European Tax Burden High, But Falling

May 18, 2006

Eurostat—the official statistical arm of the European Union (EU)—released new data on taxes as a percentage of gross domestic product (GDP) in EU countries. Overall, the data reveal that taxes in the EU account for 39.3 percent of GDP.

Overall taxes are down .2 percent from 2003. The report attributes this decline to tax cutting in Italy and Germany.

The former communist countries in Eastern Europe generally have the lowest tax burdens in the EU. Lithuania (28.4 percent), Latvia (28.6 percent), Slovakia (30.3 percent) and Poland (32.9 percent) are among the countries with the lowest tax burdens. Ireland—which levies the lowest corporate income tax rate in the OECD (12.5 percent)—also has a low tax burden (30.2 percent).

Central and northern EU countries tend to have the highest tax burdens. Sweden is number one at 50.5 percent, followed by Denmark (48.8 percent), Belgium (45.2 percent) and Finland (44.3 percent). Other notables include France (43.4 percent), Italy (40.6 percent), and the United Kingdom (36.0 percent).

Japan and the U.S. have a much lower tax burden (approximately 14 percent lower, according to the report) than EU countries. This is a bit ironic, considering that Japan (39.5 percent) and the U.S. (39.3 percent) have the highest combined corporate income tax rates in the OECD (a trend that we reported in this fiscal fact).

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