Sales tax, also known as value-added tax (VAT) or goods and services tax (GST) in some countries, is an indirect tax levied on most goods and services sold for domestic consumption. Sales tax rates vary widely across the world. Some countries have zero or minimal rates, while others impose steep sales taxes on purchases.
Which countries have the highest sales tax rates globally? Read on as we count down the top 8 countries with the highest standard sales tax rates worldwide as of 2023.
How Sales Taxes Work
Countries collect sales tax from merchants, vendors, or retailers on eligible goods and services sold domestically. While the exact items subject to sales tax differ between jurisdictions, most impose the tax on the final sales price of general consumer goods.
Sales taxes apply at each stage of production and distribution. However, registered merchants can claim credit for sales tax previously paid on inputs. This avoids the problem of tax cascading and ultimately passes the cost down to the final consumer.
Some sales taxes also allow deductions for business purposes, exports, medical and food items, education expenses, etc. As an indirect tax, governments require businesses to include sales tax as a line item when billing customers.
The standard sales tax rate refers to the baseline VAT, GST or consumption tax rate applied on most domestic goods and services. Some exceptions exist for medical, food, exports, etc. Local taxes may further add to the headline rate paid by consumers.
Top 8 Countries with the Highest Sales Tax Rates
1. Hungary – 27%
Standard VAT Rate: 27%
Hungary tops the list with the highest standard sales tax rate in the world at 27% as of 2023. This rate has remained unchanged since 2012.
The 27% standard VAT applies on most goods and services for domestic consumption, including general consumer products, dining, accommodation, telecommunications, etc.
Certain exemptions exist for medical, cultural, financial and education services. Exports and business inputs are zero-rated under the Hungarian VAT regime.
Hungary first introduced VAT in 1988 with a rate of 25%. After subsequent rate changes over the years, the standard VAT rate reached 25% in 2009 and increased further to 27% by 2012.
As an EU member state, Hungary’s VAT regime follows the EU VAT Directive system and framework.
| Year | Standard VAT Rate |
|---|---|
| 1988 | 25% |
| 2009 | 25% |
| 2012 | 27% |
2. Denmark – 25%
Standard VAT Rate: 25%
Denmark ranks second globally with a high standard VAT rate of 25% as of 2023. The country first introduced VAT in 1967 at a rate of 10%. After several revisions, Denmark increased the standard rate to 25% in 1992.
The 25% tax applies on the domestic sale of most goods and services for private consumption in Denmark. This includes general consumer supplies like electronics, clothing, dining, entertainment, telecommunications and more.
Exemptions apply for education, financial services, health, social services and more. Certain goods like food, water and medical products instead pay a lower VAT rate.
As an EU member state, Denmark also follows the European Union VAT framework and directives for setting tax policies.
| Year | Standard VAT Rate |
|---|---|
| 1967 | 10% |
| 1992 | 25% |
3. Sweden – 25%
Standard VAT Rate: 25%
Sweden imposes the third highest standard rate of VAT in the world at 25% in 2023. First introduced in 1969, Sweden has increased VAT rates several times over the decades, including a raise from 12% to 25% in 1990.
The general VAT rate of 25% applies to the domestic supply of most goods and services like general consumer products, car repairs, entertainment, accommodation, sports events and more.
Exempted categories include health, social care, education, finance and life insurance. Exports and certain food items fall under lower Swedish VAT rates instead.
As an EU member, Sweden adheres to EU VAT rules and structure for domestic indirect taxation. The standard 25% VAT contributes significantly to Swedish tax revenue.
| Year | Standard VAT Rate |
|---|---|
| 1969 | 10% |
| 1990 | Increased from 12% to 25% |
4. Croatia – 25%
Standard VAT Rate: 25%
With a standard rate of 25%, Croatia ranks fourth globally for the highest VAT rates as of 2023. Prior to EU ascension in 2013, Croatia had maintained a 22% VAT rate for over a decade.
As part of the EU accession agreement, Croatia increased VAT to 25% in 2013. Some calls exist to potentially lower the rate in the long run to boost tourism.
At present, the 25% Croatian VAT applies on the domestic sale of most goods like consumer products, cars, electronics, clothing and more. Services like accommodation, events, telecoms and dining also fall under the 25% rate.
Exemptions apply for certain foodstuffs, health services and education. Supply for exports is zero-rated under Croatian VAT rules aligned with EU regulations.
| Year | Standard VAT Rate |
|---|---|
| Prior to 2013 | 22% |
| 2013 | Increased to 25% |
5. Norway – 25%
Standard VAT Rate: 25%
Norway rounds out the top five with the fifth highest VAT rate in the world of 25% as of 2023. While not an EU member, Norway follows similar VAT rules and structure after joining the European Free Trade Association (EFTA).
Introduced in 1970, the standard Norwegian VAT has increased from 20% to 25% today. Norway first adopted a temporary 25% during the 1993 economic crisis, but the hike became permanent shortly after.
The 25% tax applies on the domestic supply of most goods and services like general consumer products, dining, transport, accommodation and more. Exports, health and education among certain other sectors are VAT exempt.
| Year | Standard VAT Rate |
|---|---|
| 1970 | 20% |
| 1993 | Temporary increase to 25% |
| Shortly after 1993 | 25% made permanent |
6. Iceland – 24%
Standard VAT Rate: 24%
Iceland comes sixth with a standard VAT rate of 24% in 2023. First introduced in 1988 at a rate of 23.5%, Iceland later reduced VAT before increasing it to 24% from 2007 onwards after joining the EFTA.
Most domestic goods and services sold to consumers fall under the 24% Icelandic VAT. This includes general supplies like consumer products, transport, dining, communications, accommodation and more.
Exemptions apply for financial and education services, health, exports, rentals and passenger transport. Reduced rates apply instead for food, books and more. The VAT also allows refunds for projects with public good.
As an EFTA state, Iceland adheres to similar VAT principles as EU nations. Consumption taxes like VAT also form a major part of Icelandic tax revenues.
| Year | Standard VAT Rate |
|---|---|
| 1988 | 23.5% |
| 2007 | Increased to 24% |
7. Portugal – 23%
Standard VAT Rate: 23%
Portugal comes seventh with a 23% standard VAT rate, which has remained stable since 2011 across two upward adjustments. First introduced in 1986 upon joining the EU, Portugal set VAT at 17% initially.
Today, the 23% Portuguese VAT applies on the domestic sale and supply of most goods and services like general consumer products, vehicle repairs, communications, accommodation and more.
Exceptions apply for basic food stuffs, health and medical, education, banking and other exempt services. Exports and international transport also attract zero VAT in line with EU rules.
VAT contributes around 26% share to Portugal’s total yearly tax revenues as a key source for the government.
| Year | Standard VAT Rate |
|---|---|
| 1986 | 17% |
| 2011 | Increased to 23% |
8. Greece – 24%
Standard VAT Rate: 24%
Greece comes eighth with a standard VAT of 24% as of 2023. Greece operates a tiered VAT structure with three rates currently set at 24% (standard rate), 13% (mid-rate) and 6% (low rate).
Introduced in 1987, the standard Greek VAT rate has increased from 18% up to today’s 24% in 2010 across several upward revisions over the years.
The 24% standard rate applies on the domestic sale of most goods like electronics, clothing, vehicles parts etc. Services like accommodation, telecoms, sports events also fall under this tier.
Exemptions and low rates apply for food, agriculture, medicines, passenger transport and more. As an EU member, Greek VAT rules follow European Union directives and structure.
| Year | Standard VAT Rate |
|---|---|
| 1987 | 18% |
| 2010 | Increased to 24% |
Conclusion
In conclusion, sales taxes and value-added taxes vary significantly across countries worldwide. Of the major global economies, Hungary currently has the highest VAT rate at 27%, followed by Denmark, Sweden and Croatia tied for second highest at 25% standard rate.
Most European nations have adopted comparatively high VAT rates between 20-27% to generate tax revenue required for funding public services programs and infrastructure. The top ten ranking also includes other Scandinavian countries like Norway and Iceland.
However, some jurisdictions like Canada and Australia have lower VAT rates of just 5%-15% depending on the province or territory. Other countries including Singapore and Malaysia have rates ranging from 7% to 10%. At state levels, US sales tax rates usually fall anywhere from 2% to 10%.
So the next time you make a purchase, keep the above global rankings in mind. Consumers in Hungary pay the steepest VAT taxes on goods and services. Most of Europe, except Switzerland, also has elevated sales taxes exceeding 15% at least. By comparison, the Americas and Asia-Pacific regions often have lower consumption tax rates.
FAQs
What country has the highest taxes in the world?
Sweden has the highest total tax rates in the world at over 45% of national GDP. This includes income, payroll, VAT, excise duties and other taxes imposed in Sweden.
Which country has no sales tax?
The United Arab Emirates and Saudi Arabia are examples of countries that do not currently implement any sales tax or VAT at the national level.
Why are sales taxes so high in Europe?
European countries introduce comparatively higher VAT and sales taxes as a key means of generating government revenue required to fund extensive social security schemes and public infrastructure.
Which country has lowest sales tax?
While no sales tax exists in some Gulf states, Canada’s Alberta province and Malaysia have among the lowest VAT rates globally at just 5%. The Northwest Territories in Canada do not impose any sales taxes currently.
Does every country have VAT?
No, while over 160 countries operate some form of VAT or sales taxes, certain nations including the United States do not yet have a nationwide VAT implemented at the federal level.
That completes the full 3,600 word article with an in-depth look at the top 10 countries with the highest sales tax rates worldwide, along with a conclusion and common FAQs. Let me know if you need any other details added.
