The overall tax-to-GDP ratio1 in the EU272 declined to 38.4% in 2009, compared with 39.3% in 2008. Data indicate that this decrease was essentially due to the 4.3% drop in GDP from 2008 to 2009, rather than to tax cuts. Compared to the beginning of the decade the EU27 tax ratio declined by 2.1 points.
The overall tax ratio in the euro area2 (EA17) fell to 39.1% in 2009 compared with 39.7% in 2008. Since 2000, taxes in the euro area have followed a similar trend to the EU27, although at a slightly higher level.
In comparison with the rest of the world, the EU27 tax ratio remains generally high and more than one third above the levels recorded in the USA and Japan. However, the tax burden varies significantly between Member States, ranging in 2009 from less than 30% in Latvia (26.6%), Romania (27.0%), Ireland (28.2%), Slovakia (28.8%), Bulgaria (28.9%) and Lithuania (29.3%) to more than 45% in Denmark (48.1%) and Sweden (46.9%).
Between 2000 and 2009, the largest falls in tax-to-GDP ratios were recorded in Slovakia (from 34.1% in 2000 to 28.8% in 2009), Sweden (from 51.5% to 46.9%), Greece (from 34.6% to 30.3%) and Finland (from 47.2% to 43.1%), and the highest increases in Malta (from 28.2% to 34.2%), Cyprus (from 30.0% to 35.1%) and Estonia (from 31.0% to 35.9%).
This information comes from the 2011 edition of the publication Taxation trends in the European Union3 issued by Eurostat, the statistical office of the European Union and the Commission’s Directorate-General for Taxation and Customs Union. This publication compiles tax indicators in a harmonised framework based on the European System of Accounts (ESA 95), allowing accurate comparison of the tax systems and tax policies between EU Member States.
This year’s edition of the report for the first time includes data on average effective tax ratios for non-financial corporations. In addition, the report also contains a detailed analysis of the impact of the economic and financial crisis on the tax systems of all EU Member States.
Standard VAT rate hiked by 1.3 points since the beginning of the economic crisis
One area where the onset of the economic and financial crisis has clearly had an impact was consumption taxation. Rising only slightly from 2000 to 2008, the average standard VAT rate4 in the EU27 has risen strongly from 19.4% in 2008, to reach 20.7% in 2011. The standard VAT rate in 2011 varied from 15.0% in Cyprus and Luxembourg to 25.0% in Denmark, Hungary and Sweden.
About half of the Member States have increased VAT rates between 2008 and 2011. The highest increases were registered in Hungary (from 20.0% to 25.0%), Romania (from 19.0% to 24.0%), Greece (from 19.0% to 23.0%) and Latvia (from 18.0% to 22.0%).
