22 April 2009

How much tax does the rest of the world pay?

The budget coverage around the increase in the top rate of taxation led me to wonder how our rate of income tax compares internationally?

I found myself debating with a friend over lunch that this new higher rate for those earning over £150,000 was not that high when put in to an international perspective - but soon realised that I didn't in fact know whether this was the case.

So I began to scour around to see if any table existed to compare the rates of corporate, income and sales tax for the major economies around the world. The best that I have managed to find is this (click for enlarged image):

Apologies for the rather messy graph. Courtesy of Wikipedia.

I was surprised to see that the highest rate of taxation (the new 50% rate) in the United Kingdom is amongst the most punishing in the world. I am a fundamental supporter of ensuring those on the highest incomes are taxed fairly and that our taxation system reflects are desire to see a more equal society. But in a globalised society where capital is footloose and fancy free, how can we expect to keep these earners?

Perhaps we need an American style tax system where being a US citizen means you are taxed on your income no matter where you work in the world?

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CC1978 said...

Interesting when you put it like that. Kind of a catch 22. How can you do the right thing when everyone will just leave?!

Anonymous said...

the state of the UK finances are criminal. Brown has bankrupt us all

Anonymous said...

We're all screwed mwhaha

Tom said...

Worth noting that the highest rate listed in that graph is Denmark, at a 63% top rate (and also a very high VAT). Guess which country topped Forbes Magazine's list of the best places in the world to do business recently? Tax rates are by no means the most important thing for keeping business in the UK.

Shake up said...

I am up for a debate on the budget - how you can defend 50% income tax plus 11% national insurance contribution - combined 61% taken from you before you even see a penny of, on average 100 hours per week of work - Surely an equal society is not built on working for 39% of your blood a sweat. Also I think your being short sighted - this country manufacturers nothing of real value - its greatest asset is its human capital - which is largely made up of highly skilled, very mobile foreign workers - who will move for the right opportunity. This country will not be able to attract or retain the human capital it needs to compete in a globally competitive fight for talent - by offering a take home pay of 39% of £150k. An equal society is a noble goal but this government promised that hardworking - entrepreneurial individuals would never be penalized in the pursuit of trying to obtain a fairer and more equal society - they have broken that promise and lurched to a far left Scottish mafia style of politics. That will not only destroy the new Labour project but leave this country struggling not only to compete - but break even in a world that will be undergoing a generational shift of power. I am disgusted by the budget and the political gimmicks of Gordon brown - who now encompasses a state of psychology that is quite frightening!

Richard Lane said...

@ Tom. I definitely right about taxation rates not only not being the only attraction for businesses. Government investment in infrastructure, education, sound legal rights, copyright protection are vital to ensure companies can have peace of mind when

I also think that a huge amount of business profit comes from capital gains - the buying and selling of assets for profit. This income is taxed at an international competitive 18%!

The Labour government has done a great job in investing in all the none taxation benefits that attract companies.

Richard Lane said...

@ Shake up

Firstly, your claim that you pay 61% of your earnings in tax before you even see a penny is laughable. You pay 50% tax only on earnings above £150,000 – not for the amounts you earn between £0 - £149,999. Those who earn more than £150,000 are in the lucky 1% (ONE PERCENT!!) of the population. We as a society should be able to have a debate on what we feel is a reasonable gap between the highest and lowest earnings in society.

What is more, a vast majority of the so called ‘wealth creators’ in society earn the vast majority of their wealth through capital gains – the buying and selling of assets for profit. This profit is taxed at 18%!!

Thirdly, national insurance contributions are not 11% on all incomes. Contributions are capped, meaning the high earners stop paying national insurance contributions at a certain point.

No one pays 61% in tax!

What is more, as Tom stated, the government has invested a huge amount in none tax business benefits. Any country can offer low taxes to tempt business, but if they do not have a well trained work force, transport infrastructure, legal protections etc, it is all meaningless.