It is a well-known fact that taxes play a critical role when it comes to maintaining a nation’s economy. Tax is sort of a financial charge levied by a country’s government or its functional body on its citizens. Taxes are charged on the basis of specific percentages called tax rates. This tax rate varies from country to country depending on the economic policy of that specific country.
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Few countries have been known to have really high tax rates that could go as high as 50% and some of the others have been known to have a really low tax rate. The top 6 low tax rate countries in the world are listed below.
Low Tax Rate Countries In The World
Situated in the southern part of Africa, 70% of Botswana’s terrain is covered by desert. Botswana has 1 of the comprehensive at the same time simple tax rates in the world. Total tax rate goes up to just 19.4%. Botswana’s corporate tax is the lowest in the South African region. Personal tax rates are based on taxable income slabs.
Value added tax is comprehensively imposed on an end user basis at the rate of 0% on zero rated supplies and up to 10% on standard rated supplies. The country has been having a low taxation regime for quite a number of years to attract and motivate internal investment and local business expansion.
The state of Georgia ranked as the 2nd country with the lowest tax rate in the world is not located in the United States, but in the Caucasus region in Eurasia. Total tax rate of Georgia is around 16.5%. Major categories of taxable income includes dividends and interest, employment income, pensions, royalties and rental income.
Capital gains which are derived from businesses are included in the business income. Government of Georgia has drastically altered its tax regime since 2004. The government has simplified the tax system and brought down the number of taxes totaling 21 in the year 2004 to only 6 today towards improving investment and business climate of the country. Such laudable measures have made this country economically viable on account of its lowest tax regime.
Bahrain is relatively small island country located near the Persian Gulf. The country has a total tax rate of just 15%. No corporate tax or personal income tax is charged by the government on its citizens. Tax is charged though on social security and stamp duty.
Oil companies need to pay taxes for procuring and refining crude oil in the country. The country has also planned to introduce value added tax in the near future to curtail excess dependence on oil which in turn might result in changes to the low tax policy in the country.
4. Saudi Arabia
Saudi Arabia is the 2nd largest nation in Arab countries. Residents are not required to pay taxes on employment income, business income is only taxable. Total tax rate of Saudi Arabia is around 14.5% which is primarily paid by its non-resident citizens or businesses of the nation Arabia.
An important reason for the low tax system for businesses in Saudi is to encourage and promote inbound construction for Saudi Arabia has garnered top ranking among G20 nations.
This is a country located in South Africa which has a total tax rate of 14.5%. An individual is taxed on the grounds of income received. There is no estate tax, capital duty or net worth. Corporate income tax is charged at 1.7% which is really low compared to the economic performance of Zambia. Poor and inconsistent government and banking policies might be causative reasons for the disproportionate taxing system of the country.
The United Arab Emirates is located in the Southeastern Arabian peninsula and is a federation of 7 emirates. Individual citizens are not required to pay taxes and no tax is levied on capital acquisition and net wealth. Total tax rate is close to 14.1%. The primary reason for such a low tax regime is the acquisition of wealth by the government through oil and natural gas trade with western countries.
The above listed countries have different reasons for having a low taxation regime. It has been argued that low tax rates primarily benefits the rich and fosters tax covering.
Looking at the positive side of having a low tax rate, increased economic growth, attracting more investment, encouraging entrepreneurship, inflation control and healthy trade relations with other countries paving the way for an economic boom. Wish we had such low tax regimes in our country.