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Percentages: Tax Breaks
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Where you live could affect how much of your salary is spent on tax. Where in the world has the highest and lowest tax systems, and what is tax spent on?Transcript
When most people receive their first paycheck from a new job, they expect more money than they actually get.
This is because, for many employees around the world, a percentage of their income goes straight to the government, as income tax.
Income Tax Rates
Income tax is literally a tax on income, charged as a percentage.
Not all countries impose an income tax.
United Arab Emirates
In the United Arab Emirates, for example, workers don't pay any income tax at all.
Unsurprisingly, over 40,000 millionaires live in the United Arab Emirates, tax free.
The Netherlands
At the other end of the spectrum, workers in the Netherlands can end up paying 52% income tax.
Their tax rates are progressive, meaning the more workers earn, the more they pay.
Workers earning just under €19,000 pay 1.85% tax.
For earnings above this, up to just over €33,000, they pay 10.8%.
The percentage then jumps to 42% for earnings up to €56,000.
Earn over this and workers pay the top tax rate of 52%.
The tax is cumulative so someone earning €70,000 wouldn't pay the 52% top rate on their whole salary, but rather the cumulative total of each tax bracket.
18,731 Euros.
But while the Netherlands has one of the highest top rates of income tax in the world, the progressive rates help to make the system fairer.
The more a worker earns, the more tax they pay.
But paying income tax isn't all bad.
Countries which impose an income tax often have high literacy, good health and social welfare services, and state-funded schools.
So although workers in the Netherlands pay some of the highest taxes in the world, they also enjoy some of the highest standards of living.
