The not too long ago printed Worldwide TaxA tax is a compulsory cost or cost collected by native, state, and nationwide governments from people or companies to cowl the prices of basic authorities companies, items, and actions.
Competitiveness Index (ITCI) 2023 compares how properly OECD nations promote sustainable financial progress and funding by way of aggressive, impartial tax methods. This text examines how European OECD nations rank on particular person taxes, persevering with our sequence on the ITCI’s element rankings.
The ITCI’s particular person tax element scores OECD nations on their prime marginal particular person earnings taxAn particular person earnings tax (or private earnings tax) is levied on the wages, salaries, investments, or different types of earnings a person or family earns. The U.S. imposes a progressive earnings tax the place charges improve with earnings. The Federal Earnings Tax was established in 1913 with the ratification of the sixteenth Modification. Although barely 100 years previous, particular person earnings taxes are the biggest supply of tax income within the U.S.
charges and thresholds, how advanced the earnings tax is, and the tax charges levied on earnings from capital positive aspects and dividends.
Estonia has probably the most aggressive particular person tax system within the OECD for the tenth consecutive 12 months. The Baltic nation levies a prime marginal earnings tax fee of 20 p.c on wage earnings, the second lowest fee within the OECD. Estonia applies the highest fee at 0.72 instances the common nationwide earnings, making it a comparatively flat earnings tax.
Estonia’s labor tax funds are largely automated, leading to one of many best earnings tax methods to adjust to within the OECD. Estonian policymakers prioritize simplicity, which is constantly evident all through the tax code.
As a consequence of Estonia’s cash-flow tax on enterprise income, there is no such thing as a separate levy on dividend earnings, setting the dividend tax fee to zero p.c. Capital positive aspects are taxed at a fee of 20 p.c, near the OECD common of 19 p.c and aligned with its company tax.
In distinction, the Danish particular person earnings tax system is the least aggressive of all European OECD nations (Chile ranks the bottom within the OECD). Denmark’s prime marginal tax rateThe marginal tax fee is the quantity of further tax paid for each further greenback earned as earnings. The common tax fee is the entire tax paid divided by whole earnings earned. A ten p.c marginal tax fee signifies that 10 cents of each subsequent greenback earned could be taken as tax.
of 55.9 p.c is utilized at 9.6 instances the common nationwide earnings, together with an 8 p.c labor market tax. Capital positive aspects and dividends are each taxed at prime charges of 42 p.c, the very best within the OECD.
Click on right here to see an interactive model of OECD nations’ particular person tax rankings, then click on on a selected nation for extra details about the strengths and weaknesses of its tax system.
To see whether or not a rustic’s particular person tax rank has improved in recent times, take a look at the desk beneath. To be taught extra about how we decided these rankings, learn our methodology right here.
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