Income inequality by country, before and after taxes
Do taxes affect income inequality by country?
This animated chart, from Our world is in datashows after-tax income inequality across 45 countries – a key measure for examining differences in living standards globally.
Which tax systems compensate for income inequality the most?
First, income inequality was analyzed using the Gini coefficient, a common measure for analyzing wealth distribution. The Gini coefficient falls on a scale from 0 to 100, where a score of 0 indicates equally shared income and a score of 100 means one person takes it all.
Here is how the distribution of wealth in each country has changed as a result of their tax systems, using the most recent data available:
nation | year | Before vs after tax % (decrease in Gini coefficient) |
---|---|---|
🇧🇪 Belgium | 2020 | 49.5% |
🇫🇮 Finland | 2021 | 47.3% |
🇸🇮 Slovenia | 2020 | 45.5% |
🇦🇹 Austria | 2020 | 44.8% |
🇮🇪 Ireland | 2020 | 44.5% |
🇫🇷 France | 2019 | 43.7% |
🇨🇿 Czech Republic | 2020 | 43.2% |
🇸🇰 Slovakia | 2019 | 42.0% |
🇩🇪 Germany | 2019 | 40.4% |
🇩🇰 Denmark | 2019 | 39.8% |
🇵🇱 Poland | 2020 | 38.9% |
🇳🇴 Norway | 2021 | 37.9% |
🇬🇷 Greece | 2020 | 37.7% |
🇮🇹 Italy | 2020 | 37.2% |
ðŸ‡ðŸ‡· Croatia | 2020 | 37.0% |
🇵🇹 Portugal | 2020 | 37.0% |
ðŸ‡ðŸ‡º Hungary | 2020 | 36.8% |
🇪🇸 Spain | 2020 | 36.1% |
🇨🇦 Canada | 2020 | 36.1% |
🇪🇪 Estonia | 2020 | 35.1% |
🇸🇪 Sweden | 2021 | 35.0% |
🇱🇺 Luxembourg | 2020 | 34.4% |
🇳🇱 Netherlands | 2021 | 33.6% |
🇯🇵 Japan | 2018 | 33.3% |
🇷🇴 Romania | 2020 | 33.1% |
🇮🇸 Iceland | 2017 | 32.2% |
🇱🇹 Lithuania | 2004 | 31.3% |
🇬🇧 United Kingdom | 2020 | 30.0% |
🇳🇿 New Zealand | 2020 | 29.5% |
🇱🇹 Lithuania | 2020 | 29.2% |
🇨🇦 Canada | 2019 | 28.6% |
Israel | 2020 | 28.3% |
🇦🇺 Australia | 2020 | 27.9% |
🇱🇻 Latvia | 2021 | 27.6% |
🇺🇸 United States | 2021 | 27.5% |
🇷🇺 Russia | 2017 | 27.0% |
🇧🇬 Bulgaria | 2020 | 24.1% |
🇨🇠Switzerland | 2019 | 21.4% |
🇰🇷 South Korea | 2020 | 18.3% |
🇧🇷 Brazil | 2016 | 17.4% |
🇹🇷 Türkiye | 2019 | 17.3% |
🇿🇦 South Africa | 2017 | 12.8% |
🇨🇷 Costa Rica | 2021 | 11.6% |
🇨🇱 Chile | 2017 | 7.1% |
🇮🇳 India | 2011 | 2.6% |
As the table above shows, Belgium The country saw the largest decline in income inequality, falling by almost half after taxes. The country’s progressive tax rate system – where taxes increase as a person’s income increases – is one factor behind this decline.
Other Nordic countries such as Finland, Slovenia and Austria saw notable declines.
Income inequality also decreases significantly Ireland, where several large technology giants have merged due to their favorable tax policies. In fact, foreign-owned companies, including Apple and Microsoft, make up the majority of corporate taxes.
However, in 2024, the country will introduce a 15% corporate tax rate as part of a new global minimum.
Interestingly, in weAfter-tax income inequality has fallen by approximately 28%, but pre-tax inequality is high. In 2019, people in the top income quintile earned on average 14 times more than the median household income. A report by the Congressional Budget Office indicates that transfers and taxes increased the income of the lowest-income households by five times. $15,100 in the middle.
Does government spending affect inequality?
Studies show that Gini coefficients are country-specific Government spending.
In this way, higher government spending contributes to a more equal distribution of income, or a lower Gini coefficient. It also shows that strong education systems have increased the effectiveness of the redistribution of public spending.
Let us consider here how government spending in France constitutes 58% of GDP, and in Belgium it is about 54%. In contrast, it represents 37% of the gross domestic product in America, whose after-tax Gini coefficient exceeds the two European countries by a significant difference.
If the United States decides to increase government spending as part of efforts to reduce inequality, this will likely mean higher taxes. Given the current political climate, the chances of this happening seem fairly slim.
This article was published as part of the Visual Capitalist Creator Program, which features data-driven visuals from some of our favorite creators around the world.