European Union: More taxes out of less income

From left to right: Pierre Moscovici, French Minister of Finance,  Christine Lagarde, Managing Director of the IMF, Wolfgang Schauble, German Federal Minister for Finance, Maria Fekter, Austrian Federal Minister for Finance. Eurogroup of 24/3/2013, (Council of the European Union photographic library).

From left to right: Pierre Moscovici, French Minister of Finance, Christine Lagarde, Managing Director of the IMF, Wolfgang Schauble, German Federal Minister for Finance, Maria Fekter, Austrian Federal Minister for Finance. Eurogroup of 24/3/2013, (Council of the European Union photographic library).

In the fourth year of the ongoing financial and real economy crisis, with government social spending severely cut and bank credit to households and businesses continuously shirking, tax increases remain the only sure thing in life. According to a study by two Eurostat authors, Elisabeth Joossens and Laura Wahrig, taxes in absolute terms surpassed the pre-crisis level in 2011. Eurostat is the statistical service of the European Union.

In detail the study concludes that taxes (including social contributions) in 2011 accounted for 40.0 % of Gross Domestic Product (GDP) in the European Union (EU-27) and 40.8 % of GDP in the euro area (EA-17). “This represents an increase of 0.4 percentage points of GDP in the EU-27 and 0.5 in the EA-17…In 2011 tax revenues made up about 90 % of total general government revenue in the European Union. Taxes on production and imports accounted for 13.4 % of GDP and current taxes on income, wealth, etc. 12.6 % of GDP. The share of current taxes on income, wealth, etc. decreased from 2007 to 2010, but a slight increase was seen in 2011. The share of social contributions increased noticeably from 2008 to 2009, decreased further in 2010, but stayed relatively stable between 2010 and 2011, to reach 13.9 % of GDP”.

It is really an appalling situation to see people in countries like Greece, Spain, Portugal and Ireland who keep losing for years now large chunks of their incomes, to be asked to pay more taxes, both as a percentage of GDP and in absolute terms. The two authors note that, “In 2011, tax revenues in terms of GDP increased substantially, which was due to absolute tax revenues increasing along the same path as in the previous year, but nominal GDP growth being lower”.

This is obviously a technocratic observation. In reality it is a daily nightmare mainly for Greeks and Spaniards. With unemployment at 27% in both countries and millions of households with no working member, the increase of taxation has become an insurmountable problem. In Greece the complete incompetence or probably unwillingness of the Athens government to tax the wealthy professionals and the small and medium businesses, has led to increases of indirect taxation, while a newly imposed property tax is collected with the electricity bills. In this way the unemployed are caught between a rock and a hard place, even if they occupy in their own home.

Of the three or four Eurozone countries worst hit by crisis, Greece is in an impossible situation. Being the country with the lowest absolute income per capita and GDP losses of at least 20% during the last four years, its citizens are asked to pay  more taxes. According to Eurostat, tax payments as a percentage of GDP topped at 34.9% in Greece, 30.4% in Ireland and 32.4% in Spain. The same source states that “Among the countries which have joined the EU since 2004, Slovenia and Hungary had the highest tax revenue-to-GDP ratios at 37.5% and 37.1% of GDP, respectively. Even so, tax revenues in Slovenia are still 2.5 pp. of GDP lower than in the EU-27”.

All in all it’s a pity to observe that in worsening conditions for every household all over the European Union, governments are trying to increase their tax revenues in order to reduce budget deficits. Necessary or not this policy is depriving the increased tax collection of justification in the eyes of the average citizen. The problem is that almost all governments didn’t use the good times of the growth period in 2000-2008 to straighten up deficits.

They did exactly the opposite, increasing fiscal gaps and state debt. Actually most political formations in government or in the opposition pressed for larger deficits and lower taxation for higher incomes. As a result, today amidst the worst economic crisis after the WWII with falling real incomes, most of EU member states being over-indebted are obliged to keep increasing taxation. It’s a pity the political class in most of EU countries didn’t have the courage and the vision in the good times to prepare for the difficult years.

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

EU Copyright Directive: Will US tech giants comply or ditch the EU market?

‘All atrocity crimes are preventable’ and can never be justified – UN chief

On International Day, UN stands in solidarity with some 20 detained staff

UN health experts warn ‘dramatic resurgence’ of measles continues to threaten the European region

Rare Disease Day: a new EU platform to support better diagnosis and treatment

We won’t win the online security war without people power

Do doctors need to know their patients’ sexual orientation and gender identity?

Medical deserts in the European Union: the practicalities of universal health coverage

How energy infrastructure is shaping geopolitics in East Asia

How Germany strives to mold ECB’s monetary policy to her interests

UN food agency appeals for access to key storage facility amid fight for Hudaydah

Vegetarianism is good for the economy too

A Valentine’s Special: giving back, a dialogue of love

Improvements to pension systems have made them better placed to deliver pensions

Ireland’s planning to make its Emerald Isle even greener

How to Create a Clear Vision For the Future of Healthcare

Brazil’s hopeless future of science

Juncker Investment Plan for Europe welcomed by European Youth Forum

This Japanese concept will help you see the world – and learn – in a different way

Why your next work meeting should be a ‘walk-and-talk’

Eurogroup asked to reduce public debts of its member states

Can elections in Italy and Germany derail Eurozone?

UN chief calls for Security Council to work with Myanmar to end ‘horrendous suffering’ of Rohingya refugees

Parliament: Last compromise on bank single resolution mechanism

Art has the power to change the world, says this renowned Iranian muralist

How data can empower patients to personalize and improve their cancer treatment

It’s time for the world to stand up behind South Africa

We finally have a life-saving vaccine for Ebola

Commission makes it easier for citizens to access health data securely across borders

No barriers to free flow of non-personal data in the EU

Towards a climate-neutral Europe: EU invests over €10bn in innovative clean technologies

Seven trends shaping the future of the mining and metals industry

Where does our food come from? Here’s why we need to know

Coronavirus: the truth against the myths: Lockdown by a novel coronavirus, named 2019-nCoV

5 key concepts for blockchain newbies

3 ways Africa can improve the health of women and children

A Sting Exclusive: “The Digital Economy and Industry are no longer opposing terms”, Commissioner Oettinger underlines live from European Business Summit 2015

World Bank President steps down, Chief Executive assumes temporary role

Coronavirus spread now a global emergency declares World Health Organization

In Rome you can swap plastic bottles for metro tickets

UN chief praises impact of Palestine refugee agency as ‘our common success’, at key pledging conference

The new Kiev rulers ask $35 billion from the West

Energy of African youth ‘propelling’ new development era as UN ties bear fruit

On the detention of children in the United States of America

UN chief condemns killing of ‘blue helmets’ in DR Congo, as violence erupts prior to elections

5 things to know about how coronavirus has hit global energy

10 expert predictions for the next decade in Chinese AI

How to harness data to tackle rare diseases

EU-China trade: closer ties as US-China trade battle brews

UN Chief ‘strongly rejects’ Guatemala decision to expel anti-corruption body

Aviation Strategy for Europe: Commission signs landmark aviation agreements with China

This Pacific island has banned fishing to allow the marine ecosystem to recover

Why good cybersecurity in business is everyone’s responsibility

Three steps we must take to secure the future of our forests

Eurozone slowly but surely builds its Banking Union

UN chief welcomes DR Congo President’s promise to stand down

Rule of Law: The Commission opens a debate to strengthen the rule of law in the EU

Engaging ‘head and mind’, key for effective learning, says UNESCO chief on Literacy Day

Security: better access to data for border control and migration management

Can Greece’s democratic institutions keep it in Eurozone?

More Stings?

Advertising

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s