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5 countries with the Highest Individual Income Taxes

Comparing the benefits of various tax rates across the world is complicated. Some argue that overly low taxes result in the growing economic disparity, while others believe that high taxation results in a country’s brain drain and an unnecessarily heavy economic burden on its people. Would it then be wise to consider a country with high individual income taxes as a viable place of business, especially if business takes off and income tax increases substantially? We compare the five countries with highest individual income taxes (also known as peak individual marginal tax rates, which are applicable to very high net-worth persons), and here is the lowdown.  

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1. Individual Income Tax in Sweden 

Despite having the world’s highest individual tax at 57%, Sweden ranks a highly respectable 22nd in the world for Gross Domestic Product (GDP) and seventh for GDP per capita. It is also a haven for setting up shop – the World Bank Report 2015 considers Sweden to be the 11th easiest country for doing business. There are many benefits to working in Sweden, given its strong currency, open-mindedness to new ideas and products, and more. Its stable economy, skilled workforce, and innovative technologies also make it an ideal place for business. 

Aside from the high taxation, individuals stand to gain many benefits working in Sweden. Often, expats are attracted by its liberal values, pristine natural landscapes, and extensive social welfare (that’s what the high taxes go towards, after all). However, Swedes are known to be introverted and reserved, making it difficult for expats and their dependents to integrate to local culture.

2. Individual Income Tax in Denmark

Flexible labour market (e.g. no restrictions regarding overtime work), easy business set up, and a highly qualified and motivated talent pool make Denmark an easily accessible place for doing business, despite the maximum individual tax of 55%. In terms of talent, 96 percent of youth complete a secondary education program and 47 percent a tertiary one. It is also possible to set up a business in a single day, and receive residence and work permits within five weeks. 

As for liveability, expats can look forward to working in the world’s happiest and most liveable city, if the numerous news reports are anything to judge by. Expats with young families can look forward to a top notch education system, which receives high priority and substantial public funding, with 14.8 percent of public finance dedicated to it.

3. Individual Income Tax in Finland 

As with the previous two Nordic countries, Finland has a robust welfare system for its citizens, contributing to the peak individual income tax of 55.4% as of 2015. Strengths of doing business in Finland include its global leadership in telecommunications and innovative tech applications, a government focused on globalising its marketplace and reducing trade barriers, as well as a transparent business environment with little corruption.

There is not much diversity in Finland’s demographics, and as such many foreign customs or religions may be unfamiliar to Finns. However, the number of foreigners in the country is increasing rapidly, from 12,800 in 1980 to 195,500 in 2012, which bodes well for expats looking to settle into Finnish life. 

4. Individual Income Tax in Netherlands

Standing at 52%, the peak individual income tax of the Netherlands is still staggeringly high, but the country makes up for it by being the eighth most competitive economy in the world, according to the World Economic Forum’s ‘Global Competitiveness Index’. The country is known for being an early adopter of new technology, and has a very open economy. 

Aside from the official Dutch and Frisian languages, English is widely spoken and understood in Finland, which should be of comfort to expats looking to move there. However, the cost of living is high, in part due to the high rent. This is due to the fact that the Netherlands is densely populated, and foreigners can only apply for free-sector apartments.

 5. Individual Income Tax in Japan  

A maximum of 50.8% individual income tax is applicable to Japanese workers, but it is still relatively easy to do business in Japan, a country ranked 29th in the world by the World Bank for setting up shop. In fact, it is possible to set up a business in the Land of the Rising Sun within just 14 days. As the world’s third largest economy, Japan is often revered as Asia’s economic powerhouse, and the pioneer of disruptive technologies.

Unlike western culture, Japanese culture relies heavily on indirect communication, such as non-verbal cues or body language, rather than the literal meaning of the words being communicated. Knowing when to apply honorifics, such as appending “-san” when addressing Japanese colleagues or clients, is important. Expats would have to relearn much of business etiquette, when moving to Japan.

Be it engaging employees for a new business venture overseas, or setting up shop in an unfamiliar culture vastly different from yours, it is possible to mitigate the challenges of expansion. For example, a global mobility partner like Shield GEO is capable of delivering a single point of contact for all your needs – including on-boarding of new employees, setting up employment, and payroll. Beyond helping to kick start the business, our in-country experts can also assist in observing any on-going changes in the host country, and derive suitable solutions accordingly. Such assistance may help to minimise the risk and headache leaders often face when expanding and maintain the business.   

If you'd like to know more about how you can successfully grow your business overseas, get in touch

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