The negative consequences of the financial crisis for society have once again been shown: this week, the Statistical Office of the European Communities, Eurostat presented the latest developments in respect of taxation in the European Union. Even though, compared to previous years, the 2010 EU tax burden remained stable at 38.4 %; when it comes to VAT, however, Eurostat hints at a sharp increase of tax rates - bad news for employees on a lower income.
Compared to 2000, this year, average VAT rates within the EU rose from 19.2 % to 21 %. Whilst at 20 %, Austria’s VAT rate has been unchanged for years, there are some states, whose rates have been significantly increased between 2000 and 2012. For example, in Latvia from 18 to 22 %, in Rumania from 19 to 24 % or in Cyprus even from 10 to 17 %. A number of other states, among them Germany, Great Britain or Greece have considerably increased their VAT rates. This is bad news, in particular for employees who are on a lower income, as it is in particular this group who spend the major part of their income on cost of living for which they have to pay VAT. This is in sharp contrast to top earners, who only consume part of their income and are therefore affected by a lower effective VAT burden in relation to their income, and to the financial industry, which does not pay any VAT at all on their speculative transactions (keyword Financial Transaction Tax).

A propos top earners: between 2000 and 2012, the top rates of income tax have fallen significantly - from 44.8 to 38.1 %. The most significant reduction of the top rate could be observed in the new Member States. For example in Bulgaria - from 40 to 10 %, Rumania - from 40 to 16 % or Hungary from 44 to 20.3 %. However, the problem is that to a large extent only people on a higher income benefit from this. This also shown by the revenue generated by income tax: on EU average, labour taxes only declined from 35.8 to 33.4 %. However, people on a low income suffer a negative double whammy: not only do they not benefit from the reduction in income tax top rates, but to add insult to injury, their income is even reduced by having to pay higher VAT rates.

In contrast, companies have every reason to be happy: between 2000 and 2012, corporate tax rates have fallen from 31.9 to 23.5 %. Only from 2011 to 2012, one could observe a slight increase of 0.1 %.

Eurostat has also reviewed the revenue generated by property tax, which is by far the highest in Great Britain at 4.2 % GDP resp. EUR 71.9 billion in 2010, followed by France at 3.4 % resp. EUR 66.5 billion. According to statistics, Austria is trailing far behind, occupying one of the last places: in 2010, she only generated 0.5 % resp. EUR 147 million from property tax.

Further information:

Eurostat publication: Taxation trends in the European Union