5 Countries With High Income Tax Rates
Which nations have the highest tax rates on high earnings, and why does it matter? Some individuals feel that taxing the affluent heavily helps redistribute revenue across society, improving equality and ensuring that the less fortunate have enough housing, healthcare, and food.
Others argue that high taxes on affluent people deter them from working and investing as much as they would if taxes were lower. Increased taxation may result in a decline in these two activities, removing their societal value. Advances in technology, medicine, and other fields increase everyone’s level of life.
Regardless of whatever hypothesis you believe, there is little doubt that tax rates influence affluent people’s choices about where and how to live, work, and invest, including their activities in nations with the highest marginal tax rates on individuals.
Based on the most recent Organization for Economic Cooperation and Development (OECD) statistics, the rates indicated below include both personal income taxes and employee social security payments. Then, in each nation, we examine how different taxes are levied on the rich.
- Some argue that high tax rates on the rich help redistribute money so that everyone has access to housing, healthcare, and basic needs.
- Critics argue that this inhibits the affluent from working and investing as much as they should.
- European nations have some of the highest tax rates, with Portugal having one of the highest at 61.3% total.
- Sweden ranks fifth with 57%, while Ireland closes out the top 10 with 48%.
- With a rate of 43.7%, the United States ranks 17th.
The national government of Portugal taxes employment income, company and professional income, and gains in net worth and pensions at progressive rates of up to 47.2%, and investment income, real estate income, and increases in net worth and pensions at a flat rate of 28%. Employees pay 11% in social security taxes, while employers pay the remaining 23.8%. In 2016, Portugal imposed a 3.5% surtax on earnings over the minimum wage.
Property taxes and transfer taxes are levied on real properties at the municipal level. If you sell your main house in Portugal, your profits are tax-free if you utilize the funds to purchase another permanent property in Portugal or another European Union member state.
Portugal allows for health and education expenditure deductions, as well as personal tax credits depending on the number of family members. Gifts and inheritances are tax-free for spouses, descendants, and ancestors, while other receivers must pay a 10.8% tax. Portugal has no net wealth or net worth tax.
The national government of Slovenia taxes employment income, company income, revenue from basic agriculture and forestry, rents and royalties, capital income (dividends, interest, and capital gains), and other income. 50% is the most progressive tax rate. Employees pay 22.1% of their gross income in social security taxes, while employers contribute 16.1%.
Capital gains, some company operations, and rental property income are taxed separately and at sometimes different rates than all other types of income. Capital gains are taxed at 25%, however the lower the rate the longer the holding period. After five years, the rate reduces by 10%, then by another 5% every five years after that. An person may avoid paying capital gains tax on an investment if they retain it for 20 years.
Individuals in Slovenia are entitled to an income tax allowance, with extra benefits if they are disabled or have dependents. Property owners pay taxes in certain places depending on a variety of variables. Slovenia charges progressive inheritance and gift taxes depending on the value of the property and the recipient’s connection with the dead or the giver. There is no net worth or wealth tax.
Belgian inhabitants are subject to both national and regional income taxes. Individuals must pay taxes on both movable and immovable property, as well as professional and other income. The greatest progressive tax rate is 50%, which may be augmented by municipal surcharges ranging from 0% to 9%. Employees pay a social security tax of 13.07% of their gross salary.
Individual capital gains from shares classified as professional income are normally taxed at the regular individual income tax rate, but the majority of capital gains from persons not involved in business operations are not taxed.
Business costs, social contributions, and alimony payments are all tax deductible in Belgium. The government also offers a personal allowance depending on the taxpayer’s marital status, dependent children, and so on. Charitable contributions, some life insurance policies, pension plan contributions, real estate investments, and other products are eligible for tax benefits.
Real estate purchase is taxed at 10% or 12.5% depending on the location, and there are additional yearly property taxes. Even spouses, legal cohabitants, and descendants are subject to inheritance taxes. For certain recipients, the rate might reach 30%. Unrelated recipients and distant relatives may be subject to inheritance taxes of up to 80%. There is no net worth or wealth tax.
In Finland, the tax authorities prepare citizens’ tax returns. The nation divides all individual income into two categories:
- Earned income is subject to federal, state, and local taxes, as well as social security taxes. Church taxes are also levied on members of one of Finland’s two national churches.
- The first 18,600 euros are free from national income tax but not from local income tax, church tax, or social security tax.
Municipal taxes are likewise imposed gradually and reach a maximum of 23.5%, while the church tax ranges from 1% to 2.2%.
A progressive taxation system is based on a person’s capacity to pay. This implies that if your income rises, so will your tax rate.
Income from taxable capital is taxed at two rates: 30% on income up to 30,000 euros and 34% on income over that level. Transfers of Finnish securities are subject to a 1.6% tax. Pension income in excess of 47,000 euros is subject to a 5.85% surtax after subtracting the pension income allowance. Finnish employees deducted 6.35% of their gross salary for pension insurance payments, plus 1.90% for unemployment insurance and 1.53% for health insurance charges.
Finland permits deductions for work-related expenditures such as commuting costs, professional literature, tools and equipment, and some travel expenses from earned income. It also provides for capital income deductions, such as house mortgage interest.
Municipal property taxes range from 0.93% to 6.0%, depending on region and property type. A 4% property transfer tax is also levied. Inheritance taxes vary depending on the connection between the dead and the inheritor, but they may reach 35%. There is no net worth or wealth tax.
The national government of Sweden taxes company income, employment income (at a maximum progressive rate of 57.1%), and capital income (which includes capital gains and profits and is taxed at 30%). Employers pay 31.42% of their workers’ earnings into social security.
Personal allowances and deductions for the costs of earning or retaining income, work-related travel expenditures, and increases in living expenses from work-related travel or the upkeep of more than one residence are available. Housekeeping and home maintenance costs are also tax deductible.
In real estate transactions, the buyer must pay a 1.5% real estate stamp duty on the property’s market or transfer value, in addition to local property taxes. There is no inheritance or estate tax in Sweden, nor is there a net worth or net wealth tax.
Top Tax Rates in Other OECD Countries
Top tax rates are also fairly high in a number of other OECD nations. Honorable mentions six through ten are as follows:
- Japan (55.9%)
- Denmark (55.9%)
- France (55.4%)
- the Netherlands (52.0%)
- Ireland (48.0%)
With a rate of 43.7%, the United States ranks 17th on the list.
The Bottom Line
Individuals earning significant earnings from working or investing in Portugal, Slovenia, Belgium, Finland, or Sweden may face tax rates in the high 50s and low 60s if their income exceeds a specified level. Individual income and investment taxes, as well as mandated social security payments, contribute to these high rates.
The rich also pay high taxes on real estate and inherited wealth in various nations and circumstances. Depending on whom you ask, high tax rates are either a substantial benefit to the nation as a whole or an impediment to its economic success.
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