What is the minimum income tax rate that no country can afford to lower even further?

A certain number of countres lower their Income Tax to attract foreign nationals who are not happy with their countries high rates. However if nations are to compete in applying the lowest rates possible there must be a limit under which that strategy would be a loss rather than a gain.

Monaco and some other countries charge zero income taxes. So zero seems to work. It helps if you don’t have an army or try to provide free services to everyone.

You decide the free services first and then set taxes to cover that.

5 thoughts on “What is the minimum income tax rate that no country can afford to lower even further?

  1. It’s not "taxes" that drive away businesses and wealth. It is regulations.
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  2. Monaco and some other countries charge zero income taxes. So zero seems to work. It helps if you don’t have an army or try to provide free services to everyone.

    You decide the free services first and then set taxes to cover that.
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  3. That would depend on the individual country, there is no number that would apply to everyone.
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  4. Zero. There are tax haven countries that charge no income tax at all. As Chas says, it DOES help if you don’t have an army or try to provide lots of free services! Or if the country has a huge income from something else – Brunei, Qatar, the UAE and Saudi Arabia have zero income tax because their governments make so much money out of oil. Monaco does rather well out of the casino in Monte Carlo and also charges zero, though it does have rather high social insurance taxes. The Bahamas is a rich country, mostly through tourism and offshore banking, and can also afford to charge zero income tax.

    Just out of historical interest, the United Kingdom didn’t have any income tax either until the 1800s, because government didn’t try to do much more than run an army and keep law and order. And the king paid for most of it from his income as a major property owner and landlord. Income tax was introduced as a temporary expedient to fund the Napoleonic Wars. Temporariness seems to have become somewhat permanent… It seems strange now that it seems almost obvious to tax income, but in earlier centuries there were some quite imaginative taxes I’ve come across while doing genealogical research because the records of them still exist and can be some use in tracing English ancestry. There was the hearth tax, based on the number of fireplaces in your house, and the window tax, which resulted in windows being bricked up and families living in the dark! And the money-raising annuity scheme called tontine, which is best googled if you want to know how that worked.
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