Top personal tax rates remain stable worldwide 

According to the survey, Switzerland (Zurich city) lies in 12th position in Europe, with a maximum tax rate of 40 percent. If the average of all of the cantonal capitals is taken as a basis, the average maximum tax rate comes to 33.83 percent, thereby placing Switzerland in 11th position.

 

As in previous years, the European rankings are led by Eastern European countries: Bulgaria heads the table with 10 percent, followed by Russia (13 percent), Serbia and the Czech Republic (15 percent each) and Romania and Hungary in fourth place (both with 16 percent). After Ukraine (17 percent) and Slovakia (19 percent) come the Channel Islands of Jersey and Guernsey, together with the Isle of Man, in seventh position (all with 20 percent). The European Top Ten is completed by Latvia (25 percent), Cyprus (30 percent) and Poland (32 percent).

 

In a comparison between European countries and Swiss cantons, Zug once again leads the national field, with a top tax rate of 22.86 percent (12th position), followed by Schwyz (23 percent) and Obwalden (24.12 percent) in 13th and 14th positions respectively. Geneva has the highest cantonal tax rate; at 44.75 percent, it finds itself in excellent European company, between Italy (43 percent) and Spain, Greece and Germany (all 45 percent).

 

However, more informative than a country’s nominal top rate of tax is the effective tax burden, i.e. the average income tax charge including social security costs. In this regard, Switzerland (Zurich city) lies in 16th place among the 96 countries surveyed, with an overall charge of just 17.7 percent where annual income is USD 100,000. Compared to other countries, this therefore makes Switzerland extremely attractive to average earners, too.

The biggest changes to the top personal tax rates were in Europe. At just over 17 percent, the average tax rate for Eastern Europe is therefore half of that of other European sub-regions – a result of the historical low flat tax initiatives. Hungary, in particular, is slashing its average rate: The country is also switching to a flat tax rate system and has, as a result, cut its top tax rate sharply, from 32 to 16 percent.

 

In Southern Europe, where the average rate is around 39 percent, the top tax rates were only increased in Spain and Portugal. Spain has created new tax brackets for higher income earners, raising rates at the top end by 2 percent, such that income over EUR 175,000 is now subject to a 45 percent tax rate. Portugal has also raised its tax rates slightly for the second year in a row.

 

In Northern Europe, where the average tax rate is around 40 percent, minor tax rate changes were seen in Latvia, Finland, Sweden, Iceland and Ireland. Latvia dropped its flat tax rate by 1 percent. Ireland, which initiated the upward rate movement trend back in 2009, raised rates for the third consecutive year (a 1 percent increase in 2011) as it continues to seek additional tax revenues.

 

Western Europe, where the average top rate of tax is over 45 percent, continues to have the highest rate of personal taxation of any sub-region globally. Under the pressure of its budgetary deficit, Luxembourg has responded by increasing the top personal tax rate, and also introduced an extraordinary crisis contribution tax for 2011. When combined, all of these measures effectively increased the top tax rates in Luxembourg by approximately 3 percent in 2011.

KPMG’s Individual Income Tax and Social Security Rate Survey is a cross-border survey of personal tax and social security rates from 2003 to 2011. The report is being published for the fourth time and compares 96 countries worldwide. The study concentrates on the highest rates of income tax payable to central government by individuals (unmarried, no children and non-denominational). For ease of comparison, the study has excluded, where possible, other taxes levied at federal, cantonal and municipal level. The study was commissioned by the Global International Executive Services group, comprising professionals from several KPMG International member firms.

KPMG AG

Andreas Hammer

Head of Public Relations & Public Affairs

Telephone: +41 44 249 48 20

Mobile: +41 79 335 75 06

E-Mail: kpmgmedia@kpmg.ch  

www.kpmg.ch  

Follow us on www.twitter.com/kpmg_ch