Top Earners In Western Europe Hit With Bigger Tax Bills Than Their Global Peers
Sterling Heights, Michigan (PRWEB) December 11, 2014 -- Western European economies* hit their highest earners with 25% more in tax than the global average, amounting to just over US$152,406 extra in tax on an income of US$1.5million, according to a new study by UHY, the international accountancy network.
The research reveals that the global average take home pay on earnings of US$1.5million is US$897,970 with tax at 40%. Taxpayers in Western European economies with the same earnings however, are allowed to take home only an average of US$745,563, paying 50% of their income in tax.
UHY points out that the highest earning taxpayers in Western Europe also face a far bigger tax bill than peers in other developed nations. In Western Europe, taxpayers with a gross income of US$1.5million would keep an average of 50% of earnings, compared to an average of 57% in Canada, the USA, Japan, New Zealand and Australia.
At a slightly more modest income of US$250,000 the gap is even wider, with taxpayers in Western Europe allowed to take home only 56% of earnings, compared to 65% in other major developed economies.
A middle-income taxpayer earning US$50,000 in a Western European economy would receive close to the global average net income at that salary – US$35,935 in Western Europe compared to US$37,695 globally. However, the 28% they would pay in tax compares unfavourably with the 23% they would pay in the USA.
UHY adds that Eastern European and emerging economies continue to offer the most generous tax regimes to higher earners. In Dubai and Russia flat rate, or no, taxation means that all taxpayers take home 100% and 87% of their pay respectively, while taxpayers earning US$1.5million in Slovakia, the Czech Republic, Jamaica all keep more than 70% of pay.
UHY observes that some Eastern European economies may be gradually eroding this advantage as they increase the tax burden on top earners. For instance those earning US$1.5m in the Czech Republic have seen the amount of tax they pay increase by US$183,409 since 2012, thanks to a ‘solidarity surcharge’, against a global average tax rise for this group of US$6,531.
Western countries move to reduce taxes for top earners
UHY notes that while top earning Western European taxpayers are still losing by comparison with peers globally, several countries (Italy and the UK) have dramatically reduced or withdrawn top rate tax bands imposed following the financial crisis.
For example, in 2014, a taxpayer earning US$1.5m in the UK was US$63,601 better off than two years ago, following the abolition of the 50p tax rate last year.
The USA also substantially reduced the amount of tax it took from top earners, lowering the tax take from an income of US$1.5 million to 42.57% of earnings from 43.28% - saving high earners US$10,656.
In contrast, a taxpayer earning US$1.5m in France would be US$44,646 worse off after tax than in 2012, after President Hollande introduced a new tax bracket of 45% for people earning more than €150,000. However, President Hollande’s plans to impose a 75% supertax on incomes of over EUR1 million were met with resistance and were instead replaced with a temporary additional tax to be paid by employers on salaries above EUR 1 million.
Ladislav Hornan, Chairman of UHY, comments: “The message that high taxes on top earners are uncompetitive has made some impact in Western Europe, and governments have taken steps to reduce the rates on top earners.”
“However, the gap between how heavily you are taxed in Western Europe compared to other developed economies remains striking, especially at the US$250,000 level. That’s a typical income for a successful engineer, marketer or head of IT.”
“As the global economy improves and new job opportunities open up, Western European governments need to be aware of the risk of a brain drain of skilled professionals.”
UHY studied tax data in 25 countries across its international network. The study captured the ‘take home pay’ for low, middle and high income workers, taking into account personal taxes and social security contributions. High earners were defined as workers earning US$1,500,000 per annum. The calculations are based on a single, unmarried taxpayer with no children.
*Western European economies in the study are; France, UK, Italy, Austria, Spain, Ireland, the Netherlands, Denmark and Belgium.
Please see attached chart.
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About UHY LLP
UHY LLP, a licensed CPA firm, provides audit and other attest services to publicly traded, privately owned and nonprofit organizations in a number of industry sectors. UHY Advisors provides tax and advisory services to entrepreneurial and other organizations, principally those enterprises in the dynamic middle market.
UHY LLP, operating in an alternative practice structure with UHY Advisors, forms one of the largest professional services firms in the US. While that scale might provide confidence for some clients, others tell us our greatest value is the way we bring these resources to bear to help address today’s evolving business challenges. It’s a philosophy we call “The Next Level of Service”. To learn more visit http://www.uhy-us.com.
All of the above entities are members of UHY International (“UHYI”), a worldwide network of independent professional services firms that provide audit, tax and advisory services around the globe. UHYI is ranked among the top international accountancy networks and a proud member in good standing of the Forum of Firms. Collectively, our US operating entities (UHY LLP and UHY Advisors) are the largest independent members of UHYI with significant participation, bringing the power of our international network to serve the individualized needs of our clients.
UHY LLP is a licensed independent CPA firm that performs attest services in an alternative practice structure with UHY Advisors, Inc. and its subsidiary entities. UHY Advisors, Inc. provides tax and business consulting services through wholly owned subsidiary entities that operate under the name of “UHY Advisors.” UHY Advisors, Inc. and its subsidiary entities are not licensed CPA firms. UHY LLP and UHY Advisors, Inc. are U.S. members of Urbach Hacker Young International Limited, a UK company, and form part of the international UHY network of legally independent accounting and consulting firms. “UHY” is the brand name for the UHY international network. Any services described herein are provided by UHY LLP and/or UHY Advisors (as the case may be) and not by UHY or any other member firm of UHY. Neither UHY nor any member of UHY has any liability for services provided by other members.
For UHY, the international network
Dominique Maeremans
+44 20 7767 2621, or email: d.maeremans(at)uhy(dot)com
Nick Mattison or Catherine Sirikanda
Mattison Public Relations
+44 20 7645 3636, +44 7957 340 795 or catherine.sirikanda(at)mattison(dot)co(dot)uk
About UHY
Established in 1986 and based in London, UK, UHY is a network of independent audit, accounting, tax and consulting firms with offices in over 275 major business centres in 87 countries.
Our staff members, over 7,600 strong, are proud to be part of the 25th largest international accounting and consultancy network/association. Each member of UHY is a legally separate and independent firm. For further information on UHY please go to http://www.uhy.com.
UHY is a full member of the Forum of Firms, an association of international networks of accounting firms. For additional information on the Forum of Firms, visit http://www.forumoffirms.org.
Chris Clark, UHY LLP, +1 (586) 843-2637, [email protected]
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