7 Countries with Highest Marginal Income Tax Rate in 2025

March 27, 2025 | 05:10 am

TEMPO.CO, Jakarta - The critical role of taxes lies in the benefits they provide to a nation's population, even though they may take a larger share of one's paycheck. However, some countries are leading the way with the highest tax rates in the world, particularly in marginal tax.

As quoted from Investopedia, a marginal tax rate can be defined as the tax percentage that is applied to each additional dollar of income within a given bracket. 

Countries with the Highest Tax Rates in the World

Dominated by European nations, Visual Capitalist has revealed the countries with the highest tax rates. Keep reading to discover the full list.

1. Denmark - 55.9%

Denmark boasts the highest tax rate in the world at a whopping 55.9%, including AM tax, for those considered full tax residents and who earn income above 611,800. Though the Scandinavian country is home to only six million people, the government uses this impressive tax revenue to fund an extensive welfare system, such as free healthcare and education.  

2. Finland - 55% 

Finland is close behind Denmark with a marginal progressive tax rate of 55% applied to its residents. While it may seem high, the country’s citizens enjoy incredible public services, including universal healthcare and generous parental leave. 

3. Luxembourg - 51%

Known for its strong financial sector and favorable business climate, Luxembourg still imposes hefty taxes on high earners. With a tax rate of 51%, the small yet prosperous European nation ensures it can provide excellent public services to its population, including a strong social security system and high-quality healthcare.

4. Austria - 50%

Austrians contribute a significant amount of their income to the state, having a marginal tax rate standing at 50% for individuals with income up to 103,072 EUR. In exchange, the government provides free healthcare, education, and other services that maintain a high quality of life. It's a classic example of a strong welfare state in action. Plus, Austria is also known among the top countries with the world’s best doctors.

5. Belgium - 50%

In Belgium, earning above 48,320 EUR means you’ll be taxed at 50%. While that might sound steep, Belgians are accustomed to a high level of public services in return, from healthcare and public transportation to extensive vacation time and family benefits. 

6. Israel - 50%

Israel is the only non-European country on this list with the highest tax rates in the world, standing at 50%. This tax rate helps fund the country’s well-developed healthcare system and provides generous social benefits to its citizens, including pensions, unemployment benefits, and subsidized housing for those in need.

7. Slovenia - 50%

Slovenia rounds out the list of countries with the highest tax rates. Paid on a progressive scale, the 50% tax rate is applicable for income above 78,016 EUR, according to Lawyers Slovenia. With this high tax rate, the country can fund comprehensive healthcare, education, and public infrastructure programs.

The reason for these high taxes often boils down to providing exceptional public services. From universal healthcare and education to robust social security systems, the tax money goes directly into supporting citizens' welfare. For further exploration, discover the most tax-friendly countries.

Editor's Choice: 10 Most Populated Countries in 2025: India Still Leads

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