Belastingstelsels in de EU van 1995 tot 2003 - er is geen sprake van harmonisering (en)

What does this publication deal with?

The publication provides an in-depth analysis of the main trends in tax policy in EU Member States, with coverage not only of traditional income and consumption taxes but also of newer instruments such as environmental taxes. It contains both country-by-country information and an analysis of EU-wide trends since 1995. The methodology utilised is the same across countries, supplying a precise snapshot of how each Member State's Tax System compares with the others. The survey contains data for all 25 Member States plus Norway, which is a member of the European Economic Area. The publication compares EU Member States' overall tax burdens (i.e. tax to GDP ratios), implicit tax rates ("ITRs") (i.e. effective average tax burden calculated by dividing tax base by the tax revenues) and statutory personal income tax and corporate tax rates.

What is particularly significant about this year's issue?

This year's issue is particularly important in that it for the first time extends to the 10 new Member States the calculation of implicit tax rates (ITRs) on labour, consumption, energy and capital. Although data limitations have resulted in incomplete coverage for some of the new Member States, this is a particularly important development as accession has heightened demand for reliable information on the New Member States' tax systems and has highlighted the significant differences in the level and structure of taxation between the old and new Member States.

Has the total tax burden in EU Member States decreased since 1995?

In overall terms, yes, as the 2003 level (40.3%) is very slightly lower than that of 1995 (40.5). Levels increased between 1995 and 1999, followed by a decrease in the period between 2000 and 2002. However, the decreasing trend stopped in 2003: the EU25 average tax ratio inched up again, by 0.1 per cent.

During the 1995-2003 period twelve Member States had an above average and stable tax burden; the UK, the Czech Republic and Lithuania had a low and stable tax burden; Malta, Portugal, Cyprus, Greece and Spain demonstrated a low but increasing burden; and Ireland, Latvia, Estonia and Poland's tax burdens were low and decreasing.

Is the total tax burden higher in the old EU Member States than in the new?

The report confirms that tax revenues in the new Member States are, on average, well below those in the old Member States: the total tax burden in relation to GDP of the new Member States is more than seven percentage points lower than the corresponding average in the old 15 Member States. However, the new Member States are not a homogeneous group. Within the new Member States, tax-to-GDP ratios tend to be higher in the core of the Central European region (Czech Republic, Hungary, Poland) than in the Baltic or Mediterranean region (with the exception of Slovenia).

Is there a convergence in Member States' tax structures?

In overall terms, no. Tax structures differ widely. Member States employ different tax mixes, as some emphasise direct taxes while others rely more on indirect or consumption taxes. However, there has been a slight tendency towards convergence of tax structures in recent years as Member States' ITRs on consumption, labour and capital tended to move towards the EU average.

Some differences can be seen between the old and new Member States' structures. Generally, the new Member States display a substantially lower share of direct taxes on total revenues compared to the older EU-15 countries. In 2003, the difference between the EU-15 and the new Member States (arithmetic) averages was about 9 percentage points. The lower share of direct taxes in the new Member States is counterbalanced by higher reliance on social contributions (their share is higher by about four percentage points compared to the old Member States). The combination of these factors explains why the ITR on labour is almost as much in the new Member States as in the old. The new Member States also rely more on indirect taxes (where their share is 5.2% higher).

Is there a convergence in Member States' tax levels?

No. Tax levels vary widely, between a low of 28.5% of GDP in Lithuania to a high of 50.8% in Sweden. The lowest values of the tax-to-GDP ration are found in the Baltic States, Ireland and Slovakia, whereas the highest are reported by the Nordic Member States, Belgium and France. Relatively low levels are also prevalent among the Mediterranean Member States.

But in the case of taxes on final energy consumption the statistics show a gradual convergence by the new Member States to the higher taxation levels typical of the old Member States and their environmental protection policies. Figures for the old Member States, on the other hand, show no significant increases of energy taxes since 1999.

What are the trends in labour taxation?

Traditionally, labour is taxed more than capital or consumption. This is true also for the new Member States. Despite lower overall taxation levels, the Central European new Member States tax labour almost as much as the old.

Overall, the 2003 figures contained in the report show a pause in the gradual decline in the ITR on labour recorded since the turn of the century. In the four largest EU Member States in particular an increase in the ITR on labour was recorded in 2003, whereas a slight decline was recorded amongst, for instance, the new Member States. Overall, the ITR on labour is now below peak levels but generally shows little if any improvement compared to 1995.

What is the trend in corporate tax revenues as a percentage of GDP, given the fall in statutory rates?
It is true that the decrease of statutory corporate tax rates has been particularly rapid during the last 5 years. The average corporate statutory tax rate for the EU 15 fell from 35.3% in 2000 to 30.1% in 2005. The same average for the new Member States fell from 27.4% to 20.6%.

Corporate tax revenues in the EU 25 have increased from 2.1 to 2.8% of GDP from 1995 to 2000 and decreased again to 2.2% in 2003. In the old Member States, revenue from corporate taxes has been falling since 2001. On the other hand, despite the reduction in corporate income tax rates, the revenue from corporate taxation is stable or increasing in the new Member States.

This development may be due to the effects of weaker growth in the old Member States, or to base widening measures in the new Member States, or to a combination of these and other factors.

Does the fact that corporate tax statutory rates are falling indicate the existence of tax competition?

Not necessarily. It is certainly true that corporate tax statutory rates have been falling steadily since the mid-nineties and that the decline has been stronger in the new Member States. The decline and greater convergence in statutory tax rates may be simple imitation and/or interaction between Member States tax policies. The decrease in statutory rates has, in fact, been generally accompanied by a broadening of the tax bases.

The data in this report show that although statutory rates are lower in the new Member States, their corporate tax to GDP ratios as well as their implicit tax rates on capital (an indicator which covers taxes on business and capital income as well as taxes on capital stocks) are stable and even increasing.

Overall this suggests that - up to 2003 - there is no evidence of a race to the bottom despite the falling corporate tax rates. The EU 25 corporate tax revenues represented 2.1% of GDP in 1995 compared to 2.2% in 2005 and the ITR on capital was 24.8% in 1995 compared to 28.0% in 2003.

It should be noted also, however, that the implicit tax rates on capital are available only for a few of the new Member States, which makes the averages less representative.

Considering that the impact of recent rapid reduction of rates has probably not been completely translated into tax revenue data, the situation must be kept under review.