In the EU, almost half (48.7 %) of the tax burden is borne by the factor Labour. Capital taxes only contribute 23.5 % and consumption taxes only 27.8 % to the overall tax revenue. Marco Fantini, Head of Research at the Commission at the department of Taxation and Customs Union, informed that the trend was growing in Europe to increase tax on consumption and to slightly relieve the factor Labour. This, however, has so far not changed anything with respect to the unfair distribution of the burden. The comparison of countries has shown that labour is quite differently taxed in the Member States. The implicit tax rate on labour (i.e. the average actual tax burden) in 2007 was 20.1 % in Malta and 43.1 % in Sweden. In comparison with other EU Member States, Austria’s tax on labour income is above average. In 2007, for example, the implicit tax rate on labour in Austria was 41 %, whilst the EU average stood at 34.4 %. At 26.1 %, however, the Austrian implicit tax rate on capital was below EU average (28.7 %). It is also notable that the decline of the maximum rate for corporation tax within the EU during the period from 2000-2008 was with 8.4 % higher than the decline of the maximum rate for income tax (-6.9 %). The only two countries, which raised their maximum income tax rates, were Portugal and Sweden. During this period, only Malta and the non-EU Member Norway did not reduce their maximum corporation tax rates.

Another trend is a reduction of green taxes in the EU. Since 1999, the revenue from green taxes has fallen continuously. The increase in green tax revenue generated by the 12 new Member States since joining the EU has not been able to compensate for the downwards trend in the EU-15. This is attributable to the reduction of energy taxes by most Member States, which had to react to the increased political pressure caused by massively increased oil prices over the past years.

Ironically enough, the first page of the report describes the European Union as a high tax area. Unreflectingly, the Commission compares the tax rate of the EU (39.8 % of GDP) with the tax rates of the USA (28.3 %) and Japan (27.9 %). What the report does not mention is the fact that the majority of social benefits in the USA and Japan are not financed through taxes and that as a result their citizens have to make provisions for healthcare, education, unemployment and old age themselves. The higher tax rate of the EU is a reflection of the European welfare and social model, which supports a solidary risk distribution and does not leave people in emergency situations to fend for themselves. In particular during this current economic crisis, the European welfare and social model with its “automatic stabilizers” has time and again proven to be a rescue anchor.


Further information:

Press release on the taxation trend in the European Union

Study on taxation trends in the European Union