Latest report on taxation trends in the EU

Eurostat report just published shows that the crisis has brought some lower taxes.

The report is based on 2008 tax receipts, so the full impact of the crisis is not yet clear. To provide a more complete picture, it also looks at how the crisis has changed tax policy, taking stock of measures introduced as recently as this spring.

On the whole Europeans got some relief from taxes in 2008, typically through cuts in corporate and personal tax as governments tried to soften the impact of the economic crisis. But the tax burden in the 27-nation EU remains on average high compared with the rest of the world – mainly because of our extensive welfare systems.

The load is unlikely to decrease in coming years, because most countries are now strapped for cash after spending heavily to shore up their economies.

In 2008, about 39.3% of gross domestic product went to government coffers - first time in four years the tax ratio had decreased (down 0.4 percentage points from 2007). Even so, it was still more than one-third higher than in the United States and Japan.

The ratio of tax revenues to GDP is highly uneven across the EU, ranging from 28% in Romania to 48.2% in Denmark, but tends to be higher in older EU countries.

Many countries gave taxpayers a break on personal income, more often through increases in allowances than in rate cuts, as governments tried to boost household spending to stimulate their economies.

The highest top rates on personal income were found in Sweden (56.4%), Belgium (53.7%) and the Netherlands (52.0%), and the lowest in Bulgaria (10.0%), the Czech Republic and Lithuania (both 15.0%).

Corporate tax rates – which have been falling for years – stayed the same or went down. The average rate is now 23.2%, compared with 35.3% in 1995.

The average standard VAT rate rose to 20.2% in 2010 from 19.8% in 2009. It was 19.2% in 2000.

Labour taxes - personal income tax and social security contributions taken together - represented about 34% of total tax receipts, about the same as before.

Revenue from consumer taxes, accounting for about one quarter of tax receipts, plunged 0.7 percentage points in 2008, the biggest drop on record for a single year and a measure of the severity of the crisis.