Denmark (55.9 percent), France (55.4 percent), and Austria (55 percent) have the highest top statutory personal income tax rates among European OECD countries.
The EU countries with the highest standard VAT rates are Hungary (27 percent), Croatia, Denmark, and Sweden (all at 25 percent). Luxembourg levies the lowest standard VAT rate at 16 percent, followed by Malta (18 percent), Cyprus, Germany, and Romania (all at 19 percent).
Taking into account central and subcentral taxes, Portugal has the highest corporate tax rate in Europe at 31.5 percent, followed by Germany and Italy at 29.8 percent and 27.8 percent, respectively
All EU Tax Data
According to the 2021 International Tax Competitiveness Index, Switzerland has the best-structured consumption tax among OECD countries while Poland has the worst-structured consumption tax code.
Despite ongoing multilateral negotiations in the OECD, about half of all European OECD countries have either announced, proposed, or implemented their own unilateral digital services tax.
France’s individual income tax system is the least competitive of all OECD countries. It takes French businesses on average 80 hours annually to comply with the income tax.
According to the corporate tax component of the 2021 International Tax Competitiveness Index, Latvia and Estonia have the best corporate tax systems in the OECD.
In the past three years, eight European OECD countries changed their top personal income tax rate, of which four of them cut their top personal income tax rates.
Patent box regimes (also referred to as intellectual property, or IP, regimes) provide lower effective tax rates on income derived from IP. Most commonly, eligible types of IP are patents and software copyrights. Currently, 14 of the 27 EU member states have a patent box regime.
Ireland and France levy the highest excise duties on cigarettes in the EU, at €8.42 ($9.60) and €6.61 ($7.53) per 20-cigarette pack, respectively. This compares to an EU average of €3.34 ($3.80). Bulgaria (€1.81 or $2.06) and Poland (€2.08 or $2.37) levy the lowest excise duties.
The highest excise duties are applied in Finland, Sweden, and Ireland, where the rates for a standard-size bottle of liquor are €14.10 ($16.08), €13.80 ($15.73), and €11.92 ($13.59), respectively.
As one might expect, southern European countries that are well-known for their wines—such as France, Greece, Portugal, and Spain—either don’t tax it or do so at a very low rate. But travel north and you’ll see countries that tend to levy taxes on wine—and often hefty taxes.
Finland has the highest excise tax on beer in Europe, followed by Ireland and the United Kingdom. Compare beer taxes in Europe this International Beer Day
19 European OECD countries employ a fully territorial tax system, exempting all foreign-sourced dividend and capital gains income from domestic taxation. No European OECD country operates a worldwide tax system.
To discourage this form of international debt shifting, many countries have implemented so-called thin-capitalization rules (thin-cap rules), which limit the amount of interest a multinational business can deduct for tax purposes.
To prevent businesses from minimizing their tax liability by taking advantage of cross-country differences, countries have implemented various anti-tax avoidance measures, such as the so-called Controlled Foreign Corporation (CFC) rules.
To reduce tax compliance and administrative costs, most countries have VAT exemption thresholds: If a business is below a certain annual revenue threshold, it is not required to participate in the VAT system.
Many companies have investment projects with different risk profiles and operate in industries that fluctuate greatly with the business cycle. Carryover provisions help businesses “smooth” their risk and income, making the tax code more neutral across investments and over time.
As economic activity resumes and the task of accounting for the deficits incurred in navigating the crisis of the past year becomes the focus of fiscal policy deliberations, a greater reliance on VAT could be an important tool in ensuring fiscal stability going forward. Countries should use this as an opportunity to improve VAT systems by re-examining carveouts in the form of exemptions and reduced rates.
Corporate income taxes are commonly levied as a flat rate on business profits. However, some countries provide reduced corporate income tax rates for small businesses. Out of 27 European OECD countries covered in today’s map, eight levy a reduced corporate tax rate on businesses that have revenues or profits below a certain threshold.
In recent years, several countries have taken measures to reduce carbon emissions, including instituting environmental regulations, emissions trading systems (ETS), and carbon taxes.