue tax and so forth.

TUTORIAL: Personal Income Tax Guide: Basic Concepts

One group wants a reduction of the income tax, to stimulate business investment and, thus, solve the country's unemployment problem. A second group proposes an increase in taxes on the wealthy, as a means of reducing the national debt. Yet a third group wants a total reform of the U.S. tax code, a complex document of thousands of pages full of loopholes, exemptions and special breaks for special circumstances, which allow some colossal U.S. corporations to pay no tax at all.

If you've ever wondered how America's tax structure compares to that of other nations, here's a look at the highest and lowest marginal tax rates on working people, of a select number of countries. The marginal tax rate is the rate paid on the taxable income, in the highest tax bracket.

The Highest
One of the world's highest tax rates, and the highest of Western European countries, has been imposed on the citizens of Belgium. On average, Belgium taxpayers are taxed a marginal rate of 54.9%. The country's growing unemployment and a lackluster economy have attributed to its high taxes, according to economists.

Finland taxes citizens at a marginal rate of 46.6%, reportedly the world's fourth highest. Nevertheless, the nation's economy is vigorous and unemployment as of mid-Oct. 2011, was a relatively low 6.8%.

Germany's closely similar marginal tax rate of 45% has not hurt the nation's economy, Europe's biggest and the world's fourth largest, measured by gross domestic production (GDP). Despite providing extensive and costly social safety to its citizens, Germany continues to flourish economically.


Right behind Germany with a marginal tax rate of 44.4%, the world's fifth highest, Denmark nevertheless prospers. Danish workers, according to an ABC News story of 2007, regard themselves as happy and content, despite their heavy tax burden. (To know more about high tax rate countries, check out Countries With The Highest Taxes.)

The Lowest
Surprise! Despite endless American complaints about over-taxation, the U.S. has one of the world's lowest marginal income tax rates, at 27%. Along with what, by comparison with the high rates cited above, seems a relatively low rate, the U.S. has the world's biggest economy, with a GDP of over $1,400 billion. The next largest economy, China's, is only one third as large. The U.S. national debt, however, is now seen as an impediment to economic growth, and an ongoing unemployment rate of about 9% threatens to further damage the economy. (To learn more about GDP, read What is GDP and why is it so important?)

Switzerland, long a tax haven for the wealthy and a nation with once inflexible banking laws regarding secrecy, has one of the lowest marginal tax rates on working people, at 20%. Unemployment in the nation, as of 2009, stood at less than three percent.

U.S. neighbor, Canada, imposes a marginal tax rate of 31.2% on its labor force. Like the U.S., Canada has struggled with an unemployment rate of 7.10%, as of Oct. 2011, the lowest since 2008. Although Canada's tax rate is relatively low, the nation offers a program of national health care.

Australia imposes a 31.5% marginal tax rate on workers, and has performed throughout the recent recession better than most other economically developed countries. The country encourages entrepreneurship and business investment, which have contributed to Australia's general economic health.

The Bottom Line
The cost of running a country, providing services, maintaining a military, supporting and repairing the infrastructure, and all the other essential functions of government, is immensely expensive. Taxation, along with selling government bonds, assessing fees and imposing tariffs, are the principal means by which governments raise money to meet these expenses. Therefore, taxes are inevitable, but if you're living in the U.S., your share of the tax burden is among the world's lowest.

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