Connect with us


Chart: Income Inequality by Country, Before and After Tax



Income Inequality by Country, Before and After Tax

Do taxes impact income inequality by country?

This animated chart, from Our World in Data, shows income inequality after taxes across 45 countries—a key measure for examining differences in living standards globally.

Which Tax Systems Offset Income Inequality the Most?

First, income inequality was analyzed by using the Gini coefficient, a common measure for analyzing wealth distribution. The Gini coefficient falls on a scale of 0-100, where a score of 0 indicates equally shared income and a score of 100 implies that one person takes all.

Here’s how each country’s wealth distribution changes as a result of their tax systems, using the most recently available data:

Country YearBefore vs. After Tax %
(Reduction in Gini Coefficient)
🇧🇪 Belgium202049.5%
🇫🇮 Finland202147.3%
🇸🇮 Slovenia202045.5%
🇦🇹 Austria202044.8%
🇮🇪 Ireland202044.5%
🇫🇷 France201943.7%
🇨🇿 Czechia202043.2%
🇸🇰 Slovakia201942.0%
🇩🇪 Germany201940.4%
🇩🇰 Denmark201939.8%
🇵🇱 Poland202038.9%
🇳🇴 Norway202137.9%
🇬🇷 Greece202037.7%
🇮🇹 Italy202037.2%
🇭🇷 Croatia202037.0%
🇵🇹 Portugal202037.0%
🇭🇺 Hungary202036.8%
🇪🇸 Spain202036.1%
🇨🇦 Canada202036.1%
🇪🇪 Estonia202035.1%
🇸🇪 Sweden202135.0%
🇱🇺 Luxembourg202034.4%
🇳🇱 Netherlands202133.6%
🇯🇵 Japan201833.3%
🇷🇴 Romania202033.1%
🇮🇸 Iceland201732.2%
🇱🇹 Lithuania200431.3%
🇬🇧 UK202030.0%
🇳🇿 New Zealand202029.5%
🇱🇹 Lithuania202029.2%
🇨🇦 Canada201928.6%
🇮🇱 Israel202028.3%
🇦🇺 Australia202027.9%
🇱🇻 Latvia202127.6%
🇺🇸 U.S.202127.5%
🇷🇺 Russia201727.0%
🇧🇬 Bulgaria202024.1%
🇨🇭 Switzerland201921.4%
🇰🇷 South Korea202018.3%
🇧🇷 Brazil201617.4%
🇹🇷 Türkiye201917.3%
🇿🇦 South Africa201712.8%
🇨🇷 Costa Rica202111.6%
🇨🇱 Chile20177.1%
🇮🇳 India20112.6%

As the above table shows, Belgium saw the steepest decline in income inequality, dropping by nearly half after-tax. The country’s progressive tax rate system—where taxes increase as a person’s income increases—is one factor behind this decline.

Other Nordic countries like Finland, Slovenia, and Austria, all saw notable decreases.

Income inequality also falls significantly in Ireland, where many big tech giants are incorporated due to its favorable tax policies. In fact, foreign-owned firms, including Apple and Microsoft, make up the majority of its corporate taxes.

However in 2024, the country is implementing a 15% corporate tax rate as part of a new global minimum standard.

Interestingly, in the U.S., income inequality after tax drops by almost 28%, but before-tax inequality is high. In 2019, people in the highest income quintile earned on average 14 times more than the average household. A report from the Congressional Budget Office states that transfers and taxes increased the lowest quintile household incomes by $15,100 on average.

Does Government Spending Impact Inequality?

Studies show that Gini coefficients are linked to a country’s government spending.

In this way, higher government spending contributes to a more equal distribution of income, or a lower Gini coefficient. It further shows that strong education systems increased the effectiveness of redistributive public spending.

Consider how in France, government spending makes up 58% of GDP, and in Belgium it stands at almost 54%. By contrast, it accounts for 37% of GDP in America, which has an after-tax Gini coefficient that exceeds both European countries by a notable difference.

If the U.S. were to increase government spending in efforts to reduce inequality, it would likely mean higher taxes. Given the current political climate, the odds of this appear fairly slim.

green check mark icon

This article was published as a part of Visual Capitalist's Creator Program, which features data-driven visuals from some of our favorite Creators around the world.

Click for Comments


Ranked: Average Annual Salaries by Country

See how average annual salaries vary across 30 different countries, adjusted for purchasing power parity (PPP).



Ranked: Average Annual Salaries by Country

This was originally posted on our Voronoi app. Download the app for free on iOS or Android and discover incredible data-driven charts from a variety of trusted sources.

There are many reasons for why salaries vary between countries: economic development, cost of living, labor laws, and a variety of other factors. Because of these variables, it can be difficult to gauge the general level of income around the world.

With this in mind, we’ve visualized the average annual salaries of 30 OECD countries, adjusted for purchasing power parity (PPP). This means that the values listed have taken into account the differences in cost of living and inflation between countries.

Data and Key Takeaways

This data was sourced from the OECD (Organisation for Economic Co-operation and Development), an international organization that promotes policies to improve economic and social well-being. It has 38 member countries, though in this instance, data for all of them was not available.

All figures are as of 2022.

RankCountryAverage Annual Salary
(USD, PPP adjusted)
1🇱🇺 Luxembourg78,310
2🇺🇸 U.S.77,463
3🇨🇭 Switzerland72,993
4🇧🇪 Belgium64,848
5🇩🇰 Denmark64,127
6🇦🇹 Austria63,802
7🇳🇱 Netherlands63,225
8🇦🇺 Australia59,408
9🇨🇦 Canada59,050
10🇩🇪 Germany58,940
11🇬🇧 UK53,985
12🇳🇴 Norway53,756
13🇫🇷 France52,764
14🇮🇪 Ireland52,243
15🇫🇮 Finland51,836
16🇸🇪 Sweden50,407
17🇰🇷 South Korea48,922
18🇸🇮 Slovenia47,204
19🇮🇹 Italy44,893
20🇮🇱 Israel44,156
21🇪🇸 Spain42,859
22🇯🇵 Japan41,509
23🇵🇱 Poland36,897
24🇪🇪 Estonia34,705
25🇨🇿 Czechia33,476
26🇵🇹 Portugal31,922
27🇭🇺 Hungary28,475
28🇸🇰 Slovak Republic26,263
29🇬🇷 Greece25,979
30🇲🇽 Mexico16,685

From this dataset we can see that Luxembourg, the U.S., and Switzerland offer the highest average annual salaries.

All three of these countries are highly developed economies with well-established service sectors, which typically lead to more high-paying jobs. The cost of living in these countries is also relatively high, necessitating higher wages to maintain a standard quality of life.

At the other end of this ranking, Mexico and Greece have the lowest average salaries. In Mexico’s case, the country’s economy has a large portion of lower-wage jobs, particularly in agriculture and manufacturing.

Greece, on the other hand, has struggled with consistently high unemployment since the 2008 global financial crisis. This puts downward pressure on wages because there is a surplus of labor.

See More Economics Graphics From Visual Capitalist

If you enjoy graphics like these, check out Visualized: The Most (and Least) Expensive Cities to Live In.

Continue Reading
Visualizing Asia's Water Dilemma