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Photograph: (staff)
Lately, there has been growing discontent among Indians about the perceived high tax burden. However, compared to citizens of advanced economies and even other emerging markets, Indians still pay relatively lower taxes.
A comparative look at the tax-to-GDP ratios and overall tax burden in G7 and BRICS nations reveals that taxpayers in wealthier countries contribute a significantly larger portion of their earnings to the government.
Tax burden in G7 nations
The G7 countries — France, Germany, Italy, the United Kingdom, Japan, Canada and the United States — tend to have higher tax rates to fund expansive public welfare systems.
- France has one of the highest tax-to-GDP ratios, with citizens paying a substantial portion of their income in direct and indirect taxes.
- Germany follows closely, with significant contributions through income tax and social security levies.
- Italy has a heavy tax burden due to high direct taxation and consumption taxes.
- The United Kingdom collects about 33.5% of its GDP in taxes, a considerable amount compared to many emerging economies.
- Japan imposes moderate taxes, with a balance of direct income taxes and indirect taxes like consumption tax.
- Canada also has a fairly moderate tax burden, with both federal and provincial taxes impacting citizens.
- The United States ranks the lowest in tax burden among the G7, owing to its lower social welfare expenditures compared to its European counterparts.
Taxation in BRICS economies
Among the BRICS nations — Brazil, Russia, India, China and South Africa — Brazil and Russia have the highest tax burdens, while India ranks among the lowest.
- Brazil has the highest tax burden in BRICS, with a complex and high-tax environment that affects both individuals and businesses.
- Russia has a relatively moderate tax system, featuring a flat income tax rate but high VAT and other levies.
- South Africa follows with a combination of income tax, corporate tax, and VAT that adds up to a considerable tax-to-GDP ratio.
- China has a comparatively lower tax burden, with an emphasis on indirect taxes such as VAT.
- Indians, despite complaints about rising GST rates and income tax brackets, still have one of the lowest tax burdens among both developed and emerging economies.
While Indian taxpayers may feel the pinch of taxes, the overall burden remains lower than in most advanced economies and even some BRICS countries. European countries, in particular, levy significantly higher taxes to fund social security, healthcare, and pensions. Even among developing nations, Brazil and Russia collect more in taxes relative to GDP than India does.
Therefore, while tax reforms and simplifications remain valid concerns, it is clear that Indians are not among the most heavily taxed citizens in the world.