Why Do Taxes Vary So Much Across Countries?

Taxes are an important source of revenue for governments around the world, and the amount of taxes paid by individuals and businesses varies significantly from country to country. This is due to the different rates at which each country funds social security programs, such as old-age pensions and health care. In some countries, such as the Netherlands, social security taxes are significantly higher than basic income taxes. So what would it mean to have a fair tax system? Would people pay more than companies? And would people pay more taxes through consumption or when they earned income? This visualization contains a snapshot of the different tax categories of the OECD member countries, which demonstrates how there are many different ways to increase revenues.

For starters, social security and consumption taxes generate much more income in other countries than in the U. S. UU. In fact, social security is the main generator of tax revenues in many places, including Japan (40.2%), Germany (37.9%) and France (32.8%).

And the comparative amount that people share is substantially lower in the developed world compared to the U. In many countries, people don't even contribute 20% of their income to total taxes, such as Colombia (6.2%), Slovenia (14.3%) or Portugal (18.4%). This is because other entities, such as companies, pay much more taxes in countries such as Japan (12.9%) or Australia (19.1%) compared to the US. Value Added Tax (VAT) is an obvious example of this.

A VAT-based tax system means that every time a company “adds value” to the supply chain, a tax must be paid to the government. This accumulates over time as finished products are manufactured and brought to market, and is usually transmitted to consumers through higher prices. In addition, data show that developed countries actually collect much higher tax revenues than developing countries despite comparable legal tax rates, even after controlling for underlying differences in economic activity. Similarly, sales of basic necessities, such as food, are often taxed at a much lower rate than sales of luxury items, such as tobacco products or a new car. Tax havens generate government revenue by attracting a generous amount of capital inflows and imposing low rates, fees and tax rates. In addition, tax rates and regulations vary greatly from country to country, and even within different parts of the same country. This implies that, in order to assess who bears the burden of a tax, it is not enough to analyze the legal tax rates.

An important feature of income tax systems is the statutory tax rate that applies to the highest income bracket. The Tax Foundation then took these figures and calculated the percentage of the different types of taxes by country. The vertical axis represents the fraction of all professional football players in the best leagues who are foreign nationals in the country in which they play, and the horizontal axis shows the maximum average tax rate on the earnings of foreign players in that country. This means that marginal rates apply only to the portion of taxable income that exceeds the lowest income threshold for that marginal rate. The visualization does this, showing the reduction in inequality that different OECD countries achieve through taxes and transfers. The authors also show that player mobility had a negative impact on the performance of football clubs in countries with high tax rates. For example, high tax rates can discourage the supply of labor and, in the case of very wealthy people, they can even induce the migration of talent to countries where the tax burden is lower. In conclusion, taxes vary widely from country to country due to different social security programs and taxation systems. It is important to understand how these systems work in order to assess who bears the burden of a particular tax.

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