5/10/2009
The global decline in top personal income tax rates over the past seven years may be coming to an end due to the need for new sources of budgetary and stimulus funding among governments, according to a survey released today by KPMG International, and that shift may have implications for international assignment programs and future global workforce mobility trends.
According to KPMG’s 2009 Individual Income Tax and Social Security Rate Survey, the top average personal income tax rate dropped 0.3 percent worldwide in 2009 to 28.9 percent from 29.2 percent in 2008.  However, some countries are already making plans to implement personal income tax rate increases for its top earners, while other countries are examining this option, according to subsequent country budgets and income levies.
According to the KPMG study, the highest personal income taxes in the world are still paid by the citizens of the European Union (EU).  But with the introduction of flat rate taxes in a number of Eastern European countries – including Latvia and Poland, which reduced their top rates to 23 and 32 percent respectively for 2009 – average rates have fallen from 41.1 percent in 2003 to 36 percent in 2009.
Denmark – when looking at social security and the personal income tax rate together – has the highest personal income tax rate at 62.3 percent.  In the Asia-Pacific region, Japan has the top rate at 50 percent.  Chile has the highest rate in the Latin American region at 40 percent.
Social security is often a forgotten tax and many countries are talking about increasing contributions made to these programs. HR professionals need to consider social security along with the entire gamut of taxes – national, state, municipal, etc. in order to better inform their international assignment program decisions and discussions.
The study also reviewed contribution requirements (for both employer and employee) for employees earning gross income of $100,000 and $300,000.  France had the highest combined rate at approximately 60 percent under either scenario, followed by Belgium at 47 percent and then Hungary and Italy both in the lower 40 percent range. 
India Perspective
“The highest tax rate in India has remained consistent at the rate of 30% for the last few years.  However, the slab rates have been revised upwards thereby reducing the overall effective tax rate for the individuals over the last few years.

Further, the new Direct Tax Code proposes to substantially increase the slab rates which would benefit the individuals effective April 2011,” says Vikas Vasal, Executive Director, KPMG India.
KPMG’s 2009 Individual Income Tax and Social Security Rate Survey
KPMG’s 2009 Individual Income Tax and Social Security Rate Survey is a cross-border survey of personal tax and social security rates with historical data from 2003-2009. The report covers 86 countries, concentrating on the highest level of personal tax payable to the central government.  For ease of comparison, the survey has excluded, where possible, other taxes such as state and municipal taxes.
The study was commissioned by the global International Executive Services practice, comprising professionals from several KPMG International member firms.