This is a tool that calculates and compares the income tax on earned income for various centres around the world. Optionally, it is possible to include social insurance and/or mandatory pension contributions in the analysis. The comparison is for a single person or married couple, and is over a specified group of tax years, handling the fact that in different countries, tax years can run between different dates. The results are displayed in two main tables.
The first results table shows the annual gross income in the currencies associated with the compared centres, with a row for your own income and, if you are married, your spouse's income and the resulting totals.
The second results table displays the calculated annual income tax and net income for each compared centre, together with a percentage indicating the proportion of the gross income that is tax. If the relevant options are switched on, the table also displays the calculated social insurance and/or mandatory pension contributions, with the net income reflecting these extra deductions. In the case of a married couple, the displayed results show the total income tax and net income, though the tax may be calculated via separate or joint assessment. Since the resulting tax assessment for a centre may differ from the inputted preference, e.g. a country may not allow separate or joint assessment for a married couple, this is also shown.
Additionally, if required, the tool displays more detailed results from the tax calculations: a general currency exchange rate table plus details on a centre by centre basis. The details for each centre are described later on in this document.
Note: To be able to compare the tax between different countries, some compromises need to be made and this should be taken into consideration when comparing results. For example, the tool has one input field for gross income, from which standard deductions and allowances are subtracted to give the taxable income, while in practice, specific deductions could result in differently adjusted gross income values for different countries. The standard deductions and allowances that are handled by this tool are described in the centre specific sections below.
Note: This tool does not cover any country specific tax credits.
For the income tax calculations, it is necessary to supply the following compulsory information:
- The base currency, which specifies the currency of the input data and the main comparison results table. However, the tax details for each centre are shown in the local currency.
- Your gross earned income in monthly, weekly or annual terms.
- The tax year group, which handles the fact that in different countries, tax years can run between different dates, e.g. in one country, the tax year may run from April in one year to March in the following year, while another country may have a tax year that runs from January to December in the same calendar year. To ensure the best comparison, tax years that overlap the most are grouped together.
- Your date of birth, in the default format (DD/MM/YYYY), unless you change the format in the menu. To reduce the time needed for data entry, a default date of birth is provided that can be used by most tax payers for calculating tax. Only if you are 65 or over during the tax year, and age related allowances come into consideration for certain compared centres, is it essential to provide an accurate birth date.
- Your personal status, i.e. whether you are single or married.
- The number of dependent children. If this is greater than 0 and your personal status is single, the tool assumes that you are a single parent who provides sufficient support to the children to qualify for single parent tax tables, allowances etc.
- Whether social insurance contributions should be included in the comparison or not. For the centres (e.g. Switzerland) where social insurance contributions are deductible from gross income when calculating tax, including these contributions automatically results in a decrease in taxable income.
- Whether mandatory pension contributions should be included in the comparison or not. For the centres (e.g. Switzerland) where mandatory pension contributions are deductible from gross income when calculating tax, including these contributions automatically results in a decrease in taxable income.
If you are married, it is necessary to supply the following additional information:
- The gross earned income of your spouse in monthly, weekly or annual terms. If this field is left blank, the tool assumes that your spouse has no income.
- The date of birth of your spouse, in the default format (DD/MM/YYYY), unless you change the format in the menu. To reduce the time needed for data entry, a default date of birth is provided that can be used by most tax payers for calculating tax. Only if your spouse is 65 or over during the tax year, and age related allowances come into consideration for certain compared centres, is it essential to provide an accurate birth date.
- Whether you should be assessed separately or jointly. However, a country may not allow one of these options or may choose the assessment based on the lowest tax bill, so this is just a preference.
Currently seven centres are compared with this tool: the United Kingdom (UK), the United States (US) centres of New York and Chicago, Hong Kong (HK), Singapore (SG) and the Swiss centres of Zurich and Geneva. Each centre is discussed in turn below.
The first centre in the comparison is the United Kingdom. Various points to note concerning the UK tax calculation are:
- Joint assessment of earned income is not possible for a married couple (the married couple's rebate, which is applicable in certain cases, is only considered in the specialist UK tax tools).
- Qualification for the blind person's allowance cannot be specified in this tool (see the specialist UK tax tools for this).
- In the detailed results section of the tool, a results table is shown for the annual UK tax calculation, with a row for your own income and, if you are married, your spouse's income and the resulting totals. Each row shows the personal tax allowance used, the taxable income, the calculated tax, the national insurance contributions (Class 1) if required, and the resulting net income.
The data (e.g. rates and allowances) used by this tool for the UK tax calculation was obtained primarily from...
http://www.hmrc.gov.uk/rates/it.htm
and...
http://www.hmrc.gov.uk/rates/nic.htm
The second and third centres in the comparison are the US centres of New York and Chicago. Various general points to note concerning the US tax calculations are:
- A married couple in the US can choose either separate or joint assessment.
- Income is taxed at federal, state and city levels, though not all states and cities tax income.
- In the detailed results section of the tool, a results table is shown for the annual tax calculation for each US centre, displaying the calculated tax at each of these levels, together with the total. There is a row for each relevant income: your own, your spouse's (if married and separate assessment has been chosen) or your joint income (if married and joint assessment has been elected for).
- Gross income is sometimes called adjusted gross income in the US (total income minus specific allowed deductions).
- The tool assumes the same (adjusted) gross income for all federal, state and city tax calculations, though, in practice, the amounts could differ.
- Itemised deductions are not considered here - standard deductions are used.
- Qualification for the blind person's standard deduction cannot be specified in this tool.
- Applicable tax credits are not covered here.
- It is not possible to specify the Head of Household filing status.
- The federal income tax is calculated using both the regular method and the alternative minimum tax method, with the maximum tax being selected.
- Therefore, in the detailed results section of the tool, a results table is shown for the annual regular federal tax rate calculation, with a row for each relevant income: your own, your spouse's (if married and separate assessment has been chosen) or your joint income (if married and joint assessment has been elected for). Each row shows the standard deduction and personal exemption used, the taxable income, and the calculated tax.
- A results table is also shown for the annual alternative minimum federal tax rate calculation, with a row for each relevant income: your own, your spouse's (if married and separate assessment has been chosen) or your joint income (if married and joint assessment has been elected for). Each row shows the personal exemption used, the taxable income, and the calculated tax.
- To show how the actual tax is determined from these calculations, an extra table is displayed to indicate which of the regular or alternative tax calculations results in more tax and is thus chosen.
- If social insurance contributions should be included in the comparison, a further federal level social insurance contributions results table is shown, with a row for each relevant income: your own, your spouse's (if married) and the total (if married). Each row shows the social security contributions, the health insurance (Medicare) contributions, and the total contributions.
The data used by this tool for the US regular federal tax calculation was obtained primarily from the following sources:
The data used by this tool for the US alternative federal tax calculation was obtained primarily from the following sources:
The data used by this tool for the US federal social insurance contributions calculation was obtained primarily from the following sources:
Various points to note concerning the New York state and city tax calculations are:
- The state tax is calculated using progressive tax rate bands.
- The city tax is calculated using progressive tax rate bands, assuming residence in New York City.
The data used by this tool for the New York tax calculations was obtained primarily from the following sources:
Various points to note concerning the Chicago (Illinois) state and city tax calculations are:
- The state tax is calculated using a flat rate of 3%.
- There is no city level income tax.
The data used by this tool for the Chicago tax calculations was obtained primarily from the following sources:
The fourth centre in the comparison is Hong Kong. Various points to note concerning the HK tax calculation are:
- If a married couple elect for joint assessment but separate assessment results in a lower tax bill, separate assessment is carried out.
- The income tax is calculated using both progressive tax rates and the standard flat tax rate, with the minimum tax being selected.
- Therefore, in the detailed results section of the tool, a results table is shown for the annual progressive tax rate calculation, with a row for each relevant income: your own, your spouse's (if married) and your joint income (if married and joint assessment has been elected for). Each row shows the gross income, the tax allowance used, the mandatory pension contributions (if applicable), the taxable income, the calculated tax before any reduction has been replied, the tax reduction if relevant, and finally the calculated tax after any reduction.
- A results table is also shown for the annual standard tax rate calculation, with a row for each relevant income: your own, your spouse's (if married) and your joint income (if married and joint assessment has been elected for). Each row shows the gross income, the mandatory pension contributions (if applicable), the taxable income (noting that this calculation has no tax allowances), the tax percentage rate, the calculated tax before any reduction has been replied, the tax reduction if relevant, and finally the calculated tax after any reduction.
- To show how the actual tax is determined from these calculations, an extra table is displayed to indicate which of the progressive or standard tax calculations results in less tax and is thus chosen, and also, if joint assessment has been elected for, whether separate or joint assessment works out better.
- Concerning the tax reduction on the calculated tax, mentioned above, this is currently only relevant to the tax year 2009-10, and involves a reduction of 75% up to a maximum of 6000HK$. In the 2010-11 tax year calculations, no such reduction is applied.
- If mandatory pension contributions should be included in the comparison, a further results table is shown, displaying the pension contributions for each relevant income: your own, your spouse's (if married) and the total (if married).
The data used by this tool for the HK tax calculation was obtained mainly from the following sources:
The data used by this tool for the HK mandatory pension contributions calculation was obtained primarily from the following sources:
The fifth centre in the comparison is Singapore. Various points to note concerning the SG tax calculation are:
- Separate assessment of earned income is assumed for a married couple in Singapore, as this is virtually always the case.
- In the detailed results section of the tool, a results table is shown for the annual tax calculation, with a row for each relevant income: your own and your spouse's (if married). Each row shows the gross income, the tax relief applied, the mandatory pension (savings) contributions (if applicable), the taxable income, the calculated tax before any rebate has been replied, the tax rebate if relevant, and finally the calculated tax after any rebate.
- If mandatory pension (savings) contributions should be included in the comparison, a further results table is shown, displaying the Central Provident Fund (CPF) contributions for each relevant income: your own, your spouse's (if married) and the total (if married).
- The tool automatically includes certain tax deductions when determining the taxable income and thus calculating the income tax: various tax reliefs which depend on your personal status and the number of children you have, as well as the deduction for any mandatory savings contributions.
- In more detail, the following tax reliefs are taken into consideration:
- Earned income relief.
- Qualifying child relief - given to the person with most income in a married couple.
- Spouse relief.
- The tax rebate on the calculated tax, mentioned above, is currently only relevant to the tax year 2009, and involves a one-off personal tax rebate of 20% up to a maximum of 2000SG$. In the 2010 tax year calculations, no such rebate is applied.
- Since it is not possible to distinguish between ordinary and additional (such as annual bonus) wages in this tool, the tool assumes that the earned income consists entirely of ordinary wages, and thus applies a maximum to the allowed monthly mandatory savings contributions of 4500SG$.
The data used by this tool was obtained mainly from the following sources:
The data used by this tool for the SG mandatory savings contributions calculation was obtained primarily from the following sources:
The sixth and seventh centres in the comparison are the Swiss centres of Zurich and Geneva. Various general points to note concerning the Swiss tax calculations are:
- Separate assessment of earned income is not possible for a married couple in Switzerland, so assessment is always joint.
- Income is taxed at federal, cantonal and municipal levels.
- In the detailed results section of the tool, a results table is shown for the annual tax calculation for each Swiss centre, displaying the calculated tax at each of these levels, together with the total. This is either for your own income or, if you are married, your joint income.
- Church taxes are not considered in this tool.
- The federal tax, which is applicable across the whole of Switzerland, is calculated using a dozen or so progressive tax rate bands.
- If social insurance contributions should be included in the comparison, a further federal level social insurance contributions results table is shown, with a row for each relevant income: your own, your spouse's (if married) and the total (if married). Each row shows the calculated 1st Pillar social security contributions (e.g. old age and survivors insurance), the unemployment insurance contributions, the accident insurance contributions, and the total contributions.
- In Switzerland, social insurance contributions are deductible from gross income when calculating tax, so when these contributions are inlcuded, this automatically results in a decrease in taxable income.
- If mandatory pension contributions should be included in the comparison, an extra results table is shown, displaying the pension (2nd Pillar) contributions for each relevant income: your own, your spouse's (if married) and the total (if married).
- In Switzerland, mandatory pension contributions are deductible from gross income when calculating tax, so when these contributions are inlcuded, this automatically results in a decrease in taxable income.
- A results table is also shown for the annual federal tax calculation, displaying the gross income, the tax deductions, the taxable income, and the calculated tax. In more detail, the tax deductions include the standard tax allowances, the social insurance contributions (if applicable) and the mandatory pension contributions (if applicable). This is either for your own income or, if you are married, your joint income.
- There is also a results table for the annual cantonal tax calculation for each Swiss centre, displaying the gross income, the tax deductions, the taxable income, and the calculated tax. In more detail, the tax deductions include the standard tax allowances, the social insurance contributions (if applicable) and the mandatory pension contributions (if applicable). This is either for your own income or, if you are married, your joint income.
- The possible standard allowances that are covered by this tool are the married couple's allowance, an allowance if both members of a married couple are working, and an allowance for each dependent child.
The data used by this tool for the Swiss federal tax calculation was obtained primarily from the following sources:
The data used by this tool for the Swiss federal social insurance and mandatory pension contributions calculations was obtained primarily from the following sources:
Note: Need to find some more official sources for some data.
Various points to note concerning the Zurich cantonal and municipal tax calculations are:
- The cantonal tax is calculated using a dozen or so progressive tax rate bands.
- The municipal tax is calculated using a multiplier on the cantonal tax. This multiplier depends on the municipality. For this tool, the city of Zurich is assumed.
The data used by this tool for the Zurich tax calculations was obtained primarily from the following sources:
Various points to note concerning the Geneva cantonal and municipal tax calculations are:
- The calculation of the base cantonal tax changes in 2010. In 2009, the base cantonal tax is calculated from a single or married table with many different income tax points and then a rebate is calculated from the same table using an amount that is dependent on tax status (single or married, children etc.). In 2010, the base cantonal tax is calculated using a dozen or so progressive tax rate bands.
- In addition, for married couples, in 2009, the joint income is used to determine the tax point(s) in the married table, whereas in 2010, the joint income is halved, the tax is calculated using the same table as for singles, and then the tax is doubled.
- As an extra point, the 2009 base cantonal tax for an income that exceeds the table maximum is calculated by finding the final band tax percentage in the table and using that to calculate the extra tax. This is not completely accurate but a good approximation.
- Once the base cantonal tax has been calculated, there are various additional steps to calculate the actual cantonal tax: an additional amount using a multiplier, a reduction using a reduction percentage and an extra 1% added for l'aide à domicile.
- The municipal tax is calculated using a multiplier on the cantonal tax. This multiplier depends on the municipality. For this tool, the city of Geneva is assumed.
The data used by this tool for the Geneva tax calculations was obtained primarily from the following sources:
Associated tool link: http://www.coggit.com/tools/world_income_tax_comparison.html