Thursday, January 10, 2008

The lowest taxing countries

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Some countries are better than others when it comes to reducing your tax burden. You can't just look at the stated policies of a country to determine whether they are low-taxing nations or not, just as you cannot simply look at income tax rates. eg. Consider the following countries:
1. Australia has quite high personal & corporate tax rates (30%) but it offers generous deductions for expenses.
2. The Philippines has high tax rates but the government does a poor job at collecting the profits because most businesses understate income. Importers pay bribes to customs rather than pay import taxes, which are very high. As a consequence, there are 2 economies, one that rewards the 'cheats', and one that penalises the 'compliant'. The question is - who are the defenders of objective morality. Who is more practical in this context? Its easy to get away with it. Some people dont 'cheat'. Why? Because they are cowards? Or maybe they dont believe in breaking the law. Maybe because they are collectivists and paying tax is consistent with their ethical view. The idea of sacrificing your life in service for others is a central theme in most philosophies and religions.

So who is the lowest taxing nation? Perhaps its Hong Kong? The low income tax rates there likely result in high rates of compliance. Maybe it is China, where tax rates might be high but you need only bribe an official to evade it. But you would need to earn alot to make it worthwhile for you and the corrupt official.

I dont know the lowest taxing nations yet - but I will find out.
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