NEW YORK, Oct. 3, 2011 /PRNewswire/ -- Although regulators around the globe contemplated changes to tax policy and rates to stabilize their revenue base in the face of continued economic uncertainty, only 11 percent of 96 countries recorded any change in top personal income tax rates -- and not a single G-20 country reported a change to its top personal income tax rate for the 2011 tax year, according to the most recent KPMG International Individual Income Tax and Social Security Rate Report.
The KPMG report notes that Spain was the only country within the world's top 20 economies (defined by GDP) that changed its top personal income tax rate in 2011, with a 2 percent rise for top earners. In contrast, KPMG's report in 2010 revealed nearly twice as many rate changes – 21 overall including changes in four G-20 countries -- versus this year's 11.
"Personal income tax rate discussions have been high on the public agenda in 2011, as many economies continue to address debt concerns and walk a tightrope between further recovery and downturn, but these discussions have not yet translated into rate changes -- particularly in the larger economies," said Ben Garfunkel, national partner in charge of the International Executive Services practice at KPMG LLP, the U.S. audit, tax and advisory firm.
"Tax authorities are trying to identify strategies that successfully balance the pressures to identify and secure greater revenues with the imperative to keep their top personal income tax rates competitive -- so that they can continue to attract top talent and encourage businesses to set up operations in their countries," Garfunkel added.
Most Changes in European Region
The vast majority of rate movement in 2011 came from the European region, according to the KPMG report. Spain created new tax brackets for higher income earners, raising rates at the top end by 2 percent so that income over EUR 175,000 is now subject to a 45 percent rate. 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.
Under pressure to reduce its budgetary deficit, Luxembourg increased its top personal income tax rate by raising the unemployment surcharge for high income earners and introducing a crisis contribution tax. When combined, these measures have effectively increased Luxembourg's top personal tax rates by approximately 3 percent.
The small Caribbean island of Aruba had the highest personal income tax rate at 59 percent. Other countries with high top personal income tax rates included Sweden (57 percent rate), Denmark (55 percent rate), Netherlands (52 percent), Austria (50 percent), Belgium (50 percent rate) the United Kingdom (50 percent), and Japan (50 percent).
"It appears thus far that many regulators are proceeding cautiously when it comes to top personal income tax rates, sensitive to the political and social impact that changes may have on their country's plans to recover fiscal vitality," said Garfunkel.
Report's Broader Findings
The KPMG report's broader analysis also compared both effective income tax and social security rates on USD 100,000 and USD 300,000 of gross income. Effective rates are derived by taking total taxes over gross income prior to any deductions (which may include social security) to allow for a better comparison, as deductions can vary greatly across countries.
Some of these findings include:
- Belgium had the highest combined effective personal income tax and employee social security rate on USD 100,000 (48 percent) and US 300,000 (55 percent) of gross income.
- France continued to have the highest combined employee and employer social security rate at over 50 percent of earnings, with Belgium the next highest at 48 percent.
- Over one-third of the countries in the KPMG study had combined employer and employee social security-based effective tax rates of above 20 percent on USD 100,000 of gross income.
KPMG's 2011 Individual Income Tax and Social Security Rate Report is a cross-border study of personal tax and social security rates with historical data from 2003-2011. The report covers 96 countries, concentrating on the highest level of personal tax payable to the central government. For ease of comparison, the study has excluded, where possible, other taxes such as state and municipal taxes.
The study was commissioned by KPMG's global International Executive Services practice, comprising professionals from several KPMG International member firms.
A copy of the report is available at:
About KPMG LLP
KPMG LLP, the audit, tax and advisory firm (www.us.kpmg.com), is the U.S. member firm of KPMG International Cooperative ("KPMG International"). KPMG International's member firms have 138,000 professionals, including more than 7,900 partners, in 150 countries.
SOURCE KPMG LLP