Do taxes affect the level of happiness in a country? 

January 19, 2024

According to the annual World Happiness Report, Finland ranks as the happiest country in the world. The top ten included other Scandinavian countries such as Denmark, Sweden, Iceland and Norway. Poland took 39th place, and Sierra Leone, Lebanon and Afghanistan were at the bottom of the list.  

Global happiness

The assessment of global happiness was based on the Gallup World Poll. Six factors were taken into account: 

  • GDP per capita, 
  • healthy life expectancy, 
  • perception of corruption in the state, 
  • having a trusted person to whom you can get support, 
  • freedom to make decisions, 
  • generosity in the community. 

The authors of the report draw interesting conclusions – people coming from countries with democracies, high levels of trust in the government and society, and relatively low levels of inequality are much happier. The Scandinavian countries are seen as respecting human rights and providing strong social support to their citizens. Denmark is the least corrupt country, followed by Finland, Sweden and the Netherlands. The countries where the rule of law has been breached are Hungary, Bulgaria and Romania.  

The growing GDP in the Scandinavian countries shows that they are very entrepreneurial countries. These countries achieved prosperity in the 1980s and 1990s, which is now held back by high taxes.  

It is worth mentioning that in Scandinavian countries there is a low level of obesity due to the wide availability of fresh and healthy products and the fact that most people are physically active. 

The Netherlands have the shortest working week (approx. 33 hours), following Germany and Denmark (approx. 35 hours). In these countries, personal and family life is much more valued, and leisure time is not an exception, but a regular routine during the day.  

It is evident that the harsh climate is not an obstacle to happiness. The report shows that there are many factors that influence the happiness of citizens, but it is important to remember that the study did not include people in nursing homes or prisons. The researchers did not conduct interviews in places where they did not feel safe, which in itself may indicate the living conditions of certain areas. Attention should also be paid to the factor of high GDP per capita. 

According to Gallup, they survey “the complete non-institutionalized adult population of the nation” to gather data for the happiness report. 

GDP per capita fails to consider income inequality. It represents the annual total value of goods and services produced in a country, divided by the entire population. This measure does not provide insights into wealth distribution or concentration among individuals, with no information about the people who actually posses wealth in a country.  

Nevertheless, the report is an interesting point of reference in the context of reflections on improving the quality of life of citizens. 

Taxes in various countries

Value Added Tax rate 

  • Denmark – 25% 
  • Finland – 24% 
  • France – 20% 
  • Germany – 19% 
  • Poland – 23% 
  • Portugal – 23% 
  • Spain – 21% 
  • Sweden –25%  
  • Italy – 22 %  

Top Personal Income Tax Rate 

  • Denmark – 55,9% 
  • Finland – 53,4% 
  • France – 55,4% 
  • Germany – 47,5% 
  • Poland – 36% 
  • Portugal – 53% 
  • Spain – 54% 
  • Sweden – 52,3%  
  • Italy – 47,2% 

There is no proof regarding the connection between low taxes and happiness of an individual, but it is said that the amount of taxes to be paid can have an impact on an individual’s finances.  

In some countries with relatively high taxes, citizens may feel more satisfied with the social benefits that are financed by these taxes, while in others, the low tax burden may be seen as beneficial for economic development and individual entrepreneurship.
 

Text based on: https://www.euronews.com/next/2023/03/20/these-are-the-worlds-10-happiest-countries-in-2023-and-most-of-them-are-in-europe ; https://taxfoundation.org/data/all/global/top-personal-income-tax-rates-europe-2023/ 

 

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