A look at tax rates across Europe

By Chris Burke - Topics: Barcelona, BREXIT, Income Tax, Interest rates, spain, Tax

In a recent article in the Guardian newspaper, Patrick Collinson examines how the average burden on British people earning £25,000, £40,000 and £100,000 compares with taxes paid by similar earners in Europe, Australia and the US.

Chris Burke from The SpectrumIFA Group in Barcelona calculated the figures for Spain and explains “homeowners also pay an annual tax on the value of their property, currently around €900 on a home valued at €300,000, so slightly less than typical council tax rates in the UK. However, he says that inheritance tax has shifted enormously in recent years, having been raised to 19% during the financial crisis but now starting at just 1%”.

Labour’s plan to tax incomes over £80,000 more heavily is a “massive tax hike for the middle classes” that will “take Britain back to the misery of the 1970s”, according to rightwing newspapers. But are British households that heavily taxed?

A comparison of personal tax rates across Europe, Australia and the US by Guardian Money reveals how average earners in Britain on salaries of £25,000, or “middle-class” individuals on £40,000, enjoy among the lowest personal tax rates of the advanced countries, while high earners on £100,000 see less of their income taken in tax than almost anywhere else in Europe.

The survey found that someone earning £100,000 in the UK in effect loses about 34.3% of their pay to HM Revenue & Customs once personal allowances, income tax and national insurance are taken into account. The one-third reduction is roughly the same as the US, Australia and Spain, but a long way behind the 38% in Germany, 41% in Ireland, 45% in Sweden and up to 59% in France (though the French figures include very large pension contributions).
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Note that these figures are a rough guide only. International tax comparisons are bedevilled by large numbers of factors. We compared rates for a single person with no children and with no special allowances. Most countries tax individuals rather than households, but France taxes couples, which has the impact of reducing the burden on a high earner with an at-home partner. Autonomous regions within countries impose their own varying taxes. We converted euros, dollars and krona into sterling at a time when the pound had fallen rapidly; some earnings might have translated into higher tax bands abroad before sterling plunged.

Some countries, such as the US, raise relatively large revenues from property taxes. Others squeeze revenue from sales taxes – 25% in Sweden, 19% in Germany. While there is some harmonisation of income tax rates, social security varies dramatically. Australia imposes a small medical levy of 2%. France’s charges can be as high as 30%.

One of the most striking facts to emerge is church taxes. In Germany, individuals are expected to give 8% of their income to the church.

EU officials may look forward to the day when the single currency is teamed up with a single tax policy. But what emerges from our survey is how elaborate each country’s tax and social security systems are. Britain’s actually looks relatively simple compared with France’s. The Brexit negotiations will be a walk in the park compared with any attempt to harmonise the EU’s 27 national tax and social security systems.

France

Gross salary £25,000
After tax £17,050
Tax rate 31.8%

Gross salary £40,000
After tax £23,520
Tax rate 41.2%

Gross salary £100,000
After tax £40,600
Tax rate 59.4%

Spain (Catalonia)

Gross salary £25,000
After tax £20,812
Tax rate 16.7%

Gross salary £40,000
After tax £31,000
Tax rate 22.1%

Gross salary £100,000
After tax £65,700
Tax rate 34.3%

Germany

Gross salary £25,000
After tax £18,923
Tax rate 24.3%

Gross salary £40,000
After tax £27,256
Tax rate 31.8%

Gross salary £100,000
After tax £61,740
Tax rate 38.3%

Sweden

Gross salary £25,000
After tax £19,500
Tax rate 22%

Gross salary £40,000
After tax £30,000
Tax rate 25%

Gross salary £100,000
After tax £55,000
Tax rate 45%

Ireland

Gross salary £25,000
After tax £21,183
Tax rate 15.3%

Gross salary £40,000
After tax £29,624
Tax rate 26%

Gross salary £100,000
After tax £59,000
Tax rate 41%

United Kingdom

Gross salary £25,000
After tax £20,279
Tax rate 18.9%

Gross salary £40,000
After tax £30,480
Tax rate 24.8%

Gross salary £100,000
After tax £65,780
Tax rate 34.3%

To read the full article please click here
First published Saturday 27 May 2017, author Patrick Collinson

Article by Chris Burke

Chris BurkeIf you are based in the Barcelona/Costa Brava area you can contact Chris at: chris.burke@spectrum-ifa.com for more information. If you are based in another area within Europe, please complete the form below and we will put a local adviser in touch with you.

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