Inegalitarian taxation on labour haunts Europe’s social model

José Manuel Barroso, President of the European Commission, participated in the "Jobs for Europe" conference with Martin Schulz, President of the European Parliament and Herman van Rompuy, President of the European Council, (from left to right). (EC Audiovisual Services).

José Manuel Barroso, President of the European Commission, participated in the “Jobs for Europe” conference (not a laughing matter) with Martin Schulz, President of the European Parliament and Herman van Rompuy, President of the European Council, (from left to right). (EC Audiovisual Services).

At a time when labour is under serious pressures and threats in the entire European Union, taxation on labour wages continuous not only being the main source of government income but always increasing. Despite the fact that unemployment has reached historic records in the euro area, at 12.1% in March with one out of two young people looking desperate for a job, labour taxation continues to constitute a major disincentive to work. This article is European Sting’s contribution to today’s Labour Day, of 1st May.

According to an announcement by Eurostat, the EU’s statistical service, “The largest source of tax revenue in the EU27 is labour taxes, representing nearly half of total tax receipts, followed by consumption taxes at roughly one-third and taxes on capital at around one fifth”. Given that consumption taxes are an even more inegalitarian way to distribute the overall taxation burden, those two sources of government income, namely labour and consumption, constitute by far the largest sources of taxes.

The relevant Eurostat press release goes like that:”The GDP-weighted average implicit tax rate on labour in the EU27 was up from 35.4% in 2010 to 35.8% in 2011. Among the Member States, the implicit tax rate on labour ranged in 2011 from 22.7% in Malta, 24.6% in Bulgaria, 25.5% in Portugal and 26.0% in the United Kingdom, to 42.8% in Belgium, 42.3% in Italy and 40.8% in Austria.

The average implicit tax rate on consumption in the EU27 was up from 19.7% in 2010 to 20.1% in 2011. Implicit tax rates on consumption were lowest in 2011 in Spain (14.0%), Greece (16.3%), Latvia (17.2%) and Italy (17.4%) and highest in Denmark (31.4%), Sweden (27.3%), Luxembourg (27.2%), Hungary (26.8%) and Finland (26.4%).

In the EU27 in 2011, the average implicit tax rate on capital for the Member States for which data are available was down compared with 2010 in ten Member States and up in nine. Implicit tax rates on capital ranged from 5.5% in Lithuania to 44.4% in France”.

No matter how difficult it is day after day for the average wage earner to make ends meet, those people are increasingly called in to contribute more to the government leviathan. At the same time public expenditure on unemployment benefits and social protection is constantly decreasing, while almost all Eurozone governments spent trillions to support the banking system.

According to the European Commission over the past three years public entities in the Eurozone have spent €4.5 trillion to save the banks from their own sins. Still, taxation on capital keeps decreasing and actually there is an unspoken competition between EU governments, for even lower taxation on profits, as a means to attract investments. In reality profits are being transferred to tax-havens and at the end of the day it’s the labouring millions who are presented with the government bills.

Unfortunately labour income is not only decimated by taxes. On top of that there are social contributions, which in many Eurozone member states represent an even larger reduction of take home pay. Last Monday Eurostat observed that, “The overall tax-to-GDP ratio, meaning the sum of taxes and social contributions in percentages of GDP, in the EU27 stood at 38.8% in 2011, from 38.3% in 2010 and 38.4% in 2009. The overall tax ratio in the euro area (EA17) increased to 39.5% in 2011, up from 39.0% in 2010 and 39.1% in 2009.

The tax burden varies significantly between Member States, ranging in 2011 from less than 30% in Lithuania (26.0%), Bulgaria (27.2%), Latvia (27.6%), Romania (28.2%), Slovakia (28.5%) and Ireland (28.9%), to more than 40% in Denmark (47.7%), Sweden (44.3%), Belgium (44.1%), France (43.9%), Finland (43.4%), Italy (42.5%) and Austria (42.0%).

Between 2010 and 2011, the largest increases in tax-to-GDP ratios were recorded in Portugal (from 31.5% to 33.2%), Romania (from 26.7% to 28.2%) and France (from 42.5% to 43.9%), and the highest falls in Estonia (from 34.1% to 32.8%), Sweden (from 45.4% to 44.3%) and Lithuania (from 27.0% to 26.0%)”.

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

%d bloggers like this: