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In 2003, the overall tax burden in the EU25 stood at 40.3% of GDP. The total tax burden varied significantly between Member States, ranging from 28.5% in Lithuania and 28.9% in Latvia to 50.8% in Sweden and 48.8% in Denmark. There were also significant differences between Member States in the levels of implicit tax rates and in the top tax rates on personal and corporate income.
The publication ‘Structures of the taxation systems in the EU’ issued by Eurostat, the Statistical Office of the European Communities and the Commission’s Directorate-General for Taxation and Customs Union provides a compilation of tax indicators in a harmonised framework based on the European System of Accounts (ESA 95) for analysing the structures of the taxation systems of the Member States and monitoring taxation policies across the EU. The 2005 edition also provides for the first time implicit tax rates for the ten new Member States.
Implicit tax rates on labour and consumption varied by one to two across the Member States
Broken down by economic function, that is labour, capital and consumption, labour taxes were the largest source of tax revenue, contributing in 2003 around half of total tax receipts in the EU25 as a whole. Taxes on capital accounted for approximately 20% of total tax receipts, while consumption taxes accounted for almost 30%.
The average implicit tax rate on labour in the EU25 was 35.9% in 2003, and has remained relatively stable since 1995. Among the Member States, rates ranged in 2003 from 22.4% in Malta, 24.4% in Cyprus and 24.6% in the United Kingdom to 46.1% in Sweden, 43.3% in France and 43.2% in Belgium. The implicit tax rate on labour largely reflects the important role played by wage-based contributions in financing the social security system. On average in the EU, more than 60% of the overall implicit tax rate on labour consists of non-wage labour costs paid by both employees and employers.
The average implicit tax rate on capital in the EU25 increased steadily from 23.2% in 1995 to 27.8% in 1999, then fell to reach 25.4% in 2003. The increase occurred against a background of falling statutory corporate tax rates and simultaneous base broadening measures. However, an important part of the increase in the implicit tax rate on capital can be attributed to cyclical factors, that is the economic expansion up to 2000. The decline in the implicit tax rate observed in 2001, 2002 and 2003 was linked to the slowdown of economic growth and the impact of measures taken to reduce tax rates. The lowest implicit tax rates on capital in 2003 were recorded in Lithuania (6.5%), Estonia (10.9%) and Greece (17.0%), and the highest in France (35.9%), Ireland (33.3%) and Portugal (32.6%).
The average implicit tax rate on consumption in the EU25 was 22.0% in 2003, and has remained relatively stable since 1995. Consumption was most taxed in Denmark (33.9%), Sweden (30.5%) and Hungary (28.5%). Malta (16.1%), Spain (16.5%) and Italy (17.0%), on the other hand, registered the lowest implicit tax rates.
Top tax rates generally lower in new Member States
In 2005, the top statutory personal income tax rate in the EU25 is on average 41.1%. Amongst the Member States, the highest top statutory personal income tax rates are found in Denmark (59.0%), Sweden (56.5%), Finland (52.1%) and the Netherlands (52.0%), and the lowest in Slovakia (19.0%), Estonia (24.0%), Latvia (25.0%) and Cyprus (30.0%).
The average effective top statutory tax rate on corporate income in the EU25 in 2005 is 26.3%. The highest effective top statutory tax rates on corporate income are recorded in Germany (38.6%), Italy (37.3%), Spain and Malta (both 35.0%), and the lowest in Cyprus (10.0%), Ireland (12.5%), Latvia and Lithuania (both 15.0%).
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