South Eurozone urgently needs fairer distribution of taxation burden

Brussels Tax Forum. Discussion between Sharon Bowles, Member of the European Parliament and Chairwoman of the Economic and Monetary Affairs Committee (on the left), and Algirdas Šemeta, member of the European Commission in charge of Taxation and Customs Union, Audit and Anti-Fraud. (EC Audiovisual Services).

Brussels Tax Forum. Discussion between Sharon Bowles, Member of the European Parliament and Chairwoman of the Economic and Monetary Affairs Committee (on the left), and Algirdas Šemeta, member of the European Commission in charge of Taxation and Customs Union, Audit and Anti-Fraud. (EC Audiovisual Services).

Eurostat, the EU statistical service, published last week data on the evolution of tax revenues for the EU member states. A first reading reveals two very interesting developments. Both are connected to the economic crisis which hit Eurozone in 2009-2010. In 2010 tax revenues decreased as a result of the crisis. However, despite the fact that the crisis rather deepened in the following years, tax revenues increased in 2011 as a result of the austerity measures taken all over the EU but more so in the worst hit countries of the South.

The double edge of austerity

Austerity had a double edge. Governments cut down social spending and at the same time increased taxation, in order to reduce budget deficits. This policy reached unprecedented levels in the south of Eurozone. Nevertheless, the four worst hit by the crisis countries, Greece, Portugal, Spain and Ireland, still in 2011 run comparatively very low tax revenue percentages in relation to GDP. During that year tax revenues to GDP were estimated in Ireland at 30.4 %, Spain 32.4 %, Greece 34.9 % and Portugal 36.1%, amongst the lowest revenues from taxes in the EU. At the same time Denmark, Belgium and France (48.6 %, 46.7 % and 45.9 % respectively in 2011) tax revenues were the highest.

Eurostat notes that, “The effects of the economic and financial crisis on tax revenues from 2007 onwards are apparent. From its last spike in 2006 in the EU-27 the ratio of tax revenue to GDP decreased by 1.1 percentage points to 39.6 % in 2010, while the ratio for the euro area also decreased by 0.9 percentage points of GDP from its peak of 41.2 % in 2007 to 40.3 % in 2010. 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 (or negative). This reflects pro-active tax measures taken by Member States during the last years to correct their deficits. EA-17 tax revenue as a percentage of GDP remains at a slightly higher level than EU tax revenue”.

Unfair distribution of tax burden

Coming back to the four countries worst hit by the crisis, their overall low tax revenue percentage only tells half of the story. Those countries, and for good reasons Italy should be grouped together with them, allowed for historical reasons a large part of incomes untaxed. In Ireland profits are taxed with a mere 10%, the lowest in the EU. As for Greece, Italy and Spain, due to an incompetent and/or corrupt tax administration, small and medium businesses and professionals traditionally avoid taxation. In the case of Greece and Spain this reality had catastrophic political and social dimensions.

For one thing, it blocked the fair distribution of the high cost to redress the economy and reduce the large fiscal deficits. As a result, the burden fell on those who cannot avoid taxation that is mainly wage earners and pensioners. This unfair distribution of the tax burden has undermined the political system and the social cohesion. Spain’s political system for historical reasons was spared from this ordeal. In Greece and Italy though, austerity and unfair distribution of the cost to rebalance the economy and the state finance brought about extreme, even fascist, political groups or political harlequins.

All in all, fair distribution of the taxation burden appears now as an utmost urgent priority for the political system all over south Eurozone. This is particularly true in Greece, where the tax administration and even the political system show a strong resistance, to measures blocking the unholy dealings between the taxman and citizens.

 

Advertising

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

Africans can fight COVID-19 with stakeholder capitalism

6 ways countries can prepare for the next infectious disease pandemic

On World Day to Combat Desertification, UN shines spotlight on ‘true value’ of land

Chart of the Day: These are the world’s most innovative economies

EuroLat plenary in Panama: control of trade talks and fight against crime

Fairer food supply chain: Agriculture MEPs clamp down on unfair trading

Rehn very reserved about growth in Eurozone

Financiers can turn the world into a dirty and dangerous place

UN condemns ‘cowardly’ attack on Libya’s national oil corporation headquarters

Greece begins a new chapter following the conclusion of its stability support programme

4 key steps towards a circular economy

ACP-EU Parliamentary Assembly: strengthening the partnership

China’s cities are rapidly becoming more competitive. Here’s why

Cross-border cooperation: the EU Interreg programme celebrates 30 years of bringing citizens closer together

Gender inequality in the medicine field: two commonly issues

The time for cities to get smart is now

We can save the Earth. Here’s how

Can indoor farming feed the world?

Do we really understand the value of independent journalism?

Why trade wars have no winners

We must move from egocentric to ecocentric leadership to safeguard our planet

ISIS fighters fleeing Mosul for Syria can topple Assad. Why did the US now decide to uproot them from Iraq?

Let’s Learn

Easing ‘classroom crisis’ in Côte d’Ivoire, brick by (plastic) brick

European Commission: Does Apple, Starbucks and Fiat really pay their taxes?

An entrepreneurial point-of view on tackling the migration crisis and the risks of abolishing Schengen

Why COVID-19 poses a particular threat in the world’s slums

Eurozone slowly but surely builds its Banking Union

UN Envoy urges Burundi leaders to ‘seize opportunities for national unity and peace’

This man is helping explorers carry out scientific research at the ends of the Earth

Track the spread of coronavirus around the world

G20 LIVE: “United States and Turkey stand in solidarity with France and its people in handing the perpetrators of this crime and bringing them to justice”, US President Barack Obama underlines from G20 in Antalya Turkey

Major UN aid operation for 650,000 gets underway across Syria-Jordan border

The India–U.S. trade dispute and India’s evolving geopolitical role

Congrats to the #FutureofMalta: a new age of voting

4 essential qualities for digital leaders

‘Make healthy choices’ urges UN agency, to prevent and manage chronic diabetes

This entrepreneur built an island resort out of plastic waste

Refugee crisis update: EU fails to relocate immigrants from Greece and Italy

Investing in working conditions and quality jobs

Why the way of loving closes doors of health?

6 ways to drive funding to transform the fashion industry

The future of manufacturing is smart, secure and stable

Avocado: the ‘green gold’ causing environment havoc

Kazakhstan continues to push for a nuclear-free world

European Commission and four online marketplaces sign a Product Safety Pledge to remove dangerous products

Haiti cholera outbreak ‘stopped in its tracks’

Workplace risks: Final vote on protection from carcinogens, including diesel fumes

Can Obama attract Iran close to the US sphere of influence?

Global Talent – Professional Internships

The Arctic is having holes stabbed through it at an alarming rate

A Sting Exclusive: “China-Africa Cooperation Sets a Fine Example of South-South Cooperation”, by China’s Ambassador to EU

COVID-19: Stopping the rise in domestic violence during lockdown

Health privatization to blame for health inequality or poor investment in public health?

Tackling obesity would boost economic and social well-being

Here’s how the US can get the best out of 5G

This is what the world’s CEOs think about the global outlook

Autumn 2019 Economic Forecast: A challenging road ahead

Making the move to more sustainable mobility – three steps for companies

Inflammation is the fuel that feeds the cancer flame. So how do we fight back?

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