European Tax Comparison: How Countries Stack Up

In an op-ed in today's Washington Post, former Republican governor Mitch Daniels claims that the U.S. has the "most progressive tax system among the most developed countries". His argument is that almost all developed countries except for the U.S. have a value added tax (VAT), which is inherently regressive. He goes on to say that "the top 10 percent pay about 70 percent of U.S. income taxes, and more than half the total U.S. taxes even when payroll taxes are included. The dreaded 1 percent pick up more than a quarter of the entire federal tab."

Are these figures accurate? How sound is his overall argument that the American tax system is more progressive than the taxes in most European countries?

You have to consider that several things Europeans pay for via taxes or other public contributions, like health insurance, are instead "private" expenses in the US. You still effective have to spend this money in the US to avoid bankruptcy in an emergency, but it isn't officially counted as a "tax" in most statistics. So comparing tax rate to tax rate isn't necessarily the most meaningful metric.

I am likely to leave the Netherlands before 2028 if the proposed wealth-tax reform is enacted. As currently drafted, the system would impose taxes on annual market returns—even when those gains have not been realized.

I am therefore seeking information and advice:

🥁

Are there European countries with an OK healthcare system that maintain reasonable income tax levels (ideally capped at 30–35%) and do not levy a wealth tax? A capital-gains tax on realized gains would be entirely acceptable.

Unless there is a crazy amount of hike, I wouldn't consider living somewhere else just because of tax reasons.

After all I have a life here in Italy. A house, a farm, beach, good weather, good food, great people.

That said, if suddenly the rate jumps from 26% to 40% (that's crazy hike category for me), then I would probably move my residence to a lower pct EU country but still keep living in Italy.

And yes, I know I'm not supposed to live here more than 6 months in a year if my residence is elsewhere, but I guarantee you nobody will know where I am living within the EU, nor can they prove anything.

This map says little about the tax burden. It only tells us something about payroll taxes. In the Netherlands, payroll taxes are relatively low, but excise duties on energy, sugar, alcohol, and smoking are high. Cars are also heavily taxed.

Relative to your salary, how much are you actually paying. I am an American and I have the feeling the propaganda that you guys pay 50% of your $$ in taxes is bs. It might be for ultra high earners but I want standard middle class comparisons because I bet the American middle class is paying close to you guys (and getting way less). I'm looking for answers from any country though I know Western Europe and Eastern Europe will be very different. And it doesn't matter if you convert to USD or not

EDIT: THANK YOU ALL for the responses! As I suspected, it wasn't much higher than what I am paying now for taxes. I made about $83k last year and paid almost $20k in taxes, almost a 24% tax rate and I wouldn't mind paying an extra 10% more for a more functional society where everyone is taken care of. But yea I just wanted transparency from real people within the same class as I to compare to.

Many often forget that Europe is not France.

Keep in mind that the published table doesn’t include Romania, Cyprus, Malta, and the many micro states in Europe such as the Channel Islands, Mann, Gibraltar, Andorra, etc. etc. but you can view the raw data yourself.

So I worked in AT/DE/CH & now the U.S.

Recently I compared my U.S. deductions to what the deduction would be in AT (same income). Yes, the effective tax rate is more, but the overall annual take home was just 5k euros more a year on the US which could easily be eaten up by one bigger doctors appointment.

And all the risk - employment at will, retirement is 401k not a pension, health insurance is fully tied to employer, unemployment money is nothing I could survive on etc - is pushed on the employee compared to the DACH region. I rather take the 5k less a year and be less stressed about all the other things

Hey! Look at me 🇧🇪, at the top of this chart!

Your country announces that capital gains taxes will increase significantly over the next few years, while another EU country offers much lower investment taxes. Assuming you could legally move your tax residency, would you consider relocating primarily for tax reasons? If yes, what tax rate would make you seriously consider it?

Actual TAXES? Or total deductions? The other answers so far are clearly total deductions.

I split mine out for you: I take home half my paycheck every month, but I pay 17% in total taxes at the end of the day. The rest is health insurance, retirement, disability, etc.

The company pays tax where you run it. It doesn’t matter where you incorporate it. If you could lower your taxes by incorporating in a low-tax country, everyone would be doing it. If you keep running your company from Lithuania, the company will have to pay tax like a Lithuanian company, even if it is registered elsewhere. If you want to pay lower taxes, you’re going to have to move to a country with lower taxes and set up a company there.

VAT is based on where your customer is located - it doesn’t matter where your company is based. Everyone pays the same VAT. Otherwise some countries would have an unfair advantage. So it is not possible to reduce VAT, unless you only sell to customers from countries with lower VAT.

Since I’m mainly holding etfs i may just move for a year in a country with 0% when i plan to sell. Currently my country doesn’t have an exit tax.

would you consider relocating primarily for tax reasons?

Lol no. I would say the amount of taxes is irrelevant as long as I have enough money to have a decent quality of life. Taxes influence how I allocate my money to try and getting higher returns, not where I live.

I already did move to Switzerland. Taxes were indeed one of the reasons. Currently paying 0% capital gains tax.

Honestly, I would no longer tolerate anything above 0%.

And Americans complain their taxes are too high lol

Hey guys,

I’m curious where would you suggest to incorporate if i’d like to minimize my taxes?

I sell physical goods to EU and taxes in Lithuania are just too obnoxious.

Thing is - 99% of my clients are not based in Lithuania, so I’m looking for basically anything else.

I’ve heard Cyprus is one of the good places out there.

Appreciate any kind of suggestions🙏

I noticed there is a lot of talk about how high taxes are in Europe vs the US. Many americans think taxes in Europe are super high und they would never want to pay such high taxes. After googling I saw that taxes in the US can be very high as well, plus I feel like you get less from the taxes you pay (no Universal healthcare etc.). How does actual tax load compare for a average income Person in Western or northern Europe compared to the US if you add stuff like healthcare cost to make it more equal so the comparison is fairer? Other things I noticed that are funded through taxes in Europe and less so in the US such as education or public Transport, how does one put these things in to the equations to make the comparison as fair as possible?

As far as I know, if you sell more than €10k per year you have to start charging other EU country VAT, so only below €10k you have to charge Lithuanian VAT. If you sell to non EU countries you don’t apply VAT at all.

Then, there are other things to consider, at least in Latvia you don’t pay income tax until you take money out, plus there is no capital gain on investments for companies, you can build wealth quite well with Latvian system, maybe it’s similar in Lithuania. Tax for companies is not so bad in Baltic States in the end.

Plus remember that as a business owner you still need to pay your personal income tax when you pay yourself a salary and this one depends on your tax residency. If you open a company in another country but still will live in Lithuania you will pay Lithuanian tax on your income. So, most likely if your company is not huge it is not efficient to incorporate in another country. Just do your business and think how to grow it and use tax benefits in your country rather than decrease the tax for a few %

Malta. Write to me if you want more details.

VAT is 18% (but doesn't really matter as once you reach a low sales threshold in any EU country, you have to register and collect VAT there. Plus, VAT doesn't matter for you as a business. It's a customer tax)