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

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the European Sting Milestones

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

Road use charges: reforms aim to improve fairness and environmental protection

David Attenborough’s worried about this ocean threat – and it’s not plastic

Deadly swine fever threatens Asia, UN agriculture agency warns, urging regional collaboration

A free press is ‘cornerstone’ for accountability and ‘speaking truth to power’: Guterres

EU deal on electricity market rules to benefit both consumers and environment

7 ways for businesses to capture the youth dividend

Security Council imposes arms embargo on South Sudan

The Future of Balkans: Embracing Education

Eurozone in trouble after Nicosia’s ‘no’

A Valentine’s Special: heart has nothing to do with it, it’s all Brain

Are we at risk of a financial crisis? Our new report takes a look

The digital skills gap is widening fast. Here’s how to bridge it

How India is solving its cooling challenge

‘Dangerous nationalism’ seriously threatens efforts to tackle statelessness: UNHCR chief

State aid: Commission finds Luxembourg gave illegal tax benefits to Engie; has to recover around €120 million

The sustainable fashion revolution is well underway. These 5 trends prove it

Iraq: Security Council told ‘despair’ has ‘given way to hope’ but road to stability ‘long and far from easy’

Global leaders and companies pledge to reduce the gender pay gap by 2030

Boosting adult learning essential to help people adapt to future of work

More accessible products and services for disabled and elderly people

Why the answer to a more sustainable future could lie within the platform economy

MEPs vote for upgrade to rail passenger rights

eGovernmnet for more efficiency, equality and democracy

Solutions for cultural understanding: medical students’ perspective

LGBTQI+ and medicine

These 4 scenarios show how we might be working in the future

JADE Testimonial #3: Sebastian @ Fundraising

Ensure that widows are ‘not left out or left behind’, UN chief urges on International Day

The influence of the multilateral agreement on migrant health

Our tourism system is broken – time to customize

Indonesia has a plan to deal with its plastic waste problem

‘Crimes against humanity,’ ‘war crimes’ and risk of new ethnic violence in DR Congo, warn UN experts

Vaccines: from miracle to possible danger

Turkey presents a new strategy for EU accession but foreign policy could be the lucky card

Humane leadership must be the Fourth Industrial Revolution’s real innovation

Is the European Banking Union an impossible task?

UN Security Council ‘utterly failed’ Syrian detainees; a victim voices her plea to ‘end impunity and stop this horror’

European Young Innovators Forum @ European Business Summit 2014: Europe for StartUps, vision 2020

Technology can help solve the climate crisis – but it will need our help

EU continues targeting on Chinese steel imports instead of the revival of its own economy

Cyprus tragedy reveals Eurozone’s arbitrary functioning

Countries must invest at least 1% more of GDP on primary healthcare to eliminate glaring coverage gaps

UNICEF delivers medical supplies to Gaza in wake of deadly protests

Kids who live in the countryside have better motor skills, a study in Finland has found

UN atomic watchdog chief updates governing body on key North Korean reactor

Prevent future crises and empower youth – now!

Energy Union: EU invests a further €800 million in priority energy infrastructure

UN-backed intercultural dialogue forum urged to keep working to ‘bridge gap between the like-minded’

Immigration crisis at its very worst: EU to outsource rescue business to North Africa?

EU announces record €550 million contribution to save 16 million lives from AIDS, tuberculosis and malaria

Could robot leaders do better than our current politicians?

The European Sting @ Mobile World Congress 2014, Creating What’s Next for the World. Can EU Policy follow?

UN chief welcomes possibility of resumed talks between US and North Korea

Corruption In The Balkans Is Impeding EU Membership

EU-India summit: Will the EU manage to sign a free trade agreement with India before Britain?

Banking Union: Non-performing loans in the EU continue to decline

Protests, violence in Haiti prompts international call for ‘realistic and lasting solutions’ to crisis

Unemployment and stagnation can tear Eurozone apart if austere policies persist

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

Across the world, women outlive men. This is why

More Stings?

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