Countries With the Highest Sales Taxes
In the U.S., sales tax varies by state. Around the world, however, many countries have instilled a nationwide sales tax. In fact, a number of these nations — including those in the European Union (EU) — administer a Value Added Tax (VAT). As a consumption tax, VAT is collected at each stage of the supply chain, as opposed to a sales tax, which is collected only at the point of sale. Luckily, travelers to the EU can receive a VAT refund to recoup some of that spent money.
Either way, it’s good to know which countries have a high sales tax — especially if you’re traveling on a budget. “Trading Economics” released a list of updated sales tax rates for 2020 throughout the world and it should come as no surprise that most of these taxes are VAT. However, as of late January 2020, Bhutan was knocked out of the number one spot — lowering its whopping 50% sales tax down to a 7% goods and services tax. However, here are nine other countries that remain on the list.
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Although it sits at number nine on our list, Ireland has the fourth-highest sales tax in the world, meaning there are a few ties coming up. Its rate of 23% extends to many goods and services, but luckily, the country offers reductions for items deemed essential. The reduced rate of 13.5% includes an extensive list of goods and services including foodstuffs, children’s car seats, firewood, bicycle repair, and cut flowers and plants for decorative use. The 9% rate is for newspapers, sports facilities, and hairdressing while the 4.8% pertains solely to agricultural livestock.
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Iceland is tied with Greece and Finland with a national sales tax of 24%. The standard VAT is reduced to 11% for certain goods and services including hotels, foodstuffs, travel agents, and e-books. Even better, exports, export services, and ships are granted 0% sales tax, which varies from the 0% exemption allowed for financial services, education, and public transportation. The former allows for tax credits, while the latter does not.
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Another country with a sales tax of 24% is Greece. The country’s standard VAT applies to most taxable goods and services with reduced rates of 13%, 6%, and 0% for a variety of items. The list of these items is pretty standard and includes food, dining, and books, but there are a few exceptions. The country also allows a reduced rate for mentally disabled persons or any structure accommodating them. Just know that if you’re a tourist, you’ll be paying the hefty VAT at local shops. Luckily, with a little preparation, you might be able to get a refund at the airport.
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Finland’s standard VAT rate of 24% has been in place for seven years with two reduced rates in place for allowable goods and services. A rate of 14% is set for food and restaurants, while there is a much longer list for the reduced rate of 10%, which includes books, newspapers, medicine, public transportation, and admission to sporting events. Despite these high taxes, Finland has been voted the happiest country in the world three years in a row, so it seems the VAT doesn’t negatively affect national morale.
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With a VAT of 25%, Sweden has the second-highest sales tax rate in the world. It’s also in a four-way tie for this title with Norway, Denmark, and Croatia. Luckily, there are reductions for certain goods and services including 0% for prescription medicines and health-related times, 6% for books and cultural services, and 12% for groceries and dining out. However, with this standard added tax comes a sense of ease. With no added sales tax tacked on at the register, all items are marked with the accurate price — tax included.
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Just like its neighbor, Norway has a nationwide sales tax of 25%. The VAT applies to all sales of goods within the country — even digital products like music, e-books, and websites that are bought elsewhere. This means if you have customers in Norway for an online business, you are subject to this tax if sales are over 50,000 NOK. The only other reductions are for food items, which are set at a rate of 15%, and public transportation, which is currently taxed at 12%.
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The last of the Scandinavian countries on the list, Denmark maintains a 25% VAT that is non-deductible. The only goods and services allowed at a reduced rate are newspapers, journals, and transportation. On top of this, Denmark has a high rate of income taxes with the rate expected to rise to 55% in 2020. But despite high taxes across the board, Danes still remain relatively happy, especially when compared to the rest of the world. In fact, a Gallup survey from 2014 indicated that nine out of ten Danes were happy to pay these high taxes since they felt it was an investment toward their quality of life.
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Also in second place for the world’s highest sales tax is Croatia. Called “PDV,” Croatia’s sales tax is quite high at 25%. Thankfully, there are some notable reductions for matters of public interest and financial activities. Some of these dispensations include the postal service, medical care, and youth education in addition to the lottery and slot machines. Meanwhile, certain food items, medicine, and necessary products like baby diapers all benefit from a lowered PDV at varied rates.
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Number one as the country with the highest sales tax, Hungary maintains a hefty 27% VAT that applies to all sales in the supply chain. There are a few exceptions on certain items, however. Medicinal products, as well as a variety of food products, are allowed a 5% reduction from the standard tax. Interestingly enough, certain services like catering, internet, and baking also benefit from a reduced rate of 18%. To offset the high consumption tax, income and corporate taxes are lower by comparison.
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