21st Jan 2019

Denmark and Sweden have highest taxes

  • Danes and Swedes are the highest taxed in the EU (Photo: Images_of_Money)

Danes and Swedes are the highest taxed people in Europe, according to research published on Monday (29 April).

Denmark and Sweden claim tax revenues accounting for 47.7 percent of economic output and 44.5 percent respectively.

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The two countries also have the highest top rates of income tax at 55.6 and 56.5 percent respectively.

Meanwhile, citizens in Lithuania, Bulgaria and Latvia are the least taxed, with governments taking between 26 percent and 28 percent.

Tax rates have risen across the board, particularly among the four EU bailout countries (Greece, Ireland, Portugal and Cyprus), as cash-strapped governments bid to balance budgets against a backdrop of stagnant economic output and recession.

A hike in VAT has been the most popular, with 17 member states increasing the levy, which hits food, energy and utility bills, since 2008.

But although top rates of income tax have risen in the wake of the crisis, at 38.3 percent, the average top rate is still well down from the 45 percent level in 2000, at the height of Europe's economic boom.

Tax receipts plummeted in 2008-9 as the near collapse of the financial sector caused a decline in corporate tax revenue. The subsequent recession and high unemployment has also put extra pressure on income tax revenue and welfare bills.

There is still a pronounced gap in the tax take across the EU, with the 12 countries who have joined the bloc since 2004 claiming around 30 percent of GDP in tax, around ten percent lower than across the EU-15.

The Eurostat data also shows that although income tax on work is still the largest single source of revenue, the burden is gradually shifting towards corporate tax.

Although the EU has very limited powers over national tax regimes, the EU executive wants governments to shift the burden away from income tax on labour to 'growth-friendly' levies on property and assets as well as consumption.

In research published in November 2012 as part of its 2013 Annual Growth Survey, the commission urged governments to change their tax regimes to offer "more incentives for workers to work and employers to employ" and government should reduce "the burden on the most vulnerable."

To balance the books, "taxes such as consumption tax, recurrent property tax and environmental taxes could be increased" to compensate for lower income tax revenues.

The value of property and assets has risen far quicker than incomes across Europe in the past twenty years. However, research indicates that increases to VAT rates disproportionately hit people on lower wages.

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