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Europe — Tax on labour unchanged during downturnv1

30 June 2010

The latest European Union (EU) taxation trends published by the EU Statistical Office (Eurostat) show that the overall tax-to-GDP ratio in the EU27* was 39.3% in 2008, the first year of the economic and financial crisis, compared with 39.7% in 2007. The EU27 tax ratio was 40.6% in 2000, fell to 38.9% in 2004 and then rose until 2007.

The overall tax ratio in the Euro area (EA16**) fell to 39.7% in 2008 compared with 40.4% in 2007. Since 2000, taxes in the Euro area have followed a similar trend to the EU27, although at a slightly higher level.

In comparison with the rest of the world, the EU27 tax ratio remains generally high and more than one third above the levels recorded in the USA and Japan.
However, the tax burden varies significantly between Member States, ranging in 2008 from less than 30% in Romania (28.0%), Latvia (28.9%), Slovakia (29.1%) and Ireland (29.3%), to almost 50% in Denmark (48.2%) and Sweden (47.1%).

Between 2000 and 2008, the largest falls in tax-to-GDP ratios were recorded in Slovakia (from 34.1% in 2000 to 29.1% in 2008), Sweden (from 51.8% to 47.1%) and Finland (from 47.2% to 43.1%), and the highest increases in Cyprus (from 30.0% to 39.2%) and Malta (from 28.2% to 34.5%).

The largest source of tax revenue in the EU27 is labour taxes, representing over 40% of total tax receipts, followed by consumption taxes at roughly one quarter and taxes on capital at just over one fifth.

The average implicit tax rate on labour, a broad measure of the tax burden falling on work income, was almost unchanged in the EU27 at 34.2% in 2008 compared with 34.3% in 2007, after having declined from 35.8% in 2000. Among the Member States, the implicit tax rate on labour ranged in 2008 from 20.2% in Malta, 24.5% in Cyprus and 24.6% in Ireland to 42.8% in Italy, 42.6% in Belgium and 42.4% in Hungary.

The average implicit tax rate on consumption in the EU27, which had risen between 2001 and 2007, dropped to 21.5% in 2008 from 22.2% in 2007. In 2008, implicit tax rates on consumption were lowest in Spain (14.1%), Greece (15.1%) and Italy (16.4%), and highest in Denmark (32.4%), Sweden (28.4%) and Luxembourg (27.1%).

In the EU27, the average implicit tax rate on capital for the Member States for which data are available was 26.1% in 2008 compared with 26.8% in 2007. The lowest implicit tax rates on capital were recorded in Estonia (10.7%), Lithuania (12.4%) and Ireland (15.7%), and the highest in the United Kingdom (45.9%), Denmark (43.1%) and France (38.8%).

*EU27 includes Belgium (BE), Bulgaria (BG), the Czech Republic (CZ), Denmark (DK), Germany (DE), Estonia (EE), Ireland (IE), Greece (EL), Spain (ES), France (FR), Italy (IT), Cyprus (CY), Latvia (LV), Lithuania (LT), Luxembourg (LU), Hungary (HU), Malta (MT), the Netherlands (NL), Austria (AT), Poland (PL), Portugal (PT), Romania (RO), Slovenia (SI), Slovakia (SK), Finland (FI), Sweden (SE) and the United Kingdom (UK).

**EA16 consists of Belgium, Germany, Ireland, Greece, Spain, France, Italy, Cyprus, Luxembourg, Malta, the Netherlands, Austria, Portugal, Slovenia, Slovakia and Finland.

To read the full taxation trends please click here



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