The latest survey or personal taxation reveals that Belgium, Denmark and Hungary have the least attractive personal tax environments.
But if you really want to pay the minimum income tax, move to the United Arab Emirates, Hong Kong or Russia. Oh – and get married. Married employees with two children are almost always better off than single employees. Mercer’s Worldwide Individual Tax Comparator Report, a global survey of expatriate hot spots, analysed the tax and benefits systems across 32 countries focusing on personal tax structures, average salaries and marital status. This data is used by multinational companies to structure pay packages for their expatriate and local market employees.
For single managers, the UAE is the most attractive tax environment on the basis of the percentage of net income left after tax. The UAE ranks highly as it does not assess any income tax and the country's social security contributions amount to only 5% of an employee's gross salary. Russia, ranked second, applies a flat tax of 13% across all income levels, while Hong Kong reaches third place with taxes and social security contributions at 14.2% of gross base salary. Excluding Russia, European countries typically have less attractive tax environments and dominate the bottom of the rankings. Ireland ranks 18th, Spain 19th, and Switzerland 21st. France and Germany are ranked 22nd and 29th. At the bottom of the rankings, single managers in Hungary at 30th place, Denmark 31st and Belgium 32nd pay, respectively, 48.5%, 48.6% and 50.5% of their gross income in taxes and social security contributions.
Brian Waite, a senior consultant specializing in international issues, said local taxation is one of several factors that multinationals take account of when deploying staff across the globe. “It has an obvious impact on take-home pay, and in some countries with low or zero tax rates it is an important incentive for employees to work abroad,” Waite said. “In other high-tax destinations, multinationals need to create compensation packages that at least match their expatriates’ purchasing power in the home country.”
Dubai, fast expanding as an alternative financial centre, has many advantages. Markus Wiesner, Mercer’s head of operations in Dubai says that young professionals can fast-track their savings for three to five years to afford a mortgage when they return home, while senior executives can maximise their savings potential ahead of retirement. “It’s in these particular groups that we get a really good mix of expatriate talent in Dubai,” Wiesner said.
Asian markets dominate the top of the rankings with Hong Kong, Taiwan, Singapore, South Korea and China (Beijing) ranked 3rd to 7th. The lowest ranked Asian market is India at joint 14th with the UK. In the Americas, Mexico in 8th place, Brazil at 9th and Argentina 10th outrank the United States also at joint 14th and Canada at 20th.
According to Niklaus Kobel, researcher at Mercer’s Geneva office, marital status is still a major factor in determining local tax rates as well as income level. “It is important to note that high tax rates do not necessarily mean less affluence,” Kobel said. Not all taxation systems vary according to marital status, however. Married employees in Brazil, India and Turkey have similar tax rates to single employees. (citywire.co.uk)