Wednesday, August 26, 2009

Death and taxes

Only two things are certain in life... there’s little we can do about the first but wait, but for the second… well, there’s little we can do there either.

A common complaint of expatriates living in Norway is the notion that income taxes are sky high. This is true, compared to say, Qatar, where there are no personal income taxes (PIT), or Paraguay, where PIT maxes out at 10%. But is Norway really much higher than other countries? Some nifty little wizards at KPMG have compiled a report addressing just that.

According to the 2009 Individual Income Tax and Social Security Rate Survey, Norway has a PIT rate* of 40%, the UK 40%, and the US 35%**. However, these are not the highest PIT rates. Denmark has a PIT rate of 62.3%, Sweden 56.7%***, Netherlands 52%, and Austria, Belgium, and Japan 50%. But that’s only part of the story.

When you consider a combination of the highest tax rates based both on personal income tax and social security tax, the highest-taxed locations might surprise you (well, it did me, but I am easily surprised). KPMG found that “When taking both the personal income tax rate and social security rates into account for employees earning 100,000USD, the countries with the highest rates were Slovenia (54.9 percent), Croatia (53.5 percent) and Hungary (48.1 percent).”

In fact, if you consider both PIT and social security tax, on 100,000USD of gross income, one would pay 32.9% in Norway and 25.3% in the US. While a difference of more than 7% might seem quite large, it is worth noting that I am getting a lot for that 7.6% differential in Norway. I am pretty sure that difference is worth inexpensive-to-free health care, subsidized-to-free childcare and schooling, and even a gratis university education from a public institution (how I wish I would have had this kind of benefit before Sallie Mae and I met).

There’s really nothing witty or clever to joke about regarding tax rates so I won’t bother trying (although please feel free to comment if you do have some humor to share about this). However, it’s good to know that I am not being gouged by the Norsk tax system quite as badly as I thought I was. Cheers, Norge!
For some reason a discussion of taxes requires a lot of footnotes. Of course it does.
* Note that this is the highest tax rate in countries with graduated tax systems.
** This is the federal tax rate only and does not take into account state income taxes.
***The PIT rates for Denmark and Sweden include a social security component as this is rolled into the PIT rate. They get a lot of free stuff for their tax dollars so don't feel too sorry for them.


  1. Damn... now what am I going to complain about?

    I am no smartie pants... So I won't even pretend... but where does the cost of living & the VAT add into this? I feel like we are taxed ALL OVER THE PLACE... SALES TAX, VAT, RADIO/TV TAX ROAD TAX & now they want to tax us for driving during rush hour...
    PS I pay more in childcare here & get a lot less for my money... (less hours) Just saying... but then again I am missing home this week & feeling a little bitchy.. : )

  2. I'm no smartie pants either, American! My point was really just that PIT and social security are not *as* far off from the US as one might think. Having said that, I still think it is a lot more expensive to live in Norway overall.

    In terms of cost of living in general, living in Norway costs about 23% more than in the US (based on figures for Oslo and NYC, so the comparison is a little different between, say, Stavanger and Houston). And there's no disputing that sales tax is much higher in Norway - 25% here versus 8.25% in Houston, for example.

    I think there's still cause to bemoan higher living costs, but it's just not perhaps in direct relation to income tax. So complain away! ;-)

  3. Wrote a long comment agreeing with your assessment of the good value offered by Norwegian income tax compared to Ireland but managed to lose it. This is the short version. Great post!

  4. I hate when the long comments get deleted - argh!! So here's my short answer to your comment: thanks! ;-)

  5. Hi! I'm so happy to make the acquaintance with your blog! Enjoyed this post and all of the others I have just now read, especially those about learning Norwegian (good luck to you, really!) and about how living in Norway has allowed you to learn about who you are. I can relate to all of that, no doubt. Oh, and I agree that Norwegian drivers are dangerous. ;-)

    Re: taxes here, I believe I'm paying less in income tax now than I did in California (taking into account my much lower earnings here and high CA state tax), so have nothing to complain about there. I deeply resent paying VAT on food, as I believe it's punitive (we all have to eat) and I hate, hate, hate paying bom (tolls) on roads when we already pay high tax on bensin and cars and the train is so ridiculously expensive. Other than that, I'm good. :-)

  6. Nice to meet you, Michele! I do think further work needs to be done on this tax/cost of living question, and when I get my next break from my students I might whip something up. When you take into account things like state income tax and property tax (which is about 30 times less in Rogaland than in Houston), I wonder how it all shakes out?

    And, girl, I am WITH you about bom. I have to pass one what seems like every 10 minutes and I think it is all a mad conspiracy. Plus a dear friend just told me the toll here in Stavanger just went from 13nok to 20nok. I believe that is the actual definition of highway robbery - on a few levels!

  7. Michele, take heart! Apparently there is talk on the federal level about lowering (significantly) taxes on fruit and veg. It doesn't cover all non-value-added foots, but it is a start.