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The Burden of Taxation: An International Comparison
Published online by Cambridge University Press: 26 March 2020
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It has often been asserted that Britain is one of the most heavily taxed countries in the world. That assertion is examined in this note by comparing the weight of taxation and compulsory social security contributions in Britain with that in other countries. The comparison is made in broad terms with about twenty countries and in more detail with Australia, Western Germany, Ireland, Sweden and the United States. But even the detailed comparison is necessarily a coarse one. Tax systems almost everywhere are immensely complicated and only a few aspects of the systems are examined here.
Taxation in this country does not appear to be exceptionally heavy. The total burden—the proportion of the country's income which is taken in tax—is quite near to the European average. Further, the British division of tax between direct taxes on households, taxes on corporations and indirect taxes, is closer to the European average than that of any other European country. Those earning more than about £10,000 a year are more heavily taxed in Britain than in the other countries examined in detail but less than one-tenth of one per cent of the working population are in this income group, so this is hardly a sufficient ground for the general complaint of high taxation. At incomes between £2,000 and £10,000 a year, Sweden takes more in tax than Britain; Australia and Ireland take about the same; and Western Germany and the United States take less. Below £2,000 a year Western Germany and Sweden have very much higher rates than the other countries.
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- Copyright © 1961 National Institute of Economic and Social Research
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(1) Taxation in this note is understood to include compulsory social security contributions (in Britain, National Insurance contributions) unless otherwise indicated. The distinction between the two is arbitrary. There are very few countries where the social security contributions are sufficient to finance the welfare schemes without some government subsidy and in some countries, like Australia, the social services are financed entirely from government revenues.
(1) At market prices. See Appendix to article, page 60, note 1.
(1) A standard family has been used as the basis for com paring taxation in different countries. The family chosen consists of a man, all of whose income is earned in wages or salary, dependent wife, both adults being under 50 years old, and two children between the ages of 5 and 10 years. Tax paid includes social security contributions less family allow ances.
(2) See Appendix to the article, page 60, note 3.
(3) Many foreign countries allow standard expenses to the taxpayer who does not claim special expenses. In these comparisons it has been assumed that the standard deductions have been taken, where they exist. This assumption becomes unrealistic at high incomes when it becomes more worthwhile to attempt to get expenses assessed on a special basis. In some countries although the letter of the law may be Draconian the tax burden of the wealthy may be eased a great deal by the leniency of tax inspectors and of the courts in allowing business expenses.
(4) No allowance has been made for the individual States' income taxes. Where they exist they raise the effective tax rates by a few per cent.
(1) Though in Holland the married man pays tax on a lower scale of rates than the bachelor.
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