EU trends show corporate and personal tax rates are on the up

21 May 2012

The average standard VAT rates in the European Union's 27 countries have risen dramatically since 2008, a new report into taxation trends by the European Commission has found.

According to the report issued by Eurostat, the statistical office of the EU, the standard VAT rate in the EU now varies from its lowest at 15 per cent in Luxembourg to the highest at 27 per cent in Hungary.

The UK's 20 per cent VAT rate for 2012 sits just under the EU average of 20.5 per cent, along with countries including Austria, Bulgaria, Czech Republic, Estonia, Slovakia and Slovenia.

The report also found that both corporate and top personal income tax rates in the EU inched up in 2012 after a period of long decline.

The highest top rates of tax on personal income were found in Sweden, which taxes its top earners at 56.6 per cent, followed by Denmark (55.4 per cent), Belgium (53.7 per cent), the Netherlands and Spain (both 52 per cent), and Austria and the United Kingdom who both tax at 50 per cent.

The lowest rates were found in Eastern Europe with Bulgaria at 10 per cent and the Czech Republic and Lithuania both at 15 per cent.

The highest corporate tax rates were recorded in France (36.1 per cent) with the UK coming in 15 places down the list at 24 per cent.

The report also found that the tax ratio for the EU remains generally high when compared on a global level, while is largest source of tax revenue remains labour taxes.

With the tax regime of property gaining recent attention from policymakers, the report now includes figures on property taxation. Revenue on property taxes is highest in the UK at 4.2 per cent, following Chancellor George Osborne's move in Budget 2012 to increase stamp duty land tax on the most expensive property to between 7 and 15 per cent. Tax revenue on property is estimated to have brought in around £72 million for the UK Treasury in 2010.

The figures may come as a concern after the recent 2020 Tax Commission report suggested higher taxes could actually reduce taxable income; harming the economy and increasing the incentive for higher earners to move to countries with lower taxes.

The commissioned report said this was 'particularly concerning as Britain's tax revenues were heavily dependent on a small number of high earners who are subject to very high tax rates.' It also claimed that wealth taxes, such as stamp duty land tax, were 'unfair' and called for them to be abolished.