Governments run on taxes, which is one of the major means of capital generation for a state. The state imposes income tax on income generated by individuals or businesses within their domain. Income tax helps in funding public services, providing goods for citizens, and paying government obligations. Income taxes vary from country to country, where income taxes are inquired by the federal government and state governments. Income taxes are of two types including personal income tax and corporate income tax. Personal income tax applies to an individual’s salary, wage, and other types of income. While, corporate tax is levied on corporations, businesses, partnerships, and the self-employed.
Global Tax Competitiveness
The COVID-19 pandemic changed the dynamics of global economies. Many countries adopted temporary changes to their tax systems during the COVID-19 period. Countries including the United States and France have reduced their corporate income tax rates by several percentage points. On the other hand, Colombia has increased its corporate income tax rate. Among the OECD countries, Portugal has improved its corporate tax base, while Belgium’s corporate tax base has been made less competitive. The United States, the United Kingdom, and Chile are discontinuing temporary improvements to their corporate tax bases.
The country’s tax code structure is a key factor that determines its economic performance. A well-structured tax code provides an easy gateway for taxpayers to apply tax policies and promote economic development through their taxes. According to the Tax Foundation, marginal tax rates on individual and corporate income have dropped significantly across the Organisation for Economic Co-operation and Development (OECD) over the past few decades. Most of the OECD countries generate a large amount of revenue from broad-based taxes such as value-added taxes (VAT) and payroll taxes. Taxes are hard to collect in the countries with highest wealth inequality due to the complex economy and taxation system.
Estonia is ranked number one among the OECD countries with the best tax code for a straight tenth year, according to the Tax Foundation’s International Tax Competitiveness Index. Estonia has a 20% tax on both corporate income and individual income, respectively. Latvia has the second most competitive tax system, which has adopted the Estonian system for corporate taxation. Latvia also has an efficient taxing system for labor income. Following Estonia and Latvia, New Zealand, Switzerland, Czech Republic, Luxembourg, and Turkey are among the top countries with the most efficient and competitive tax systems. Estonia has a competitive tax score of 100, while Latvia, New Zealand, Switzerland, Czech Republic, Luxembourg, and Turkey have competitive tax scores of 88.5, 86.1, 84.7, 81.2, 78.9, and 78.6, respectively. On the contrary, Colombia, Italy, France, and Chile have the least competitive tax systems having competitive tax scores of 46.4, 48.4, 49.1, and 50.5, respectively.
Leading Tax Service Providers
Despite the economic constraints, people are finding ways to earn higher each year. In 2022, the global wealth stood at $454.38 trillion. According to Credit Suisse’s Global Wealth Report 2023, global wealth is projected to reach $629 trillion by 2027, rising by 38% over the next five years. The wealth per adult is expected to reach $110,270 in 2027. The primary growth driver of global wealth will be the middle-income markets. With the increase in global wealth, taxation will be an important segment all over the world. As per The Business Research Company, the global tax preparation services market is estimated to have reached $31.29 billion in 2023 and is projected to reach $38.28 billion in 2027, growing at a compound annual growth rate of 5.2%. There are some of the leading accounting and tax service providers that offer a wide range of consultancy and other services including H&R Block, Inc. (NYSE:HRB), Intuit Inc. (NASDAQ:INTU), and CBIZ, Inc. (NYSE:CBZ).
H&R Block, Inc. (NYSE:HRB) is a top tax preparation firm in the world. The tax service provider has been offering trusted tax expertise for over 70 years. On December 14, H&R Block, Inc. (NYSE:HRB) announced its generative AI tool for the tax preparation process, H&R Block AI Tax Assist. H&R Block, Inc. (NYSE:HRB) has introduced this AI tax tool to provide tax preparation services to individuals, the self-employed, and small business owners. H&R Block AI Tax Assist will efficiently work through the tax preparation process by assisting with tax information, tax knowledge, tax preparation, and tax changes. H&R Block AI Tax Assist uses the power of Microsoft Corporation’s (NASDAQ:MSFT) Azure OpenAI Service.
Intuit Inc. (NASDAQ:INTU) is another leading financial technology firm that owns several tax service platforms including TurboTax, QuickBooks, Credit Karma, and Mailchimp. On November 28, Intuit Inc. (NASDAQ:INTU) announced its results for the fiscal first quarter of 2024. The company posted revenue of $2.98 billion, beating consensus estimates by $94.53 million. Intuit Inc. (NASDAQ:INTU) reported an earnings per share of $2.47, surpassing the estimates by $0.49. The company continues to enhance its tax service platforms which play a vital role in the company's revenue generation. Here are some of the comments from the Q1 2024 earrings call:
“With the strong start to the year, we are reiterating our full-year guidance for fiscal year 2024. Consumer Group revenue growth reflects a strong finish to the tax extension season. We remain focused on transforming the assisted consumer and business tax categories with TurboTax Live.
CBIZ, Inc. (NYSE:CBZ) is a renowned tax, accounting, and advisory services provider. CBIZ, Inc. (NYSE:CBZ) was part of 20 hedge fund portfolios at the close of the third quarter of 2023, compared to 17 positions in the previous quarter. The total stakes of these hedge funds amounted to $277 million at the close of Q3 2023. As of September 30, Claus Moller’s P2 Capital Partners is the largest shareholder in CBIZ, Inc. (NYSE:CBZ) and has a position worth $133.86 million. The stock covers 17.51% of the fund's portfolio.
These were a few leading tax consulting companies offering a wide range of accounting and tax services to individuals and businesses around the world. Now, let’s take a look at the countries with the highest income tax rates in the world.
20 Countries with Highest Income Tax Rates in the World
20 Countries with Highest Income Tax Rates in the World
Our Methodology
We have gathered data for the countries with individual income tax rates from Trading Economics. Our ranking is based on the countries with the highest individual income tax rates in the world. For the countries with similar individual income tax rates, we have used their GDP per capita as a tie-breaker. The country with a higher GDP per capita is ranked higher. For the GDP per capita of the country, we sourced data from the International Monetary Fund (IMF), updated as of October 2023.
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20 Countries with Highest Income Tax Rates in the World
20. South Africa
Individual Income Tax Rate (2023): 45%
GDP Per Capita: $16,210
South Africa is one of the wealthiest countries in Africa. The country has a GDP per capita of $16,210. South Africa is placed 20th among the countries with highest income tax rates in the world with an individual income tax rate of 45%.
19. China
Individual Income Tax Rate (2023): 45%
GDP Per Capita: $23,310
China is the second-largest economy in the world. The country takes almost 45% of individual income tax. With a GDP per capita of $23,310, China is one of the top countries with highest income tax rates in the world.
18. Slovenia
Individual Income Tax Rate (2022): 45%
GDP Per Capita: $51,410
Slovenia is a Central European country with a GDP per capita of $51,410. Slovenia has an individual income tax rate of 45% and ranks among the countries with highest income tax rates in the world.
17. South Korea
Individual Income Tax Rate (2023): 45%
GDP Per Capita: $56,710
South Korea has a GDP per capita of $56,710 and an individual income tax rate of 45%. Ranked 17th on our list, South Korea is one of the countries with highest income tax rates in the world.
16. United Kingdom
Individual Income Tax Rate (2023): 45%
GDP Per Capita: $56,840
The United Kingdom is one of the largest economies in the world. With an individual income tax rate of 45% and a GDP per capita of $56,840, the United Kingdom ranks among the countries with highest income tax rates in the world.
15. France
Individual Income Tax Rate (2023): 45%
GDP Per Capita: $58,770
France is another leading economy and one of the richest countries in Europe. The country has a GDP per capita of $58,770. With an individual income tax rate of 45%, France ranks among the countries with highest income tax rates in the world.
14. Australia
Individual Income Tax Rate (2023): 45%
GDP Per Capita: $64,670
Australia is one of the fastest-growing economies in the region. The country has a GDP per capita of $64,670. Australia is placed 14th among the countries with highest income tax rates in the world having an individual income tax rate of 45%.
13. Germany
Individual Income Tax Rate (2022): 45%
GDP Per Capita: $66,040
Germany has a GDP per capita of $66,040 and an individual income tax rate of 45%. Germany is one of the countries with highest income tax rates in the world.
12. Iceland
Individual Income Tax Rate (2023): 46.25%
GDP Per Capita: $69,830
Iceland is an island country between the North Atlantic and Arctic Oceans. The country has a GDP per capita of $69,830 and an individual income tax rate of 46.25%. Iceland ranks among the countries with highest income tax rates in the world.
11. Spain
Individual Income Tax Rate (2023): 47%
GDP Per Capita: $50,470
Spain is one of the largest economies in Europe. The country takes almost 47% of income tax from individuals. With a GDP per capita of $50,470, Spain is one of the top countries with highest income tax rates in the world.
10. Portugal
Individual Income Tax Rate (2023): 48%
GDP Per Capita: $45,230
Portugal has a GDP per capita of $45,230 and an individual income tax rate of 48%. Portugal is placed 10th among the countries with highest income tax rates in the world.
9. Netherlands
Individual Income Tax Rate (2023): 49.50%
GDP Per Capita: $73,320
The Netherlands is one of the richest economies in the region. The country has a GDP per capita of $73,320 and an individual income tax rate of 49.50%. The Netherlands ranks among the countries with highest income tax rates in the world.
8. Israel
Individual Income Tax Rate (2023): 50%
GDP Per Capita: $54,770
Israel has an individual income tax rate of 50% and a GDP per capita of $54,770. Israel is placed eighth among the countries with highest income tax rates in the world.
7. Belgium
Individual Income Tax Rate (2023): 50%
GDP Per Capita: $65,810
Belgium is a Western European country and has a GDP per capita of $65,810. Belgium has an individual income tax rate of 50% and ranks among the countries with highest income tax rates in the world.
6. Aruba
Individual Income Tax Rate (2022): 52%
GDP Per Capita: $51,350
Officially known as the Country of Aruba, is a constituent country within the Kingdom of the Netherlands. Aruba has a GDP per capita of $51,350 and an individual income tax rate of 52%. Aruba is ranked sixth among the countries with highest income tax rates in the world.
