Ten countries that have the highest tax rates

Governments around the world are trying their best to achieve the right balance between the rise in overall net revenues, personal income tax rates and tax credits.

Thus, there is no doubt that the personal tax rate discussions is pretty much a high profile agenda for the government. This is not just an area of prime discussion in India, but in other nations as well.

For instance, Spain raised its personal tax rate by 2 percentage points to 45 per cent last year, according to a report by CNBC. While in US the tax rate is 35 per cent. As per the study conducted by KPMG in 2011, there are nations that have a higher rate than US.

Read further to find out which countries have the highest tax rate.

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Source: KPMG

Aruba
Ranking: 1
Highest income tax rate: 58.95 per cent

The standard rate of turnover tax in Aruba is 1.5 per cent. In certain cases the law provides for tariffs which deviate from other exemptions.

The closest to Aruba in terms of income tax rates are South American countries Argentina, Colombia, Ecuador, Guatemala and Venezuela, which have maximum tax rates ranging between 31 per cent and 40 per cent, according the study conducted by KPMG.

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Sweden
Ranking: 2
Highest income tax rate: 56.6 per cent

The effective taxation in Sweden is commonly cited as amongst the highest in the world. In fact, it is one of the eight European nations to make the list of countries with the highest income tax rates in the world.

Sweden has a taxation system for income from work, which combines the income tax (paid by the employee) with social security contribution paid by the employer.

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Denmark
Ranking: 3
Highest income tax rate: 55.4 per cent

In Denmark, two prepayments of corporate income tax during the taxable year are mandatory. If the final tax liability exceeds the prepayment, a surcharge of 4.8 percent (2011) of the outstanding tax liability is payable.

According to CNBC, Denmark's top marginal rate has come down from 62.3 per cent in 2008 to 55.4 per cent after the government reached a deal to cut taxes worth $4.8 billion in 2009 to boost the economy.

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Netherlands
Ranking: 4
Highest income tax rate: 52 per cent

The Netherlands has a partly progressive tax rate. In the past, the highest income bracket in the Netherlands was 72 per cent, but in 1990 it was changed to 60 per cent, and in 2001 it became 52 per cent.

The top marginal rate kicks in at $67,922 of taxable income. The other individual tax includes wage tax, property tax, capital gains tax, a land transfer tax and an inheritance tax.

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Austria
Ranking: 5
Highest income tax rate: 50 per cent

Austria's social security rate ranges from 17 per cent to 18 per cent. Here, even a holiday bonus is taxed at 6 per cent, up to a limit of one-sixth of the annual income. Other taxes like the real estate are levied at 0.5 per cent to 1 per cent of the total property value.

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Belgium
Ranking: 5
Highest income tax rate: 50 per cent

Belgium's employee social security rate is 13.07 per cent of total income and is fully deductible for income tax purposes. Employer contributions are approximately 35 per cent of total income, according to the KPMG study.

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Japan
Ranking: 5
Highest income tax rate: 50 per cent

Japan's income rate is divided into two parts with a marginal rate of 40 per cent plus an additional 10 per cent municipal tax. Further, in addition to the healthcare tax, individuals of the age 40 years and above have to pay additional nursing care insurance.

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United Kingdom
Ranking: 5
Highest income tax rate: 50 per cent

Income tax forms the bulk of revenues collected by the government in the UK. The second largest source of government revenue is national insurance contributions. The third largest source of government revenues is value added tax and the fourth-largest is corporation tax.

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Finland
Ranking: 9
Highest income tax rate: 49.2 per cent

Municipal tax rate in Finland is very significant -- it varies between 16.25 per cent and 21.5 per cent. The current marginal rate in Finland is at 49.2 per cent.

The other taxes include real estate tax, inheritance tax, gift tax, tax at source of interest income, corporate tax and capital gains tax.

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Ireland
Ranking: 10
Highest income tax rate: 48 per cent

In Ireland, employees give - pay-as-you-earn taxes based on their income, less certain allowances. Further, the taxation of earnings is progressive, with little or no income tax paid by low earners and a high rate applied to top earners.

Residents also have to pay an additional social security tax of 4 percent. The capital acquisition tax at a rate of 25 per cent is also applied to gifts and inheritances.