Independent Contractor Compliance – How US Tax Rates Compare to Other Countries

In today's world of work, digital nomads can work anywhere, however they still need to be paid compliantly. Find out how contractor compliance solutions can lower your risk when engaging global talent.

 

Globally, the US enjoys a lower personal tax burden than most countries, however our system is more complex especially when it comes to project-based, SOW, independent, self employed workers, sole traders and small businesses.  A major reason for this is outside the US, countries traditionally have preferred their workers to be treated the same from a tax liability and also contribute equally to social programs.  While it may be easy to imagine from these words, overseas workforce compliance and worker classifications can be challenging, from a tax collection and reporting standpoint. An in-country local expert that provides IC compliance solutions, can help navigate the complex issues and take the compliance risk off the hands of multinational companies.

Currently, in the US, the seven tax brackets are 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent and 37 percent.

How do these rates compare to other countries?

According to a research paper published by the Federal Reserve Bank of Chicago, “the U.S. is a relatively lightly taxed country.” In fact, of the 38 OECD member countries, the U.S. ranks 32nd in total tax burden, a measurement that includes income, property and various other taxes.

The low tax burden in the U.S. is driven by “low taxes on personal income,” the Chicago Fed notes, “and not, for the most part, by lower taxes on business and property income per se.” The U.S. corporate tax rate used to be among the highest in the world, at 35 percent. The new GOP tax law lowered it to 21 percent in 2017 where it has remained the same.

While the U.S. enjoys relatively low taxes, Americans do have to navigate one of the most complex filing systems in the world. This is why workforce compliance is a key issue for our enterprise clients.

The following countries have lower income tax rates than the U.S., which had a top rate of 37 percent in 2021. We also included the corporate rate in each country.  All data is for 2021 and comes from tax advisory service KPMG.

MEXICO

South of America in Mexico, residents pay less in individual and corporate tax.  They also pay less for healthcare.

Highest individual income tax rate: 35 percent
Corporate tax rate: 30 percent

THAILAND

Thailand’s individual tax rate is only slightly lower than the top US individual rate and ranges from 0% up to 35%.

Highest individual income tax rate: 35 percent
Corporate tax rate: 20 percent

CANADA

Heading North of America to Canada, the top individual tax rate is about 4% lower than America’s top rate. At the lower end of the scale, Canadians pay 15% compared with America’s 10%.

Not only do Canadians have a lower tax rate than America, their cost of living is also lower.

Highest individual income tax rate: 33 percent
Corporate tax rate: 26.5 percent

These are the countries where expats earn more than they would at home

NEW ZEALAND

New Zealanders enjoy a lower tax rate than America, however their neighboring country Australia has a higher rate than the US.

Highest individual income tax rate: 33 percent
Corporate tax rate: 28 percent

POLAND

Poland enjoys one of the lowest individual and corporate tax rates. Their rates are lower than America and most of Europe.

Highest individual income tax rate: 32 percent
Corporate tax rate: 19 percent

KENYA

Highest individual income tax rate: 30 percent
Corporate tax rate: 30 percent

ALBANIA

Highest individual income tax rate: 23 percent
Corporate tax rate: 15 percent

LATVIA

Highest individual income tax rate: 23 percent
Corporate tax rate: 15 percent

SINGAPORE

Coming in lower than the average rates in Asia, Singapore is more tax-friendly than the U.S.

Highest individual income tax rate: 22 percent
Corporate tax rate: 17 percent

CZECH REPUBLIC

Highest individual income tax rate: 22 percent
Corporate tax rate: 19 percent

UKRAINE

Highest individual income tax rate: 18 percent
Corporate tax rate: 18 percent

HUNGARY

Highest individual income tax rate: 15 percent
Corporate tax rate: 9 percent

Coming in with higher tax rates than America and the above listed countries are Germany at 45%, China 45%, India 42.74% and the United Kingdom also at 45%.

Independent Contractor Compliance Specialists

CXC Global assists companies to navigate the challenge of independent contractor compliance from a tax collection and reporting standpoint for project-based workers.  Our IC compliance solutions enable us to act as the local experts, removing the risk from the hands of the enterprise corporations.

 

CXC is a global HR outsourcing organization with 30 years of experience in workforce management. Our innovative and cost-effective solutions help companies gain a competitive advantage by improving efficiency while reducing risks.

Contact CXC today to start enabling your future workforce.