EU Tax Burden Increased To 41.5% In 2003

by Ulrika Lomas, Tax-News.com, Brussels

01 February 2005

Figures published by the European Union’s statistical office Eurostat show that the overall tax burden across the EU25 increased slightly in 2003 to 41.5%, up from 41.3% in 2002, although tax burdens in individual states continued to vary widely.

According to Eurostat, Sweden recorded the highest tax-to-GDP ratio in 2003 at 51.4%, followed by Denmark (49.8%), Belgium (48.1%), France (45.7%) and Finland (45.1%).

The lowest ratios were observed in Lithuania (28.7%), Latvia (29.1%), Slovakia (30.9%), Ireland (31.2%) and Estonia (33.4%).

However, the tax burden rose in seventeen Member States between 2002 and 2003, with the highest increases in the tax-to-GDP ratio recorded in Cyprus (from 32.5% to 34.3%), Ireland (from 29.8% to 31.2%) and Estonia (from 32.4% to 33.4%).

Conversely, the tax burden fell in seven countries, and the largest reductions were observed in Slovakia (from 32.5% to 30.9%), Greece (from 39.8% to 38.6%), and Finland (from 46.1% to 45.1%).

Meanwhile, the tax burden in Germany remained stable.

The figures also revealed significant differences in the structure of taxation systems between the Member States. With regard to direct taxes as a percentage of the total burden, Poland had the lowest share at 19.7% in 2003, followed by Slovenia (20.8%) and Slovakia (23.2%). This compared to the EU25 average of 31.6%.

At the other end of the scale, Denmark (59.6%), the United Kingdom (42.0%) and Finland (41.0%) had the highest shares of direct taxes as percentages of the total.

The highest indirect taxes as a share of total taxation were recorded in Cyprus (49.4%), Hungary (42.3%) and Portugal (41.9%), which compared to the EU25 average of 33.8%. The lowest shares were registered in Belgium (28.8%), Germany (29.7%) and the Czech Republic (31.4%).

Regarding social contributions, the largest shares as a proportion of the total were observed in Germany (44.4%), the Czech Republic (41.6%) and France (40.2%), whereas Denmark (5.4%), Ireland (19.1%) and the United Kingdom (21.0%) recorded the lowest shares of social security contributions. The average for the EU25 was 34.5%.

Eurostat observed that Denmark’s social security system is funded almost exclusively by general taxation.

Recommended