Common and different in income taxes internationally
Almost all countries collect personal income tax in some form or another
. Personal income tax is defined by taxation that is levied on income of individuals, and in most western countries is responsible for a large portion of the government budget. Almost all western countries also levy various social taxes, sometimes called payroll taxes. While they are often collected seperately from income tax by another body, and do not go directly to the country's treasury, I include them in the income tax category because they rise the more the individual earns, and are therefore dependant on one's income.
The income tax is generally calculated in this fashion:
One deduct from his or her income any costs accrued in earning this income.
All sorts of allowances are deducted (more on this later).
Tax is calculated, usually using a system of brackets, thus creating a progressive taxation scale.
Further deductions are made from the amount arrived at 3.
The allowances and deductions in step 2 and 4 are usually composed of personal allowances, and more allowances given for acting in a way the government encourages or for having special needs (having children or another dependant is the most common. Some countries grant allowances to people over a certain age, to people hiring home workers, or to demobilized soldiers).
At step 3, income tax is calculated. In most countries, the income is divided into brackets. For example, in the USA in 2010 a single person would pay 10% tax on the first $8,375 earned annually, 15% on the next $25,624, 25% on the next $48,400 and so on (
You can see here the entire table). This way, high-earners can expect to pay a larger percentage of their income than those with a lower income.
(If you want to see an example of how income tax is calculated in a particular country,
see this article on income tax in Ireland)
A few countries have a flat tax rate instead of a progressive system. For example, in Russia, which is not as dependant on income tax as western countries, one would pay 13% of his or her income no matter how high or low that income is.
Countries differ on how income tax for married couples is calculated. In the USA married couples are encouraged to file joint tax reports, and thus to lower the tax the family pays, especially if one spouse earns significantly more than the other. In France and in the United Kingdom, on the other hand, spouses are taxed separately.
To visually compare tax system in different countries,
here is a tax calculator which you can use to compare income tax you would have payed in several different countries around the world. Common and different in income taxes internationally
By: Jaque Iksander
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