In this part the different types of taxes are analyzed.
2.3.1 Total Tax
In Table3, the total public revenues from taxes for each country of the sample as a percentage of GDP (with and without social security charges) are analyzed for the period 1995–2009.
The most suitable diagram to analyze similarities is the “Radar” diagram. When the line of the diagram looks like a cycle, we have a common structure of tax volumes between countries; if we have a stereogram that looks like a “mountain”, then there is a decrease of Total tax. Figure1shows the volumes and trends of Total taxation including SSC per country .
Figure2shows the volumes and trends of total tax excluding SSC per country. In Denmark especially, the SSC direct is included in the taxation structure, and for this reason, there is no significant difference between total tax including or excluding SSC.
The similarities of the total tax burden between countries are produced by the use of a hierarchical cluster analysis. Figure 3 presents similarities between countries according to the volume of total tax without SSC. According to Fig.3, The Tax Regimes of the EU Countries: Trends, Similarities and Differences 123
Table3Totaltax Country/years
TotaltaxwithSSCas%ofGDPTotaltaxwithoutSSCas%ofGDPSSCas%ofGDP 199520002005200919952000200520091995200020052009 Belgium43.9445.2044.8943.4729.5431.2331.1728.9614.4013.9713.7214.51 Bulgaria30.8431.5331.2628.8821.2320.7021.5421.199.6110.839.727.69 Czech36.1933.8237.1334.4621.8519.6421.0119.0714.3414.1816.1115.39 Denmark48.7949.3650.8348.0947.7247.5749.7247.101.071.791.110.99 Germany39.7941.8638.7739.7222.9424.9522.4823.9716.8516.9116.2915.74 Estonia34.7631.0030.6435.8522.9920.0720.3822.7311.7710.9310.2613.13 Ireland33.1031.5330.7228.2228.1527.1326.0222.394.954.404.705.84 Greece29.1234.6231.9230.3419.7724.1320.6819.989.3510.4911.2410.36 Spain32.7133.9135.6130.4420.9221.8823.5018.0311.7912.0312.1112.40 France42.7144.1243.6341.5824.1528.0427.3425.0218.5616.0916.2916.56 Italy40.0741.7740.4143.1427.4429.7127.8629.3112.6312.0612.5513.84 Cyprus26.7129.9835.5135.1420.2123.4427.2626.506.506.548.258.64 Latvia33.1629.5029.0126.6421.1919.6120.6218.1111.979.908.398.52 Lithuania27.5230.1128.4929.3420.3520.7420.3517.697.179.378.1411.65 Luxembourg37.0939.1537.5637.0627.2629.0727.1225.939.8310.0810.4411.13 Hungary40.8438.9637.5139.4626.1025.9724.9626.4614.7513.0012.5513.00 Malta26.7528.1733.6834.2120.6521.7927.3228.186.116.386.366.03 Nederland40.1939.9337.5838.1824.3224.5024.6324.3815.8715.4212.9513.80 Austria41.4143.2442.3442.6726.5028.4527.7227.7414.9114.7914.6214.94 Poland37.1132.5732.7931.8025.7919.6320.4820.4511.3212.9412.3111.35 Portugal29.5331.1431.5131.0021.7723.1423.0822.007.778.008.449.00 Romania27.4730.2127.7826.9519.8519.1318.2117.537.6211.089.569.43 Slovenia39.2137.4638.6437.6122.3623.2024.4122.6616.8514.2714.2314.95 Slovakia40.3034.0831.3028.7625.2919.9418.6516.1315.0214.1412.6512.63 Finland45.6947.2543.9443.1331.6035.3231.9330.2814.0811.9312.0112.85 Sweden47.9451.5148.9146.8835.6939.0138.6138.6612.2512.4910.308.22 UnitedKingdom34.6536.7136.0234.8828.6030.5429.2828.096.056.176.736.78 Average36.5836.9936.6135.8525.3425.8725.7924.7611.2411.1210.8211.09
124 K. Liapis et al.
there are three distinct groups; three countries, that is Finland, Denmark and Sweden, stand alone in the highest level of tax burden.
Table4 (Direct and Indirect Taxes) shows the volumes of Direct and Indirect Taxes as % of GDP. According to the percentages on total revenues from taxes, significant differences exist in the tax structure (direct and indirect taxation)
Slovakia Slovenia Romania Portugal Poland
Austria Nederland
Malta Hungary
Luxembourg LithuaniaLatvia Cyprus
Italy French
Spain Greece Ireland Estonia Germany Denmark Czech Bulgaria Belgium
Finland Sweden United Kingdom
60,00 50,00 40,00 30,00 20,00 10,00 0,00
1995
2005 2009 2000
Fig. 1 Total tax with SSC as % GDP
Fig. 2 Total tax per without SSC as % of GDP
The Tax Regimes of the EU Countries: Trends, Similarities and Differences 125
between EU countries. Direct taxes remain at a lower level against indirect taxes in many countries and at an average in the EU market, which denotes an unfair tax regime according to taxation theory.
Table5(Tax Bases) presents the breakdown of total tax including SSC, in tax on labour, consumption and on other tax bases. According to the percentages on total revenues from taxes, significant differences exist in the tax structure (Labour, Consumption and Other tax) between EU countries. The taxes on labour remain at a higher level against taxes on consumption and taxes on other tax bases in many countries and as average in EU market; thus the countries are focused on Labour for the collection of public revenues.
Fig. 3 Similarities between countries according to volume of total tax without SSC
126 K. Liapis et al.
2.3.2 Indirect Taxes and Value Added Tax (VAT)
Table6 (Indirect Taxes and VAT) illustrates the VAT high rates, the VAT as % GDP, the VAT as % of total public revenues from taxes, and the VAT as % of Indirect Taxes.
Figure 4 (Indirect taxes as % of GDP per country) shows the trends and the similarities of indirect taxation between EU countries for the years 1995 till 2009.
Figure5(Value Added Tax as % of GDP per country) shows the high tax ratio and the volume of VAT as percentage of GDP between EU countries for the year 2009.
Nowadays a debate exists if there is positive correlation between VAT tax rates with volume of VAT as percentage of GDP. According to Musgrave and Musgrave (1973) and Vyncke (2009), it is obvious that the tax rate affects directly Table 4 Direct and indirect taxes
Country/years
Total tax without SSC as % of GDP
Indirect taxes
% GDP
Direct Taxes
% GDP
2009 volumes as % of total tax
2000 2009 2000 2009 2000 2009 Indirect (%) Direct (%)
Belgium 31.23 28.96 13.7 13.0 17.6 15.9 45 55
Bulgaria 20.70 21.19 13.8 15.4 6.9 5.8 72 28
Czech 19.64 19.07 11.3 11.7 8.3 7.4 61 39
Denmark 47.57 47.10 17.2 17.0 30.5 30.2 36 64
Germany 24.95 23.97 12.5 12.9 12.5 11.0 54 46
Estonia 20.07 22.73 12.3 15.2 7.7 7.5 67 33
Ireland 27.13 22.39 13.6 11.5 13.5 10.9 51 49
Greece 24.13 19.98 14.2 11.5 10.0 8.5 57 43
Spain 21.88 18.03 11.9 9.0 10.5 10.0 50 55
France 28.04 25.02 15.8 15.1 12.5 10.2 60 41
Italy 29.71 29.31 15.2 13.9 14.5 15.4 47 53
Cyprus 23.44 26.50 12.4 15.3 11.0 11.2 58 42
Latvia 19.61 18.11 12.3 10.9 7.3 7.2 60 40
Lithuania 20.74 17.69 12.6 11.8 8.4 6.0 67 34
Luxembourg 29.07 25.93 14.0 11.9 15.0 14.0 46 54
Hungary 25.97 26.46 16.3 16.6 9.7 9.8 63 37
Malta 21.79 28.18 12.6 14.3 9.2 13.9 51 49
Nederland 24.50 24.38 12.5 12.2 12.0 12.1 50 50
Austria 28.45 27.74 15.3 15.0 13.2 12.8 54 46
Poland 19.63 20.45 12.6 13.1 7.2 7.5 64 37
Portugal 23.14 22.00 13.5 12.9 9.6 9.1 59 41
Romania 19.13 17.53 12.2 11.0 7.0 6.5 63 37
Slovenia 23.20 22.66 15.8 14.4 7.4 8.4 64 37
Slovakia 19.94 16.13 12.5 10.6 7.4 5.5 66 34
Finland 35.32 30.28 13.9 13.8 21.4 16.5 45 55
Sweden 39.01 38.66 16.4 19.0 22.6 19.7 49 51
United Kingdom 30.54 28.09 13.9 12.0 16.7 16.1 43 57
Average 25.87 24.76 13.7 13.4 12.2 11.5 54 46
The Tax Regimes of the EU Countries: Trends, Similarities and Differences 127
Table5Taxbases Country/year
TotaltaxwithSSC% GDPTaxonlabour %gdpTaxonconsumption %GDPTaxonotherbases %GDP2009volumesas%oftotaltaxwithSSC 20002009200020092000200920002009Labour(%)Consumption(%)Other(%) Belgium45.243.524.223.711.310.69.79.1552421 Bulgaria31.528.914.29.913.214.74.24.3345115 Czech33.834.517.117.510.611.26.25.8513217 Denmark49.448.126.627.115.715.27.15.8563212 Germany41.939.724.522.710.511.16.85.9572815 Estonia31.035.917.518.711.714.61.82.652417 Ireland31.528.211.411.812.110.08.06.5423523 Greece34.630.312.412.512.410.89.87.1413523 Spain33.930.415.816.79.97.28.26.5552421 France44.141.622.922.811.610.69.68.1552620 Italy41.843.119.922.110.99.810.911.2512326 Cyprus30.035.19.412.210.613.49.99.5353827 Latvia29.526.615.213.811.310.22.92.6523810 Lithuania30.129.316.315.111.811.22.13.1513810 Luxembourg39.137.115.316.410.710.213.110.5442728 Hungary39.039.519.019.715.515.04.54.7503812 Malta28.234.29.79.812.113.56.310.9293932 Nederland39.938.220.420.911.711.87.85.5553114 Austria43.242.724.024.212.412.06.86.4572815 Poland32.631.814.212.111.311.57.08.1383626 Portugal31.131.011.613.011.810.97.87.1423523 Romania30.227.013.211.911.510.35.54.8443818 Slovenia37.537.620.719.613.914.02.94.0523711 Slovakia34.128.815.012.512.210.36.95.9433621 Finland47.243.123.723.813.613.49.95.9553114
128 K. Liapis et al.
Sweden51.546.930.827.412.313.38.46.1582813 UnitedKingdom36.734.914.114.011.810.410.810.4403030 Average37.035.817.817.512.011.77.26.6493318
The Tax Regimes of the EU Countries: Trends, Similarities and Differences 129
the amount of tax revenue. Deviations from this rule or instability in performance among countries indicates the existence of tax legislation, tax-free amounts, tax deductible amounts, tax exempt amounts, and differences in tax rates per incre- mental level of tax basis, or the existence of tax evasion or failure of tax authorities in collecting taxes. Figure6 (VAT tax rate and volume) shows that there exists positive correlation between tax ratio and volume for VAT but also volatility, according to the scatter diagram and the price of R squared. This volatility shows that there exists significant difference between EU countries in the performance of VAT collection, especially in the low level of tax rate. The cross section data are used for the year 2009.
Table 6 Indirect taxes and VAT
Country/year
VAT high ratios VAT % GDP
VAT %
T.TAX. VAT % IND.T 2000 2009 2011 dif00–11 2000 2009 2000 2009 2009 (%)
Belgium 21.0 21.0 21.0 0.0 7.2 7.0 15.9 16.0 53
Bulgaria 20.0 20.0 20.0 0.0 8.3 9.0 26.4 31.2 59
Czech 22.0 19.0 20.0 2.0 6.5 7.1 19.1 20.7 61
Denmark 25.0 25.0 25.0 0.0 9.6 10.1 19.4 21.0 59
Germany 16.0 19.0 19.0 3.0 6.8 7.4 16.2 18.7 57
Estonia 18.0 20.0 20.0 2.0 8.4 9.1 27.2 25.2 60
Ireland 21.0 21.5 21.0 0.0 7.3 6.4 23.1 22.7 56
Greece 18.0 19.0 23.0 5.0 7.2 6.4 20.8 21.1 56
Spain 16.0 16.0 18.0 2.0 6.1 4.1 18.0 13.5 46
France 19.6 19.6 19.6 0.0 7.3 6.8 16.6 16.3 45
Italy 20.0 20.0 20.0 0.0 6.5 5.7 15.6 13.2 41
Cyprus 10.0 15.0 15.0 5.0 5.8 9.1 19.3 26.0 60
Latvia 18.0 21.0 22.0 4.0 7.0 6.0 23.9 22.5 55
Lithuania 18.0 19.0 21.0 3.0 7.6 7.4 25.2 25.2 63
Luxembourg 15.0 15.0 15.0 0.0 5.6 6.2 14.3 16.7 52
Hungary 25.0 25.0 25.0 0.0 8.7 8.4 22.3 21.3 51
Malta 15.0 18.0 18.0 3.0 6.0 7.8 21.4 22.9 55
Nederland 17.5 19.0 19.0 1.5 6.9 7.0 17.3 18.4 57
Austria 20.0 20.0 20.0 0.0 8.1 8.1 18.8 18.9 54
Poland 22.0 22.0 23.0 1.0 6.9 7.4 21.3 23.4 57
Portugal 17.0 20.0 23.0 6.0 7.7 7.1 24.6 23.0 55
Romania 19.0 19.0 24.0 5.0 6.5 6.7 21.4 24.8 61
Slovenia 19.0 20.0 20.0 1.0 8.7 8.4 23.1 22.4 59
Slovakia 23.0 19.0 20.0 3.0 7.0 6.7 20.4 23.3 63
Finland 22.0 22.0 23.0 1.0 8.2 8.8 17.4 20.3 64
Sweden 25.0 25.0 25.0 0.0 8.6 9.7 16.7 20.7 51
United Kingdom 17.5 15.0 20.0 2.5 6.6 5.8 17.9 16.6 48
Average 19.2 19.8 20.7 1.5 7.3 7.4 20.1 21.0 56
130 K. Liapis et al.
Finland Slovakia Slovenia Romania Portugal
Poland Austria Nederland
Malta Hungary
Luxembourg Lithuania Latvia
Cyprus Italy
French Spain
Greece Ireland Estonia Germany Denmark Czech Bulgaria Belgium
United Kingdom Sweden
1995_5
1997_5 1998_5 1999_5 2000_5 2001_5 2002_5 2003_5 2004_5 2005_5 2006_5 2007_5 2008_5 2009_5 1996_5 20
15 10 5 0
Fig. 4 Indirect taxes as % of GDP per country
Fig. 5 Value Added Tax as % of GDP per country
The Tax Regimes of the EU Countries: Trends, Similarities and Differences 131
2.3.3 Direct Taxes and Tax on Personal and Corporate Income
Table 7 (Direct Taxes on Personal, Corporate and Other Income) presents the breakdown of Direct taxes into Personal, Corporate and Other Income for EU countries. According to this breakdown, significant differences exist in the tax structure on income (Personal, Corporate and Other) between EU countries. The corporate and other income taxes remain at a lower level against Personal income taxes in many countries and as average in EU market, which denotes that personal income remains the main income basis for direct taxation.
Figure 7 (Direct taxes as % of GDP per country) shows the trends and similarities of direct taxation between EU countries for the years 1995 till 2009.
Table8(Tax Rates on Personal and Corporate Income) presents the tax rates for the years 2000, 2009 and 2011, and the differences of tax rates from 2000 to 2011.
There is significant reduction in the tax rates of direct taxes for all EU countries.
The decreases of tax rates on corporate income remain at a higher level from tax rates on personal income.
Figure8(Tax on Personal Income as % of GDP per country) shows the high tax ratio and the volume of tax as percentage of GDP between EU countries for the year 2009. According to the diagram, low homogeneity exists for the volumes of personal income between EU countries.
Figure 9 (Tax on Personal Income) shows that there is positive correlation between the tax ratio and the volume of personal income tax, as well as volatility according to the scatter diagram and the price of R squared. This volatility shows that there is significant difference in performance between EU countries when it comes to the collection of taxes on personal income – especially at the high level of tax rate. The cross section data are used for 2009.
Figure10(Tax on Corporate Income as % of GDP per country) shows the high tax ratio and the volume of tax as percentage of GDP between EU countries for the year 2009. According to the diagram, low homogeneity exists for the volumes of corporate income between EU countries. Cyprus, Malta and Luxembourg as Fig. 6 VAT tax rate and volume
132 K. Liapis et al.
Table7Directtaxesonpersonal,corporateandotherincome Country/year Taxonpersonal income%GDP Taxonpersonal income%oftotal taxationTaxoncorporate income%GDP
Taxoncorporate income%oftotal taxationTaxonincome%directtaxesfor2009 20002009200020092000200920002009Personal(%)Corporate(%)Otherincome(%) Belgium13.312.229.428.03.22.57.15.876168 Bulgaria4.02.912.710.22.72.58.68.850446 Czech4.63.613.510.53.53.610.310.549492 Denmark25.626.551.955.13.32.56.65.18884 Germany10.29.724.424.41.70.74.01.78866 Estonia6.85.722.115.90.91.82.95.275250 Ireland9.27.929.327.83.82.512.08.872235 Greece5.05.114.416.94.12.412.08.0602911 Spain6.67.019.523.13.12.39.27.671236 France8.47.518.918.02.81.36.33.0741214 Italy11.511.727.527.12.42.45.95.676168 Cyprus3.63.912.011.26.26.520.618.435587 Latvia5.65.418.820.41.61.65.35.976223 Lithuania7.74.125.614.10.71.82.36.369311 Luxembourg7.27.718.320.87.05.517.814.755396 Hungary7.27.318.518.52.22.15.65.474224 Malta5.66.319.818.32.96.710.319.645487 Nederland6.08.615.022.54.32.110.95.6711812 Austria10.110.023.323.42.21.95.04.478158 Poland4.44.613.514.62.42.37.57.262317 Portugal5.35.717.118.53.72.912.09.363325 Romania3.53.511.413.13.02.69.89.754406 Slovenia5.65.915.015.71.21.83.14.970228 Slovakia3.42.49.98.42.62.57.78.7444511 Finland14.513.430.631.25.92.012.54.781126 Sweden18.116.435.235.03.83.07.36.483151 UnitedKingdom10.810.429.429.93.52.89.78.0651718 Average8.38.021.421.23.12.78.67.870247 The Tax Regimes of the EU Countries: Trends, Similarities and Differences 133
international corporate centers have high level of volumes and on the other hand, Germany has the lowest volume as % of GDP from all other countries.
Figure11(Tax on Corporate Income) shows that there is no correlation between the tax ratio and the volume of corporate income tax, according to the scatter diagram and the price of R squared. This volatility shows that high or low levels of tax rates have same volumes of tax as a percentage of GDP. The general rule (strongly positive correlation between tax rate and tax revenue) is not followed by all countries, indicating significant differences in tax legislation and problems in tax collection among countries. The cross section data are used for the year 2009.
2.3.4 Taxes on Labour, Consumption and Other
Table9(Implicit Taxes Rates on Labour, Consumption and Other Bases) provides a breakdown of Public revenues from taxation for EU countries from another point of view. According to this breakdown, there are no significant differences during the time for implicit tax rates for labour and consumption (decrease of implicit tax rate for labour and stabile for consumption).
Figure12(Taxes on Labour Bases) can show us if there is positive correlation between labour implicit tax rates with the volume of tax as a percentage of GDP. It indicates that there is strong positive correlation between implicit tax ratio and volume of tax on labour according to the scatter diagram and the price of R squared.
The cross section data are used for the year 2009.
Figure 13 (Taxes on Consumption Bases) can show us if there is positive correlation between consumption implicit tax rates with volume of tax as
Slovakia Finland
Sweden
Slovenia Romania
Portugal Poland
Austria Nederland
Malta Hungary
Luxembourg LithuaniaLatyia Cyprus
Italy Spain
Greece Ireland Estonia Germany Denmark Czech Bulgaria Belgium
United Kingdom
French 35
30 25 20 15 10 5 0
1995_15 1996_15 1997_15 1998_15 1999_15 2000_15 2001_15 2002_15 2003_15 2004_15 2005_15 2006_15 2007_15 2008_15 2009_15
Fig. 7 Direct taxes as % of GDP per country
134 K. Liapis et al.
percentage of GDP. It indicates positive correlation between implicit tax ratio and volume of tax on consumption, as well as volatility according to the scatter diagram and the price of R squared. Today, EU authorities suggest substituting tax revenues from labour with tax revenues from consumption, though this is yet to be implemented. The cross section data are used for the year 2009.
All other tax volumes as % of GDP from other tax bases include taxes such as capital gains and property taxes, and are illustrated for the year 2009 in Fig.14.