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4th Dec 2022

European states still cutting corporate taxes

European governments cut corporate taxes in 2010, continuing years of decline in taxation on capital and a shift towards taxes on consumption, and, to a lesser extent, labour.

Across the board, EU states charged an average of 37.5 percent in income tax last year, up slightly from the 37.1 percent they charged in 2009, according to the annual survey of tax rates by Eurostat, the EU's statistical office.

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  • The taxman likes VAT more than corporate taxes these days (Photo: Flickr)

Corporate taxes were down to an EU average of 23.2. percent, a slight drop on 2009's 23.5 percent.

The highest rates on corporate income are in Malta (35%), France (34.4%) and Belgium (34%), and the lowest in Bulgaria and Cyprus (both 10.0%) and Ireland (12.5%).

This comes at the end of a decade of slashing corporate taxes in the EU.

Between 2000 and 2010, the largest decreases were registered in Bulgaria (from 32.5% to 10.0%), Germany (from 51.6% to 29.8%), Cyprus (from 29.0% to 10.0%) and Greece (from 40.0% to 24.0%).

Meanwhile, value-added taxes, or taxes on consumption increased slightly in 2010. In the EU27, the average standard VAT rate rose to 20.2 percent in 2010, up from 19.8 percent in 2009.

This continues the steady but slight trend seen throughout the decade, with VAT rates an average of 19.2 percent in 2000, although between 2000 and this year, the VAT did not change in 13 states. It rose in 12 an fell in just two - Slovakia and the Czech Republic.

In 2010, the standard VAT rate varied from 15 percent in Cyprus and Luxembourg to 25 percent in Denmark, Hungary and Sweden.

However, the major source of tax revenue in the EU27 in 2010 remains labour taxes, representing over 40 percent of total tax receipts, followed by consumption taxes at roughly one quarter and taxes on capital at just over one fifth.

Among the Member States, the 'implicit' tax rate on labour ranged in 2008 from 20.2 percent in Malta, 24.5 percent in Cyprus and 24.6 percent in Ireland to 42.8 percent in Italy, 42.6 percent in Belgium and 42.4 percent in Hungary. The 'implicit' tax rate is a broad measure of the tax burden falling on work income.

However, when looking at the direct taxation of individuals, the countries with the highest top tax rate on personal income changes somewhat, with the taxman exacting the most from earners in Sweden (56.4%), Belgium (53.7%) and the Netherlands (52%), and the least in Bulgaria (10%), the Czech Republic and Lithuania (both 15%).

Commission - EU must combat €1tn tax dodging

EU countries must apply common tax rules to combat tax havens and loopholes allowing businesses to avoid corporation tax, according to new proposals released on Thursday by the European Commission.

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