It’s tax season and all over the world people are gazing at imposing-looking documents with a mixture of puzzlement and fear as they try to estimate how much they owe for the year. In most discussions of tax, it’s the marginal rates that attract the most attention. How many times have you heard someone say that Uncle Sam takes “a third” of what you make? Often these people are mistaking the highest marginal tax rate (39.6% in the USA) for the actual percentage of their income that they must pay. Most people are not subject to the highest marginal rates in their jurisdiction. It’s the effective rate that should be at the forefront of people’s minds as they assess their own tax liability.

We took a look at the effective tax rates in eight cities around the world to see what their effective tax rate is on the average income earned in that city. What we discovered is interesting; many high-tax economies, such as France and the UK tax average salaries at a much lower rate than their eye-popping upper-level tax rates would suggest. Some places, such as Sao Paolo, have average wages so low they wouldn’t qualify to be taxed at all.

We didn’t include expense deductions in these calculations, which are dependent on individual choice and circumstance or social insurance premiums. However, these numbers give a rough sense of what percentage of average annual incomes are taxed away all over the world.

Take a look at the list below; where would you rather live?

 What are the income tax rates around the world?. Image 1.

We chose 8 CITIES across the globe, from Moscow to Sydney, to retrieve our data.

 

 

 

Moscow

Russia

 

13%

Average Yearly Income: 658,428 roubles ($20,213 USD)

Effective Tax Rate on average annual income:  13%

Bottom Marginal Rate:  13%

Top Marginal rate:  13%

Russia has a flat income tax and no social security tax rate for employees, unless they are self-employed. Employers must pay an amount equal to 30% of total payroll. However, dividend income is taxed at 9% and Interest income above 5% ROI is taxed at 35%. Furthermore, import taxes go from 10-15% on most electronic equipment and 10% on food products. Its flat tax rate makes it very attractive for high income individuals.

 

Hong Kong

China

 

10%

AVERAGE YEARLY INCOME: 174,828.00 HK Dollars ($22,535.00 USD)

EFFECTIVE TAX RATE ON AVERAGE ANNUAL INCOME: 10%

BOTTOM MARGINAL RATE: 2%

TOP MARGINAL RATE: 17%

Hong Kong is famously libertine when it comes to taxes. It doesn't tax imports or exports, goods and services, sales, interest, capital gains, dividends or even income earned abroad by Hong Kong residents. Even though its highest marginal rate is 17%, effective personal income taxes are capped at 15%.

 

São Paulo

Brazil

 

 

0%

AVERAGE YEARLY INCOME: 17,184 real in 2014 ($6,358 USD)

 

EFFECTIVE TAX RATE ON AVERAGE ANNUAL INCOME: 0%

BOTTOM MARGINAL RATE: 0%

TOP MARGINAL RATE: 27%

Brazil's marginal tax rate only kicks in at 21453.24 reals per year in annual income. The average resident of Sao Paolo makes 17184. Low income Brazilians also benefit from large transfer programs such as the Bolsa Familia. However, Brazilians also must pay very high tariffs on electronics imported from abroad. The starting price for an iPhone 6 is approximately $1,080 USD. Brazilians must also pay between 8-11 percent of their income into social security; self-employed individuals pay 20%.

 

New York City

United States

 

18%

AVERAGE YEARLY INCOME: $56,962.88

EFFECTIVE TAX RATE ON AVERAGE ANNUAL INCOME: 18%

BOTTOM MARGINAL RATE: 2.9% (New York City)

TOP MARGINAL RATE: 39.6% (federal)

New York City hits residents with state, local and federal taxes. American payroll taxes for Social Security and Medicare can range from 7.65% to 8.55%. New York State Governor Andrew Cuomo raised taxes on high-income New Yorkers to 8.82% temporarily from 2011-2014.

 

Tokyo

Japan

 

20%

AVERAGE YEARLY INCOME: 4,306,000.00 yen in 2010 ($52,963.80 USD)

EFFECTIVE TAX RATE ON AVERAGE ANNUAL INCOME:  20% (not including social insurance and travel deductions)

BOTTOM MARGINAL RATE: 5% (federal) 4% (prefectural)

TOP MARGINAL RATE: 40%

Because of their tax withholding system, most Japanese do not need to file a tax return. Income taxes are withheld by their employer, and typically Japanese need only sign off on it, unless they have significant freelance income. In Japan, incomes are subject to a flat 4% prefectural tax and a flat 6% municipal tax. There are also large expense deductions for things like travel and social insurance. Employee contributions to social security can run from between 5-7% of income.

 

Paris 

France

 

 

12%

AVERAGE YEARLY INCOME: 31,030.00 EUR in 2012 ($41,269.90 USD)

EFFECTIVE TAX RATE ON AVERAGE ANNUAL INCOME: 12%

BOTTOM MARGINAL RATE: 0%

TOP MARGINAL RATE: 45%

The French government recently moved to abolish the lowest income tax rate. In France you have the option to pay your taxes by check, Smartphone app, online, wire transfer, or in automatic monthly deductions.

 

London

England

 

14%

AVERAGE YEARLY INCOME: £39,900.00 in 2012 ($59,052.00 USD)

EFFECTIVE TAX RATE ON AVERAGE ANNUAL INCOME: 14%

BOTTOM MARGINAL RATE: 0% (Personal Allowance)

TOP MARGINAL RATE: 45% (Top Tax Band, not marginal)

 

The UK has what's called a "Personal Allowance" of untaxed income up to a certain amount; currently 10,000 pounds. It is reduced by 1 pound for every 2 pounds of income above 100,000 pounds. This mitigates the fact that the UK uses tax bands, rather than marginal tax rates. If your income above your personal allowance falls into a specific tax band, it is taxed at one rate. Most UK subjects fall into the second tax band and are taxed at 20% after their personal allowance.

 

 

Sydney

Australia

 

18%

AVERAGE YEARLY INCOME: $58,828.00 AUD in 2011 ($60,004.00 USD at 2011 Exchange Rate)

EFFECTIVE TAX RATE ON AVERAGE ANNUAL INCOME: 18%

BOTTOM MARGINAL RATE: 0%

TOP MARGINAL RATE: 45%

Australia taxes above-average incomes a "Medicare Levy Surcharge" if they decide that someone has not bought enough private hospital insurance, to reduce pressure on the public healthcare system. Australia imposes Goods and Services taxes on products made in Australia and on imports worth more than $1,000 AUD. Employees are spared social security and pension taxes; employers must pay 9% of basic wages.

COVER IMAGE: Antwan Duncan, Daria Malysheva
NOTE: Figures above are estimates based on a variety of combined datasets
sources: GKS.ru, Statistics.gov.hk, Gov.hk, Statistics.gov.hk, Imports.gouv.fr, BLS.gov, Tax.ny.gov, Tax.ny.gov, Turbotax.intuit.com, SSA.gov, previdenciasocial.gov, Ftp.ibge.gov.br, E-stat.go.jp, Nta.go.jp, Kpmg.com, DDS.gov.au, Customs.gov.au, Abs.gov.au, Ato.gov.au.