When it comes to the countries with the highest taxes in the world, most people imagine a simple list that can be ordered from highest to lowest. In reality, there are multiple forms of taxation to consider, from the dreaded personal income tax to corporate taxation. As such, while one country may have a surprisingly low income tax, it could still lead the world in terms of corporate taxation. This all makes getting to the bottom of where people pay the highest taxes rarely as simple as it initially may seem.
Personal Tax Rates
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Corporate Tax RatesThe United Arab Emirates has the highest corporate tax rate in the world at 55 percent. Out of 163 nations reviewed by the Organization for Economic Cooperation and Development, this figure is much higher than the nation of Chad, which has a corporate tax rate of 40 percent. The United States is another top contender with a corporate tax rate of 39.1 percent. It's worth noting that the United Arab Emirates â€” which is actually a federation of seven different Emirates â€” makes up for its high corporate tax rate by not imposing a federal corporate income tax. Instead, most of the emirates impose more forgiving individual tax decrees that vary up to 55 percent. Corporations that produce oil, gas and other natural resources from the area also face harsher tax penalties.
Overall Tax RatesWhen it comes to the highest overall tax rates, Italy ranks at the top with a rate of 50.59 percent. While Italian workers are expected to give the government more than half of their paychecks, this high rate applies after Social Security contributions have been paid. Italian tax rates are even higher than they seem at first glance when you consider how little an Italian citizen has to earn in order to qualify for the highest tax rate. Italy's highest tax rates kick in at $125,000, while the United Kingdom's top rate of 45 percent begins at an income level of approximately $250,000. European countries tend to have higher overall tax rates than others around the world, but these rates vary. Each country has its own set of rules governing Social Security contributions, payroll taxes, and other financial exemptions the country's residents may be entitled to.
Tax Rates in the United StatesWhile the United States doesn't make the top of any list for the highest tax rates, it ranks highly in each of the prior categories. United States workers in the highest tax bracket take home only 60.56 percent of their earnings, according to New York State Tax. Compared to Aruba, the highest American income tax rate is 39.6 percent. The second highest income tax bracket in the United States is still 35 percent. The United States falls behind Italy, India, the United Kingdom, France, Canada, Japan, and Australia for income tax rates. While the United States ranks third in terms of corporate tax rates â€” at 39.1 percent â€” the country is also a world leader in corporate tax deductions. These deductions mean that corporations generally pay less to operate their businesses in the United States than they do in most European nations. United States tax law is also unique in that state taxes play such a large role in what each corporation pays. Some states have corporate tax rates that are generous enough to make up for higher federal tax rates, giving businesses more incentive to keep their operations in the country. Tax laws between states can vary as widely as tax laws between countries. Comparing tax rates around the world requires a broad approach that keeps in mind how different various forms of taxation can be. From income brackets to state policy, the amount individuals and corporations actually pay in each country isn't always the figure seen on paper. Understanding the way these dynamics work with each other goes a long way towards understanding the truth about which nations really have the highest taxes in the world.