Comparison of income tax systems in Europe, 2021

Our recently published International tax competitiveness index 2021 (ITCI) measures and compares the extent to which OECD countries promote sustainable economic growth and investment through competitive and neutral tax systems. This week, we take a look at the ranking of European OECD countries for individual taxes, continuing our series on the ITCIthe classifications of the components of.

the ITCIThe OECD personal income tax component ranks OECD countries on their highest marginal personal income tax rates and thresholds, on the complexity of income tax and on the tax rates levied on income from capital gains and dividends.

Estonia has the most competitive individual tax system in the OECD. The Baltic country levies a top marginal tax rate of 20% on wage income, the second lowest rate in the OECD. Estonia applies the maximum rate at 0.4 times the average national income, making it a relatively flat income tax.

Labor tax payments in Estonia are largely automated, making it one of the easiest income tax systems to comply with in the OECD. An Estonian company spends on average only 31 hours per year complying with labor taxes, compared to the highest compliance burden of 169 hours in Italy.

Due to the Estonian corporate profit cash flow tax, there is no separate tax on dividend income, setting the dividend tax rate at zero percent. Capital gains are taxed at a rate of 20%, close to the OECD average of 19.1% and aligned with its corporate tax.

In contrast, the French personal income tax system is the least competitive of all the OECD countries. France’s top marginal tax rate of 55.4% is applied at 15.4 times the average national income. It takes an average of 80 hours per year for French companies to comply with income tax. Capital gains and dividends are taxed at comparable top rates of 30% and 34%, respectively.

Click here to view an interactive version of the individual tax rankings of OECD countries, then click on your country for more information on the strengths and weaknesses of its tax system and how it compares to the top and bottom five countries in the OECD.

To see if your country’s individual tax ranking has improved in recent years, check the table below. To learn more about how we determined these rankings, read our full methodology here.

Individual Taxation Component of International tax competitiveness index between 2019 and 2021 (for all OECD countries)
OECD countries Ranking 2019 Ranking 2020 Ranking 2021 Change from 2020 to 2021
Australia (AU) 16 17 17 0
Austria (AT) 31 31 32 -1
Belgium (BE) 9 ten 11 -1
Canada (CA) 27 27 27 0
Chile (CL) 25 35 35 0
Colombia (CO) 1 1 2 -1
Czech Republic (CZ) 4 4 4 0
Denmark (DK) 35 34 34 0
Estonia (EE) 2 2 1 1
Finland (FI) 26 25 25 0
France (FR) 36 36 37 -1
Germany (DE) 29 28 28 0
Greece (GR) 11 11 ten 1
Hungary (HU) ten 9 9 0
Iceland (IS) 34 33 36 -3
Ireland (IE) 30 29 30 -1
Israel (IL) 37 37 29 8
Italy (IT) 33 32 33 -1
Japan (JP) 23 22 21 1
Korea (KR) 24 24 24 0
Latvia (LV) seven 6 5 1
Lithuania (LT) 5 8 seven 1
Luxembourg (LU) 19 19 20 -1
Mexico (MX) 17 16 16 0
Netherlands (NL) 22 23 22 1
New Zealand (NZ) 6 5 6 -1
Norway (NO) 15 15 13 2
Poland (PL) 12 12 12 0
Portugal (PT) 32 30 31 -1
Slovak Republic (SK) 3 3 3 0
Slovenia (SI) 14 14 14 0
Spain (ES) 18 18 19 -1
Sweden (SE) 20 20 18 2
Switzerland (CH) 13 13 15 -2
Turkey (TR) 8 seven 8 -1
United Kingdom (GB) 21 21 23 -2

Source: International tax competitiveness index 2021.

Launch 2021 International tax competitiveness index

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