The logical principle driving this system is that the person who earned $100,000 could afford to pay a higher percentage of that income than someone who earned only $40,000. For example, a person earning $100,000 in a year might be taxed at 25% (leaving $75,000), while a $40,000 earner would pay something closer to 15% (leaving $34,000). Most countries utilize a progressive income tax system in which individuals with higher incomes are taxed at a higher percentage than those who earn less. government on any income over $120,000 USD unless they were to completely renounce their U.S. Even then, one would often still owe taxes to the U.S. In order to be accepted by the new country, one must usually establish permanent legal residence there, spend at least half the year living in the new country, and submit any needed paperwork. Relinquishing one's tax responsibility is not as easy as simply moving to another country. In some cases, a person may have overpaid their taxes and will be due a refund. Income taxes are typically paid annually, with citizens filing an income tax return each year to determine the amount of taxes they owe. Income can include not only wages and salaries, but also winnings from lottery prizes, interest on savings bonds, profits from stock sales or other investments, and so on. In the United States, both the federal and state governments may levy an income tax, although some states choose not to do so. Countries That Have No Personal Income Tax: Anguilla*Įntries marked with * are classified as territories, not countries, but the United Nations.Įntries marked with ** have no personal income tax, but do collect corporate income taxes. In many cases, it is possible for a person to move to one of these countries, establish residency (and in some cases citizenship), and live free of income taxes in their own personal tax haven. The governments of income-tax-free countries typically enjoy a lucrative alternate source of income, such as a nationalized oil industry or tourism sector. On the other hand, some countries have no national income tax at all. In some highly-taxed countries income taxes exceed 50%. In at least half of the world's countries, income taxes comprise approximately 80% of all government revenues, funding public services, the military, and the government itself. Income tax is a tax levied by a government on income generated by individuals and businesses.
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