Sunday 25 September 2016

Economies that are saddled most by tax

Published 24/05/2015 | 02:30

The amount of money the government takes out of your pocket in taxes is not the only thing which can influence your financial health.

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So too does the amount of money the government takes out of an economy. A high tax burden on a country's economy can discourage investment and wealth creation. A low tax burden can make it easier for the country to attract employers which create the well-paid jobs you could be interested in snapping up.

The percentage of Gross Domestic Product (GDP - a measure of a country's economic health) which is taken by the government in tax is lowest in oil-rich Nigeria than it is anywhere else, according to a study published by UHY Farrelly Dawe White. Being a volatile and poverty-stricken country, Nigeria isn't high on most people's wish list.

However, the United Arab Emirates (UAE), with a tax burden of 2.7pc, and Singapore, with a burden of 15pc, are some of the other countries which don't saddle their economies with a high tax burden.The country with the highest tax burden is Denmark - the total amount of tax taken by its government equates to almost half of GDP.

At 28pc, Ireland had one of the lowest tax burdens in Western Europe - although it is still higher than the international average.

"Western European countries are inhibiting their economies with tax burdens at least 40pc heavier than both the global average and the average for neighbouring countries in Central and Eastern Europe," said the study. "Higher taxes prompt larger businesses to maximise returns for their investors by seeking out lower tax bases for their operations. Western Europe's economies could be vulnerable to international rivals that are increasingly able to offer a combination of stable legal systems and highly-skilled workforces.

"The UAE and Singapore are enjoying significant success in attracting corporate headquarters and professional and financial services companies."

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