Tax Rates By Country

Do you like to pay taxes? I’m not sure many of us do. Nevertheless, most of us realize that taxes are a part of life in any country with public services.

That said, complaining that taxes are too high is almost “de rigueur” in many circles. There are myriad examples of ways people demonstrate how burdened they are with taxes:

  • “I could have gone on a fabulous two week vacation if I didn’t spend so much on those taxes”
  • “I worked until April 10 just to pay off my taxes”
  • “Once they take out taxes, there’s not that much left!”

Admittedly, I too have had similar thoughts at different times.

However, when you take a comparative look at taxation around the globe, it becomes clear that some are taxed more than others. For those of us here in the United States, as well our Canadian neighbors, the results may be enlightening.

Here is a look at the Total Tax Revenue by country, as a percentage of Gross Domestic Product:

Country Tax %
Austrailia 30.8
Austria 42.3
Canada 33.3
Finland 43.0
France 43.5
Germany 36.2
Italy 43.5
Japan 28.3
Korea 26.5
Netherlands 37.5
Norway 43.6
Sweden 48.3
Switzerland 28.9
United States 28.3

Source: OECD Tax Database

As can be seen, the tax revenue as a percentage of GDP is actually relatively low for the U.S. and Canada. Compare these figures with that of France and Italy, for example. It would appear that we have it better here.

Now, let’s layer in savings rates for the same set of countries:

Country Tax % Savings %
Austrailia 30.8 2.5
Austria 42.3 9.8
Canada 33.3 1.1
Finland 43.0 -2.2
France 43.5 12.3
Germany 36.2 10.6
Italy 43.5 6.8
Japan 28.3 2.6
Korea 26.5 2.5
Netherlands 37.5 6.4
Norway 43.6 1.4
Sweden 48.3 7.8
Switzerland 28.9 9.5
United States 28.3 1.2

Sources: OECD Tax Database and OECD Economic Outlook Database

The tax data was from 2007 and savings rates from 2009, close enough for a near apples-to-apples comparison. Overall, it appears that the U.S. and Canada are not only taxed on the lower end of this set of countries, but also save very little as well.

What’s the lesson from this excercise?

My take is that though we don’t want our taxes to go higher, they could be worse - and shouldn’t be preventing us from saving more than we are at this time.

Comments

  1. says

    Yes we could save more, and taxes shouldn’t be the major limitation, provided that your income covers our true necessities. However, I will point out that as many problems as people ascribe to the US economy, the US still has the most versatile economic climate in the world. IMO, part of this is due to the lower taxes. Increasing taxes for small business owners removes the entrepreneurial incentive that was responsible for our previous prosperity in the first place.

    • Tim Chandler says

      Sounds plausible, but the data tell another story. Sweden has a highly comparable rate of entrepreneurialism (number of entrepreneurs per 1000 inhabitants) as the United States. One could argue that high taxes help — since the incentive in writing off your car and a dinner and your laptop etc. increases the higher the tax rate. But when you correlate the data you find that there is little connection between tax rates and entrepreneurialism. It’s probably more cultural.

  2. says

    Wow, that is fascinating, and kind of depressing!

    I was just discussing taxes in Europe and Canada vs. the US, and I was surprised that our tax rate is not that much different from Canada, considering they get free health care, and I don’t think their higher education is nearly as expensive as ours.

    Thanks for sharing, that was eye-opening!

    • Squirrelers says

      Everyday Tips – glad you found it informative – even if it wasn’t super uplifting how we don’t capitalize on our situaton here. Perhaps there will be some behavior changes with saving – even if limited – to take shape as a result of our recent financial situation.

    • SUCCYBYE001 says

      No one gets free health care. No one goes to college for free. Someone paid for it with their labor, time, and own personal wealth. Repeat after me, NOTHING IS FREE, NOT ENERGY, NOR GOODS AND SERVICES.

      • Tim Chandler says

        You missed the point. The point was that it’s paid by taxes in Canada, and they are rather comparable to U.S. taxes. So in that sense, Canadians and Americans pay similar taxes, but Canadians get so much more back –> hence they get it for “free.”

  3. says

    Even knowing that our taxes are lower than most, it still hurts if you really think about it. 28% – 40% just seems like a lot of money for each individual to contribute to new roads and whatnot. I don’t think governments would need as much if they were more efficient with what they get…

    • Squirrelers says

      BFS – I can certainly agree that things could be run more efficiently, in terms of usage of tax dollars. Perhaps that would make a dent into those tax rates.

      • Tim Chandler says

        Efficiency is a point, and as every business can tell you, you will never be as efficient as the people who want to replace you as CEO would want. But the point remains that a modern economy, a knowledge economy, requires more public goods provision than a subsistence farming one. And so high taxes are not growth-prohibiting. Go back to your own numbers. Sweden again. Extremely high taxes, but unemployment at 3.9% (high for Sweden), economic growth in the 2.5% range, and a national debt of 33% of GDP (US debt, same as Germany’s, by the way, is at apprx. 72%). So taxes are unpleasant, but the question is not how high they are, but for what they are used, investment (training, education, infrastructure …) or just spending (military, corporate handouts, tax cuts for voters to get their votes …)

  4. says

    That’s pretty interesting, but I’m not that surprised by the US tax vs. savings rate. However, what’s up with Finland? Why is their savings rate in the negative? Are they following in the footsteps of the US and spending more than they earn?

  5. says

    Does this include taxes at all level of government? Does it also include sales taxes and registration fees and things like that?

    I don’t know that revenue as a portion of GDP is really an accurate figure that is relevant to a personal situation. First, if you are paying 50% of your total income in taxes, you don’t care if the GDP figure is lower. Second, redistribution, subsidies, etc… all have effects that are distortionary and whose impacts cannot easily be seen. Finally, GDP is not the most reliable figure to go by. ;)

    • Squirrelers says

      Kevin – the database lists it as “Total” taxes in the table. While not perfect, it tells an interesting story when juxtaposed against GDP – as GDP in effect can be thought of as a “proxy” for the upper limit of taxes collectible :)

  6. says

    Interesting stats that I had never seen before. Yes, it does put some perspective on taxes when compared to other nations. I would guess the reason US is comparable to Canada even though Canadians get free health care is because US has much greater military budget.
    I would be curious as to how different nations compare in per capita national debt.

  7. says

    My little town has a lot of construction going on right now and the roads they are repaving don’t even seem so bad. I was thinking…aren’t there worse roads that should get done first? Some of this stimulus money seems to be getting used in a wasteful way.

    Any idea what our tax rate is projected to be?

  8. says

    So I definitely agree with you that the US isn’t saving nearly as much as it should be. However, I’d be curious what percentage of employee income on average is being paid in tax. Using GDP might make the tax level look lower since it includes everything, right? Maybe I am confused…

  9. xly15 says

    The GDP is not a good measure to compare to because the GDP also includes Services and Goods the government has bought itself. The Government itself is a component of the GDP.

  10. WestCoastSuccess says

    It is profoundly incorrect to consider a comparison between 2007 and 2009 data “apples to apples”, given the worst economic downturn since the Depression happened to take place between the two sets of data! Do you not think this had an impact on savings rates???

  11. Michael Brown says

    Taxes are normal, it is our responsibility to pay taxes for public service because in the end we the people will benefit it.

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