EU: Labor Taxes Still Main Source of Revenue for European Countries

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July 22--Labor taxes remain the major source of tax revenue for many European Union member states, and the EU tax-to-gross domestic product ratio is likely to continue rising, according to the latest edition of Taxation Trends in the EU, recently released by Eurostat, the EU statistical office.

The overall tax-to-GDP ratio for the EU's 28 member nations stood at 39.4 percent in 2012, up from 38.8 percent in 2011, Eurostat reported, and the overall tax ratio in the euro zone--which calculates the collective GDP of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Luxembourg, Malta, the Netherlands, Portugal, Slovenia, Slovakia and Spain--increased to 40.4 percent in 2012, up from 39.5 percent in 2011.

Wide Variations

The report, which Eurostat jointly published with the European Commission's Directorate-General for Taxation and Customs, also found that the tax burden varied significantly between member states. The largest gap was between Lithuania and Austria in 2012, Lithuania's tax-to-GDP ratio standing at 27.2 percent, Austria's at 43.1 percent.

Labor taxes represented more than 50 percent of the total tax receipts in 2012 for the 28 EU nations and accounted for the largest source of tax revenue in 24 and more than half of all tax revenues in 13.

Labor taxes accounted for the highest proportion of tax revenues in Sweden (58.6 percent) with the Netherlands, Austria and Germany close behind. Bulgaria, Malta, Cyprus and the U.K. were the only countries where labor taxes accounted for less than 40 percent of all revenues.

Lower Labor Taxes Needed to Create Jobs, Commissioner Says

According to Algirdas Semeta, EU commissioner for taxation, the Eurostat report confirms the EC's concerns about labor taxes still being too high.

“The tax shift away from labor, which we have consistently called for to allow our businesses to regain competitiveness, still has to materialize,” Semeta said. “Our recent recommendations to member states stressed the need to lower labor taxes in order to create jobs in Europe.”


The Eurostat report is available at http://europa.eu/rapid/press-release_STAT-14-92_en.htm.