In the U.S. we often complain about taxes, but is our personal income tax rate actually high compared to other countries around the world? After big names like Iceland's former Prime Minister David Gunnlaugsson and film star, Jackie Chan have surfaced as a result of the Panama Papers scandal, tax and government bodies (including the IRS) are scrutinising these offshore centres for money laundering and tax evasion activities.
But tax evasions aside, GET.com has just rounded up the Top 5 Countries With The Highest Personal Income Tax Rates In The World for 2016. If you're not familiar with how personal income taxes work, these numbers are basically the percentages that are levied straight on your income. For the most part, the countries listed in this article apply their highest tax rates to the highest income brackets or the highest earning individuals in the country. So what about the U.S.? Where do we stand? Let's first take a look at the highest percentages of income tax rates in the world in ascending order (from lowest to highest).
5. The Netherlands
If you earn more than €57,585 (around $65,437) in Holland, you can expect to pay up 52% of that in income taxes. What makes the little country of merchants and canals unique is the rather low bar set for the highest tax bracket.
The full 55.8% rate at the highest end of the scale lands Denmark the bronze for the third highest income tax rate in the world. This small, northern european country is famously a socialist state, with a high focus on income equality.
3. United States
We're currently the third highest ranking country for personal income tax in the world with an income tax rate of 55.9%. Of course this is a comprehensive number that includes the Federal tax (39.6%), State tax (13.3%) and Local tax (3%). This percentage applies to married couples that earn USD$464,850 per year and above, and are filing jointly and it also applies to certain surviving spouses. The rate also applies to qualified heads of households who earn USD$439,000 per year and above. For singles, unmarried individuals or married individuals filing separately, this rate kicks in if they earn USD$232,425 or more per year.
Coming in close to the highest ranking country is the Dutch Caribbean island of Aruba. Its tax rates follow a progressive system and they are applicable to an individual's worldwide income. If an individual earns AWG304,369 (around $180,000) or above per year, the second highest tax rate of 58.95% will apply.
Currently the highest ranking country for personal income tax in the world is Sweden. It's easy to see why the Swedish government is at the forefront of the drive for a cashless society and tight controls over its citizens' money. It imposes a nasty income tax rate of 59.7%. This percentage will only apply to those who earn SEK616,100 (just $75,595) or above per year. With taxes like that, you can hardly blame Ikea's Ingvar Kamprad for spending 40 years in tax-easy Switzerland. But unlike Americans who are mostly unhappy with paying high taxes, many less-wealthy Swedes are willing to pay higher taxes in exchange for greater welfare benefits and government subsidies. Perhaps this has something to do with the traditional trust in and dependance on government which is present in many former monarchies.
How Does The U.S. Tax Rate Compare With Others?
Other countries with some of the highest income tax rates include, Canada, Austria, Japan, Australia and Spain with an income tax rate of 49%. France and the United Kingdom with a 45% income tax rate, falls closely behind by a 5% difference.
It's all a matter of perspective when it comes to looking at these numbers. If you only look at the tax rates without taking into consideration the difference in currency, then by those grounds, the comparison is not a fair one.
It's also worth remembering that the U.S. tax rates are progressive, so not everybody is going to have to pay the full 55.9%. You pay according to what you earn. Before you begin panicking, here's a couple of tips for this upcoming tax season. Check out Tax Season 2016: Time Running Out To Document Charitable Gifts if you're active in charity work, and Tax Refunds: The Perfect Chance To Save for some extra cash on the side.