The Highest Income Tax Rates in the World

Source: Flickr/TaxCredits.net.

U.S. companies and individuals have been begging for a simpler, more competitive tax code, as the current one runs a migraine-inducing 70,000 pages long and is too high compared with the rest of the world. But things could be changing. For the past few years, Rep. Dave Camp (R-Mich.) has been working on a vast overhaul of the U.S. tax system. This week he finally unveiled the efforts of his work in what's being called the Camp Plan. Read on for how our current rates compare with the rest of the world's and how the Camp Plan's proposals would change our status.

The highest income tax rates in the world
Following is the list of the top 50 highest individual income tax rates in the world. The list uses the highest marginal tax rate in the country as the rate. As of 2012, the U.S. was tied for 36th with 10 other countries, but when the highest rate was changed in 2013, the U.S. moved to 34th place, with a top marginal tax rate of 39.6%.

Rank

Country

2013

1

Aruba

58.95%

2

Sweden

56.6%

3

Denmark

55.56%

4

Netherlands

52%

4

Spain

52%

6

Finland

51.13%

7

Japan

50.84%

8

Austria

50%

8

Belgium

50%

8

Israel

50%

8

Slovenia

50%

12

Curacao

49%

13

Ireland

48%

13

Portugal

48%

15

Norway

47.8%

16

Zimbabwe

46.35%

17

Iceland

46.22%

18

Australia

45%

18

China

45%

18

France

45%

18

Germany

45%

18

United Kingdom

45%

23

Luxembourg

43.6%

24

Italy

43%

25

Greece

42%

25

Papua New Guinea

42%

27

Chile

40%

27

Croatia

40%

27

Gibraltar

40%

27

South Africa

40%

27

Switzerland

40%

27

Taiwan

40%

27

Uganda

40%

34

United States

39.6%

35

South Korea

38%

36

Namibia

37%

37

Argentina

35%

37

Barbados

35%

37

Cyprus

35%

37

Ecuador

35%

37

Malta

35%

37

Thailand

35%

37

Tunisia

35%

37

Turkey

35%

37

Vietnam

35%

37

Zambia

35%

47

Venezuela

34%

48

India

33.99%

49

Colombia

33%

49

New Zealand

33%

Source: KPMG.

The proposed Camp Plan will simplify the U.S. tax system for individuals so that there are just three tax brackets, instead of the current seven. The top marginal tax rate would move down from 39.6% to 35%, moving the U.S. back to 36th place. You can read more about the Camp Plan and what it might mean for you here, and the following table shows average rates by region around the world.

Africa average

29.77%

Asia average

28.35%

Latin America average

32.66%

Oceania average

37.75%

EU average

37.85%

Global average

31.95%

Source: KPMG.

Tax rates matter especially for high-income individuals, who are best equipped financially to move to take advantage of lower rates. A great example exists in France, where the top marginal tax rate will jump to 75% on incomes above 1 million euros and has led to an exodus of top earners.

What this means for you
The Camp Plan's changes to the tax code would be a net positive if adopted. Lowering the U.S. top marginal tax rate will make us more competitive with the rest of the world. But no matter what happens, it shouldn't change your investing strategy. Continue to educate yourself, find great companies, and invest for the long term.

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  • Report this Comment On March 03, 2014, at 11:32 AM, Orion5150 wrote:

    This is what I found online regarding Sweden Tax Rates.

    kr0 - kr372,100 0.00%

    kr372,100 - kr532,700 20.00%

    kr532,700 and up 25.00%

    So where is the 56.6% coming from?

    These articles are so misleading. You would think that the US is so soft of Taxes. If you look into it, you'll see that our tax system is actually softer on the middle class and lower incomes than any other country. In Aruba (the highest taxes in the world) a married couple earning $50k US dollars is in the 38% bracket; yet in the US they would only be in the 15% bracket. I'm not say we need to tax the lower incomes more; but I am saying we don't need to raise the taxes on the wealthy. We need to better manage the tax money coming in. It really is as simple as that.

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