Reliance on Consumption Taxes in Europe

May 16, 2019

Today’s map highlights the extent to which European countries rely on consumption tax revenue.

Consumption taxes are taxes on goods and services. All European countries levy consumption taxes in the form of Value-Added Taxes (VAT) and excise taxes. In 2017 (the most recent data available), consumption taxes were the largest source of tax revenue in Europe (27 countries covered), at an average of 32.8 percent.

consumption taxes Europe consumption tax revenue 2019

In 2017, Turkey relied the most on consumption tax revenue, at 43.4 percent of total tax revenue. Estonia had the second highest reliance on consumption taxes, at 42.9 percent, followed by Hungary at 42.5 percent.

Switzerland relied the least on consumption taxes in 2017, at 22.3 percent of total tax revenue. Belgium and Luxembourg followed, both at 24.3 percent of total tax revenue.

As the following table shows, the VAT accounted on average for approximately two-thirds of all consumption tax revenue in 2017. Excise taxes and other taxes on goods and services accounted for the remaining third.

Consumption Taxes Split into VAT and Excise Taxes and Other Taxes on Goods and Services, 2017

Source: “OECD Global Revenue Statistics Database,” Note: Individual items may not sum to total due to rounding. (a) For Greece, only the aggregate Taxes on Goods and Services was available for the year 2017. To split this aggregate into the two subcategories VAT and Excise Taxes and Other Taxes on Goods and Services, each subcategory’s average share of the three previous years (2014-2016) was used to weigh it.

  Total Consumption Taxes (Share of Total Tax Revenue) VAT (Share of Total Tax Revenue) Excise Taxes and Other Taxes on Goods and Services (Share of Total Tax Revenue)
Austria 28.2% 18.3% 9.8%
Belgium 24.3% 15.3% 9.0%
Czech Republic 32.9% 22.0% 10.9%
Denmark 31.9% 20.7% 11.2%
Estonia 42.9% 27.6% 15.3%
Finland 32.8% 21.0% 11.8%
France 24.4% 15.3% 9.2%
Germany 26.2% 18.4% 7.8%
Greece (a) 39.1% 20.3% 18.8%
Hungary 42.5% 24.5% 18.0%
Iceland 33.3% 23.3% 10.0%
Ireland 32.5% 19.8% 12.8%
Italy 28.4% 14.9% 13.5%
Latvia 41.4% 26.5% 14.9%
Lithuania 38.5% 26.5% 12.0%
Luxembourg 24.3% 16.0% 8.4%
Netherlands 29.1% 17.5% 11.6%
Norway 31.1% 22.3% 8.8%
Poland 34.4% 22.5% 11.9%
Portugal 39.8% 25.0% 14.7%
Slovak Republic 33.4% 21.3% 12.1%
Slovenia 38.6% 22.3% 16.3%
Spain 29.1% 19.1% 10.0%
Sweden 28.0% 21.1% 6.9%
Switzerland 22.3% 12.8% 9.5%
Turkey 43.4% 20.1% 23.4%
United Kingdom 31.5% 20.4% 11.1%
Average 32.8% 20.5% 12.2%

Reliance on VAT was highest in Estonia (27.6 percent), and Latvia and Lithuania (26.5 percent).

Switzerland relied the least on VAT revenue, at 12.8 percent. This is partially because Switzerland has the lowest VAT rate of all countries covered, at only 7.7 percent, compared to an average of 21.3 percent. Italy (14.9 percent) and France (15.3 percent) were next lowest.

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A consumption tax is typically levied on the purchase of goods or services and is paid directly or indirectly by the consumer in the form of retail sales taxes, excise taxes, tariffs, value-added taxes (VAT), or an income tax where all savings is tax-deductible.

An excise tax is a tax imposed on a specific good or activity. Excise taxes are commonly levied on cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, amusement activities, and betting, and typically make up a relatively small and volatile portion of state and local and, to a lesser extent, federal tax collections.