{"id":100772,"date":"2015-10-11T15:00:22","date_gmt":"2015-10-11T13:00:22","guid":{"rendered":"http:\/\/businesstech.co.za\/news\/?p=100772"},"modified":"2015-10-09T17:13:23","modified_gmt":"2015-10-09T15:13:23","slug":"countries-where-people-pay-the-most-tax","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/trending\/100772\/countries-where-people-pay-the-most-tax\/","title":{"rendered":"Countries where people pay the most tax"},"content":{"rendered":"

In his lecture on 3 October<\/a>, economist Thomas Piketty basically argued that \u201cYou can\u2019t keep complaining about government inefficiency \u2013 because, really, what other option is there?\u201d<\/p>\n

Well, I think that\u2019s worth looking at. Because in some countries, avoiding tax is essentially\u00a0a form of civil protest; and to me, that seems entirely appropriate.<\/p>\n

Example: if the Jews under the Nazi government decided to evade their taxes, would we have called\u00a0called that \u201cimmoral\u201d \u2013 their decision to not fund the institutions that were being primed for their genocide?<\/p>\n

I think not.<\/p>\n

At the same time, you have to draw a line somewhere. You can\u2019t just be all \u201cI\u2019m totally discriminated against for being white\/rich\/privileged\u201d and then absolve yourself of the social imperative to pay tax.<\/p>\n

Now I realise that the libertarian group will call almost any form of taxation \u201cexpropriation\u201d \u2013 but practically speaking, there are some public goods that\u00a0people expect to be provided by the State.<\/p>\n

Changing that is a pretty drastic reform process, so in the interim, declaring that\u00a0\u201cI\u2019m not paying tax because I never asked for\u00a0street lighting to be provided\u201d<\/em> is a bit like saying \u201cI\u2019m not paying for all the channels that DStv provides because I didn\u2019t ask for the History Channel\u201d<\/em>.<\/p>\n

Sometimes, it\u2019s just part of the package, and you can\u2019t always pick and choose like that. So you can either keep the DStv package (ie. citizenship), or you can go and find a television provider that suits you better (ie. emigrate to somewhere that\u2019s a better fit).<\/p>\n

Here is a graph that I spent a solid amount of time\u00a0building on Excel:\u00a0total taxes collected as a percentage of GDP, going back to 1965, based on data from the OECD<\/p>\n

\"This<\/a>

(Click to enlarge)<\/p><\/div>\n

I specifically chose \u201cTotal Tax Collection as a % of GDP\u201d\u00a0because I\u00a0don\u2019t\u00a0<\/em>like data sets that talk about \u201chighest marginal tax rates\u201d. Speaking as an accountant, let me say that those numbers are meaningless.<\/p>\n

You can have a really high marginal tax rate (such as \u201c80%\u201d), but because of the allowable deductions, the effective tax rate is rarely higher than 20% \u2013 which makes your country a lot nicer than a country with a tax rate of 25% that is strictly enforced without any permissible deductions.<\/p>\n

So going back to the graph, some points:<\/p>\n

    \n
  1. The Scandinavian countries collect\u00a0massive amounts of their annual GDP in tax (between 40% and 50% of GDP).<\/li>\n
  2. The United States, comparatively, collects about 25% of GDP in taxes.<\/li>\n
  3. Chile and Mexico are the OECD countries with the lowest tax collections.<\/li>\n<\/ol>\n

    If you\u2019re looking for the non-OECD countries, have a look at this wikipedia page<\/a>. Some observations from there:<\/p>\n

      \n
    1. South Africa collects about 27% of GDP in taxes (higher than the US).<\/li>\n
    2. The countries of the Arabian peninsula have some of the lowest tax collections in the world (but you don\u2019t seem too many of them on the ‘tax haven’ radar).<\/li>\n
    3. The balance of the low-tax collecting countries seem to be made up of the war-torn and the developing-extremely-slowly.<\/li>\n<\/ol>\n

      Incidentally, having high taxes collections doesn\u2019t quite seem to impact economic activity in the way that we\u2019d expect. Many of those top tax collectors are \u201cmodel\u201d economies.<\/p>\n

      So I guess the question is: are the Scandinavian countries just better at policing their tax policies? Because most of the OECD countries have gone through multiple different taxation regimes since 1965, and yet those Scandinavian countries just seem to be better at it.<\/p>\n

      I\u2019m not sure that we\u2019ll have an answer to that question, but I think that there are other explanations that might fit better. Some articles that might be worth reading:<\/p>\n