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Overall Tax Ratio Rises In EU

by Ulrika Lomas, Tax-News.com, Brussels

28 June 2007


The European Statistics Office (Eurostat) and the EC Directorate-General for Taxation and Customs Union on Tuesday published the latest review of taxation trends in the EU in recent years.

According to Eurostat, in 2005, the overall tax ratio (i.e. the total amount of taxes and social security contributions) in the EU27 stood at 39.6% of GDP, up from 39.2% in 2004.

The EU27 tax ratio is nearly the same as in 1995 (39.7%); nevertheless, the ratio is lower than the peak of 41.0% in 1999. The downtrend which had started in 1999 in most countries stopped in 2005.

In 2005, the overall tax ratio in the euro area was 39.9%, up from 39.6% in 2004. Since 1995, taxes in the euro area have followed a similar trend to the EU27, although at a slightly higher level.

The figures additionally revealed that EU tax levels remain generally high in comparison with the rest of the world, with the EU27 tax ratio exceeding those of the USA and of Japan by some 13 percentage points.

However, the tax burden varies significantly between Member States, ranging in 2005 from less than 30% in Romania (28.0%), Lithuania (28.9%), Slovakia (29.3%) and Latvia (29.4%) to more than 50% in Sweden (51.3%) and Denmark (50.3%).

In the past decade significant changes in tax ratios have taken place in several Member States. The largest falls were recorded in Slovakia, where the overall tax burden dropped from 39.6% in 1995 to 29.3% in 2005, and Estonia (from 37.9% to 30.9%). The highest increases were observed in Cyprus (from 26.7% to 35.6%) and Malta (from 27.3% to 35.3%).

The figures also revealed that top personal and corporate income tax rates were on average lower in the new Member States

The top personal income tax rate differs substantially within the EU: the highest top rates on 2006 personal income were found in Denmark (59.0%), Sweden (56.6%), the Netherlands (52.0%) and Finland (50.9%), and the lowest in Romania (16.0%), Slovakia (19.0%), Estonia (23.0%) and Bulgaria (24.0%).

As for corporate income tax, the highest adjusted top statutory tax rates were recorded in Germany (38.7%), Italy (37.3%), Malta (35.0%) and France (34.4%), and the lowest in Bulgaria and Cyprus (both 10.0%), Ireland (12.5%) and Latvia (15.0%).

Over recent years top rates have shown a clear downward trend in the whole of the EU, particularly in the corporate area but also in the realm of personal taxation. On average, the new Member States display markedly lower top rates.

TAGS: Italy

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