By Rob Starr, Content Manager, Big4.com
The annual Individual Income Tax and Social Security Rate Survey produced by KPMG’s International Executive Services (IES) practice shows this is only the third time that an increase has been observed over the past ten years that KPMG’s survey has been produced. The 2011 holding pattern for personal income tax rates is now seeing a return to the 2010 trend of increasing rates with the global average top personal income tax rate going up by 0.3 percent.
The most prominent examples of this pointed out in the survey are seen in the recent French and Spanish reforms.France’s reforms saw the introduction of two new tax rate bands for high income earners which has resulted in the top rate increasing from 41 percent to 45 percent. The rate increases are generally deemed as an ‘exceptional contribution’ which affects individuals reporting incomes of above EUR250,000.
Starting in January 2012, Spain’s ‘complimentary tax’ aims to help address the country’s public deficit. The tax applies to all taxpayers, and ranges from 0.75 percent to 7 percent depending on the individual’s income level. This effectively means that the rate of tax for individuals earning above EUR300,000 has risen from 45 percent to 52 percent.
Elsewhere in Europe, there is very little change. Western Europe continues to have the highest personal tax rates of any sub-region globally (46.1 percent).The average rate for Eastern Europe (16.7 percent) is still less than half of that of other European sub-regions, largely due to the prevalence of low flat tax initiatives. Poland and the Ukraine are notable for being the only two Eastern European countries of those surveyed to maintain a progressive tax band structure.