Comparing taxes among countries is a hobby for some, a talking point for others and an important metric for those that devise strategies or who track foreign trade and investments. However, it is an uneven process. Currencies, tax rates and how they are applied, fluctuating economic conditions, population sizes, governmental restrictions and regulations, the tax base and what is taxed and extraterritorial activities vary making comparisons inaccurate.
The Visual Capitalist suggests that comparing tax revenues to a country’s Gross Domestic Product (GDP) is a way to make reasonable comparisons. I found this very interesting and insightful so am sharing it here.
The graphic is pretty clear and an attractive way to present seemingly complicated facts.
GDP is a measure of the size of a country’s economy. Taxes are government collections. The greater the proportion of taxes to GDP, the smaller the opportunity of economic growth from the private sector.
This chart measures 35 of the 37 countries that are part of the Organization for Economic Co-operation and Development (OECD) and have an overall average ratio of 33.8% of tax to GDP. Australia and Japan are not included since recent data was not available. The country with the highest ratio was Denmark at 46.3% and lowest was Mexico at 16.5%. The United States is at 24.5%. The government’s services in Denmark include universal health care and free university education. Neither is covered in the United States. The chart indicates that nearly half of Americans do not pay federal income tax. Income taxes for this chart include FICA and Medicare tax and that makes up about 25% of the total U.S. tax percent used in the chart.
The chart has been provided by www.visualcapitalist.com and they have many other cool charts and visuals. This chart was included here with the permission of Visual Capitalist and a direct link to its site with this chart is https://www.visualcapitalist.com/comparing-tax-systems-around-the-world/.You can also sign up with them for new charts they prepare or to peruse their database of great visuals.
If you have any tax, business, financial, leadership or management issues you want to discuss please do not hesitate to contact me at [email protected].
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