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BackA recent annual report by Eurostat and EU Commission compares the various tax rates in the Member States. In doing so, trends are revealed as to how individual countries adjust their tax screws in the course of the financial and economic crisis. With regard to Austria, this report contains already known accounts on the tax structure: compared with other European countries, taxation of capital is low, whilst that of wage labour is high. Both data and statements of this annual study are interesting in several respects: firstly, it becomes clear, which politico-economic measures are taken to consolidate the budget. Secondly, the current debate on tax havens and tax evasion is underpinned with data. Thirdly, this data also gives new impetus to the issue concerning a (possible) harmonisation of the European tax systems.
Once a year, the Statistical Office of the European Communities Eurostat and the Directorate General Taxation and Customs Union of the EU Commission (DG TAXUD) publish a detailed report on current taxation trends in the 27 Member States as well as in Norway and Iceland. This study (see link below) compares harmonised tax indicators on the basis of the European System of Accounts (ESA 95). The present seventh annual report enables keeping track of long-term trends and shifts. It is of key interest, in particular in the current situation, where Member States are confronted with empty state coffers and European austerity measures, which countries change their tax rates and how they do it.
Compared to 2010, in 2011, the tax and contribution ratio – the sum of all taxes and social contributions in percent of the gross domestic product – slightly rose on average in Europe (35.8 % for the EU27) as well as in Austria (40.8 %). This is still lower than in 2000 – Austria 43 %, EU27 40.4 %. However, this tax and contribution ratio – frequently referred to as “tax burden” by the Austrian media– does not really say anything about the structure of a national tax system. Other key figures are required to depict the latter in more detail, whereby the study takes a closer look at trends concerning the taxation of labour, consumption and capital, as well as comparing income, corporation and Value Added Tax. The largest source of tax revenue in the EU27 is represented by wage taxes (almost half of the entire tax revenue), followed by consumption taxes (e.g. Value Added Tax), which account for about a third and tax on capital at about a fifth.
The taxation of labour in the EU27 slightly increased to 36 %; it does, however, reveal great differences: in Malta for example, wage labour is only taxed at 23 %, in Bulgaria and Portugal at ca. 25 %, whilst countries such as Belgium, France, Italy and also Austria tax labour at ca. 40 %. In 2011, the taxation of labour in Austria amounted to 40.8 %. After Belgium and Italy, Austria has the third highest implicit tax rate on wage labour throughout Europe. If one compares the European top tax rates, one can see a slight increase (EU27 38.3 %; Eurozone 43.3%) for 2013; however, these key figures are still below the rates in 2000. Then, high income in the Eurozone was taxed at 47.1 % resp. at 44.8 % in the EU27. Then as now, in Austria this tax rate is ca. 50 %.
Europe has seen a slight increase in the taxation of consumption: some countries have turned this tax screw to replenish their cash-strapped public households. In 2010, the average implicit tax rate on consumption in the EU27 rose from 19.7 % to 20.1 % in 2011. In 2011, the tax rate on consumption was the lowest in Spain (14.0 %), Greece (16.3 %), Latvia (17.2 %) and Italy (17.4 %) and the highest in Denmark (31.4 %), Sweden (27.3 %), Luxembourg (27.2 %), Hungary (26.8 %) and Finland (26.4 %). Similar to the previous year 2011, Austria’s rate stood at 21.2 %. From the point of view of employees, the consolidation of public households via an increase of consumption taxes has to be rejected as higher consumption taxes have a far greater impact on low and average earners than on more affluent people; moreover an increase would also stifle purchasing power and macroeconomic demand.
Also interesting are the trends in respect of corporation tax, i.e. those taxes, which are paid by companies. Clear trend: enterprises and companies are contributing far less to public households than they did ten years ago. Admittedly, corporation taxes of the EU27 slightly rose on average to 23.5 % resp. to 26.5 % in the Eurozone. However, this is still less than in 2000 (EU27 31.9 % and Eurozone 34.4 %). Here in particular, European measures against a tax race to the bottom by the EU Member States would be required: corporation tax rates as in Bulgaria (10 %), Ireland (12.5 %) or Poland (19 %) are not only lacking in solidarity, they also drain public households in the long-term. At 25 % - still 34 % in 2000 - Austrian corporation tax ranks in the European midfield.
What is the current situation in respect of taxing income from capital in Europe? Between 2010 and 2011, the average implicit tax rate on capital in the EU27 decreased in ten of the 27 Member States and increased in nine. On average, in 2011, capital in the Eurozone was taxed at 28.9 %, a slight increase compared to 2010 (27.2 %), however, still a lot less than in 2000 (29.9 %). Here, the percentages vary between 10 % (Latvia), 14.8 % (Slovakia) up to 44.4 % (France). In 2011, Austria taxed capital at only 23.6 %; hence, she applied a significantly lower rate than other countries in the Eurozone on average. Compared to 2010, this represents only a slight increase; however, this means still 3.6 percentage points less than in 2000. Hence, with regard to taxing capital, Austria still has a lot of catching up to do.
Further information:
Taxation Trends in the European Union. Data for the EU- Member States, Iceland and Norway
Compared to 2010, in 2011, the tax and contribution ratio – the sum of all taxes and social contributions in percent of the gross domestic product – slightly rose on average in Europe (35.8 % for the EU27) as well as in Austria (40.8 %). This is still lower than in 2000 – Austria 43 %, EU27 40.4 %. However, this tax and contribution ratio – frequently referred to as “tax burden” by the Austrian media– does not really say anything about the structure of a national tax system. Other key figures are required to depict the latter in more detail, whereby the study takes a closer look at trends concerning the taxation of labour, consumption and capital, as well as comparing income, corporation and Value Added Tax. The largest source of tax revenue in the EU27 is represented by wage taxes (almost half of the entire tax revenue), followed by consumption taxes (e.g. Value Added Tax), which account for about a third and tax on capital at about a fifth.
The taxation of labour in the EU27 slightly increased to 36 %; it does, however, reveal great differences: in Malta for example, wage labour is only taxed at 23 %, in Bulgaria and Portugal at ca. 25 %, whilst countries such as Belgium, France, Italy and also Austria tax labour at ca. 40 %. In 2011, the taxation of labour in Austria amounted to 40.8 %. After Belgium and Italy, Austria has the third highest implicit tax rate on wage labour throughout Europe. If one compares the European top tax rates, one can see a slight increase (EU27 38.3 %; Eurozone 43.3%) for 2013; however, these key figures are still below the rates in 2000. Then, high income in the Eurozone was taxed at 47.1 % resp. at 44.8 % in the EU27. Then as now, in Austria this tax rate is ca. 50 %.
Europe has seen a slight increase in the taxation of consumption: some countries have turned this tax screw to replenish their cash-strapped public households. In 2010, the average implicit tax rate on consumption in the EU27 rose from 19.7 % to 20.1 % in 2011. In 2011, the tax rate on consumption was the lowest in Spain (14.0 %), Greece (16.3 %), Latvia (17.2 %) and Italy (17.4 %) and the highest in Denmark (31.4 %), Sweden (27.3 %), Luxembourg (27.2 %), Hungary (26.8 %) and Finland (26.4 %). Similar to the previous year 2011, Austria’s rate stood at 21.2 %. From the point of view of employees, the consolidation of public households via an increase of consumption taxes has to be rejected as higher consumption taxes have a far greater impact on low and average earners than on more affluent people; moreover an increase would also stifle purchasing power and macroeconomic demand.
Also interesting are the trends in respect of corporation tax, i.e. those taxes, which are paid by companies. Clear trend: enterprises and companies are contributing far less to public households than they did ten years ago. Admittedly, corporation taxes of the EU27 slightly rose on average to 23.5 % resp. to 26.5 % in the Eurozone. However, this is still less than in 2000 (EU27 31.9 % and Eurozone 34.4 %). Here in particular, European measures against a tax race to the bottom by the EU Member States would be required: corporation tax rates as in Bulgaria (10 %), Ireland (12.5 %) or Poland (19 %) are not only lacking in solidarity, they also drain public households in the long-term. At 25 % - still 34 % in 2000 - Austrian corporation tax ranks in the European midfield.
What is the current situation in respect of taxing income from capital in Europe? Between 2010 and 2011, the average implicit tax rate on capital in the EU27 decreased in ten of the 27 Member States and increased in nine. On average, in 2011, capital in the Eurozone was taxed at 28.9 %, a slight increase compared to 2010 (27.2 %), however, still a lot less than in 2000 (29.9 %). Here, the percentages vary between 10 % (Latvia), 14.8 % (Slovakia) up to 44.4 % (France). In 2011, Austria taxed capital at only 23.6 %; hence, she applied a significantly lower rate than other countries in the Eurozone on average. Compared to 2010, this represents only a slight increase; however, this means still 3.6 percentage points less than in 2000. Hence, with regard to taxing capital, Austria still has a lot of catching up to do.
Further information:
Taxation Trends in the European Union. Data for the EU- Member States, Iceland and Norway