Welcome to taxclimate.com. The main purpose of this site is to show you what the tax climate looks like, not only in your home country but worldwide, which will enable you to understand why certain countries have higher tax burden than others and how it affects its citizens. Sufficient knowledge of different taxes and its effects is a must when you want to start your own business or get the most out of your retirement.
Tax burden on business
Payroll tax, or employers’ contribution, is the tax your employer pays on your behalf. These taxes are meant to help fund social security, worker’s compensation, unemployment, healthcare and in some countries local and public transportation. How much your employer withholds for this purpose depends on how high (or low) your salary is and the percentage varies from one country to another.
The benefits from high tax burden on business are, naturally, better working welfare and security for all citizens. But on the other hand it’s making it more difficult for business owners to hire personnel. The higher tax burden the more expensive it is. This makes it more difficult to make businesses grow and to increase the profit. Many countries reduce employment taxes in order to fight high levels of unemployment, creating jobs by making it more attractive to hire.
Tax burden around the world
When it comes to high tax burden Denmark, France, Belgium, Finland and Sweden topped the list in 2012 with percentages in the mid- to upper ’40s. Sweden is a classic example of the advantages of higher contributions to the state. By raising taxes the country can afford to provide its citizens with close to free healthcare, free higher education, generous welfare and stable unemployment compensation. This ensures that everybody, regardless of financial status, will have equal opportunity to high standard healthcare and education.
In, for example the US where the tax burden was 25.4 % (2012), its citizens have to pay for expensive health insurances, either privately or through an employer. In most cases the employer subsidizes the cost of the insurance but workers still have to share that expense by a paying variety of charges, for example co-payments, premiums and deductibles to name a few.
University is paid for by savings or expensive student loans. This means that people who are well off has a tremendous advantage and those who are less fortunate are often forced to refrain from higher education.
Benefits of high taxes
High tax burden normally means that the more money you make the more you pay. The effect of this system is that the less fortunate benefit the most, but the advantages for a country and its citizens as a whole are many.
- Free healthcare for everybody
- Free higher education
- Generous and stabilized welfare
- Less homeless people
- Equal opportunity and equality
Disadvantages of high taxes
Although most people would say high tax burden is in everyone’s best interest there are some downsides that need to be acknowledged.
- High level of dependency on financial support
- High level of unemployment
- Insufficient motivation to achieve
Some would say that when a country’s welfare is too generous its citizens, intentionally or not, may lose their motivation to work hard to achieve their goals. Even though high tax burden is a way to enhance equality, it creates a different kind of “unfairness” by making hardworking people carry the burden of supporting everybody else, which in turn can lead to frustration and animosity.
Lowering income taxes for employees leads to more spending which is good for business and by reducing employers’ contributions you create job opportunities.
The sum of it all is that lowering taxes put more people at work which in turn leads to more people paying income taxes and less people living on welfare.