In the past decade significant changes in tax ratios have taken place in several Member States. The largest falls were recorded in Slovakia, where the overall tax burden dropped from 39.6% in 1995 to 29.3% in 2005, and Estonia (from 37.9% to 30.9%). The highest increases were observed in Cyprus (from 26.7% to 35.6%) and Malta (from 27.3% to 35.3%).
This information comes from the publication ‘Taxation trends in the European Union: Data for the EU Member States and Norway’ issued by Eurostat, the Statistical Office of the European Communities and the Commission’s Directorate-General for Taxation and Customs Union. This publication compiles tax indicators in a harmonised framework based on the European System of Accounts (ESA 95), allowing accurate comparison of the tax systems and tax policies between EU Member States.
This year's issue features a more detailed analysis of consumption taxation (breakdown of consumption taxes into their components: VAT, energy, alcohol and tobacco duties, and other taxes) and for the first time covers Bulgaria and Romania, which joined the EU on 1 January 2007.
Tax burden on labour broadly stable at a high level, while increasing on consumption and capital
For the EU27 as a whole, the average implicit tax rate (ITR) on labour (including social contributions), the preferred indicator for the average tax burden, amounted to 35.2% in 2005. The decline registered since the turn of the century stopped in 2005, despite a wide consensus on the desirability of reducing labour taxes. However, the tax burden is still lower than its maximum of 36.5% in 2000. Among the Member States, in 2005 this rate ranged from 22.1% in Malta, 24.6% in Cyprus, 25.5% in the United Kingdom and 25.6% in Ireland to 46.4% in Sweden, 43.1% in Italy, 42.8% in Belgium and 42.1% in France. In the new Member States Bulgaria and Romania, the rate amounted to 34.2% and 26.7% respectively. Despite the presence of a number of low taxing countries, taxation on labour is, on average, much higher in the EU than in the other main industrialised economies.
In contrast to the ITR on labour, the average implicit tax rate on consumption4 in the EU27 has been on the increase; it rose from 20.5% in 2001 to 22.1% in 2005. Consumption was most taxed in Denmark (33.7%), Sweden (28.1%) and Finland (27.6%), while the lowest implicit rates were registered in Spain (16.3%), Lithuania (16.5%) and Italy (16.9%). In Bulgaria and Romania the ITRs amounted to 24.6% and 18.5% respectively.
The average implicit tax rate on capital in the EU27 stood at 27.3% in 2005, up from 25.3% in 2004. There is considerable disparity in this ratio: among the Member States for which 2005 data is available, the highest implicit tax rates on capital were recorded in Denmark (46.5%), Ireland (41.4%) and France (38.9%), and the lowest in Estonia (8.1%) and Lithuania (11.4%), while Latvia registered 7.8% in 2004.
Labour taxes remain the largest source of tax revenue, representing around half of total tax receipts in the EU27. Taxes on capital accounted for approximately 22% of total tax receipts, and consumption taxes 28%.
Top personal and corporate income tax rates on average lower in the new Member States
The top personal income tax rate differs substantially within the EU: the highest top rates on 2006 personal income are found in Denmark (59.0%), Sweden (56.6%), the Netherlands (52.0%) and Finland (50.9%), and the lowest in Romania (16.0%), Slovakia (19.0%), Estonia (23.0%) and Bulgaria (24.0%).
As for corporate income tax, the highest adjusted top statutory tax rates6 are recorded in Germany (38.7%), Italy (37.3%), Malta (35.0%) and France (34.4%), and the lowest in Bulgaria and Cyprus (both 10.0%), Ireland (12.5%) and Latvia (15.0%).
Over recent years top rates have shown a clear downward trend in the whole of the EU, particularly in the corporate area but also in the realm of personal taxation. On average, the new Member States display markedly lower top rates.
