European Commission

Taxation and Customs Union

2011 edition of the ‘Taxation Trends’ report 

Marco Fantini

Head of Section « Quantitative analysis of taxation « 

DG TAXUD

2European Commission Taxation and Customs Union

The impact of the crisis on GDP growth

3European Commission Taxation and Customs Union

-2.8%

-1.7%

-1.9%

-2.3%

-3.7%

-4.7%

-5.3%

-8.2%

1.7%

-13.9%

-18%

-14.7%

-6.7%

-4.8%

-4.1%

-4.9%-7.6%

-3.7%

-2.6%

-5%-7.1%

-4.9%

-3.9%

-2.5%

-8.1%

-3.9%

-5.2%

Real GDP Growth Rate, 2009

> 0

-3 ≤ 0

-5 ≤ -3

-10 ≤ -5

≤ -10

4European Commission Taxation and Customs Union

Top 6 and bottom 6 growth rates

1.7%

-1.7% -1.9% -2.3% -2.5% -2.6%

-7.6%-8.1% -8.2%

-13.9%

-18.0%

-14.7%

-20%

-15%

-10%

-5%

0%

5%

PL CY MT EL PT FR IE SI FI EE LT LV

5European Commission Taxation and Customs Union

The impact of the crisis on public finances

6European Commission Taxation and Customs Union

Change in budget balance (2008-2009)

-8.0

-7.0

-6.0

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

MT EE HU IT RO AT CZ DE SE PL LU SI FR BE SK EL LT NL DK LV BG PT UK ES CY IE FI EU-27

EA-17

% p

oint

General government revenue contribution General government expenditure contribution Change in budget balance

Average revenue drop: 0.6% of GDP

Average expenditure increase: 4% of GDP

7European Commission Taxation and Customs Union

Trends in the overall tax ratio 2000-2009, in % of GDP

37.0%

37.2%

36.7%

35.8%

37.0%

36.5%

36.2%

36.7%

36.6%

36.2%36.1%

36.4%

37.4%

37.1%

37.0%

36.6%36.8%

36.9%

37.3%

37.0%

35.0%

36.0%

37.0%

38.0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

EU-27 arithmetic average EA-17 arithmetic average

Drop: 3.8 %

8European Commission Taxation and Customs Union

Excluding social security contributions, the revenue drop looks even stronger

24.0%

24.5%

25.0%

25.5%

26.0%

26.5%

27.0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

EU-27 arithmetic average EA-17 arithmetic average

Drop: 6.8%

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36.0

37.0

38.0

39.0

40.0

41.0

42.0

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Cyclically adjusted revenues EU-25 Tax revenue EU-25

Time trend for tax ratio, actual and adjusted for the cycle

10European Commission Taxation and Customs Union

The tax policy reaction

11European Commission Taxation and Customs Union

Budgetary impact of tax measures by type of measure, 2009

Labour raising

Consumption raising

Capital raising

Labour cutting

Consumption cutting

Capital cutting

Revenue-raising measures Tax-cutting measures

12European Commission Taxation and Customs Union

-2.8%

15%

18%

19%

15%

19%

25%

22%

22%

20%

21%

19%

25%

19%

19%

15%21.5%

16%

19.6%

20%19%

20%

20%

20%

20%

19%

25%

2009: Change in VAT rate since 2008

No change

Increase

Decrease

21%

13European Commission Taxation and Customs Union

-2.8%

15%

18%

23%

15%

19%

25%

23%

22%

20%

21%

21%

25%

19%

20%

17.5%21%

18%

19.6%

20%24%

20%

20%

21%

20%

19%

25%

2010: Change in VAT rate since 2008

No change

Increase

Decrease

21%

14European Commission Taxation and Customs Union

-2.8%

15%

18%

23%

15%

19%

25%

23%

23%

20%

22%

21%

25%

20%

20%

20%21%

18%

19.6%

20%24%

20%

20%

23%

20%

19%

25%

2011: Change in VAT rate since 2008

No change

Increase

Decrease

21%

15European Commission Taxation and Customs Union

VAT standard rates have been hiked strongly as a result of the crisis

19.0%

19.5%

20.0%

20.5%

21.0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Average standard VAT rate

Revenue data stop here

16European Commission Taxation and Customs Union

Substantial recourse to excise duties to raise revenue

Excise Duties

  Energy products Tobacco & alcohol Budgetary impact (% of GDP)

2009

Increase EE, GR, HU, LV, LT (2009-2011), RO, SI, ES

FI, HU, LV, LT (2009-2011), RO, SI, ES

EE: 0.1; GR: 0.13; HU: 0.1; LV: 0.9; LT: 0.7 (2009-2011); SI: 0.71; ES: 0.05 (2009), 0.04 (2010)

Decrease

IT, LT (2009-2011)

   

2010 -

Increase BG, CZ, DK, EE, GR, HU, LV, SI

BG, CY, CZ, DK, EE, FI, GR, HU, LV, PL, SI

BG: 0.34; DK: 0.4; EE: 0.8 (2010), 0.02 (2011); GR: 1.5; HU: 0.3; LV: 0.09

Decrease

PL, SK   PL: -0.07; SK: -0.02

17European Commission Taxation and Customs Union

Crisis has not reversed, but possibly slowed, the steep decline in corporate tax rates

20%

22%

24%

26%

28%

30%

32%

34%

36%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

EU-27 average top statutory CIT rates EU-27 EATR - Taxation of the non-financial sector

Development of statutory CIT rate (adj.)

18European Commission Taxation and Customs Union

The average decline in PIT rates has stopped

Note: Including local taxes and surcharges

36%

38%

40%

42%

44%

46%

48%

50%

52%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

EU-27 EA-17

19European Commission Taxation and Customs Union

Trend to reduce labour taxes for low-income earners continues

Tax wedge on labour for worker at 2/3 of average earnings

33%

34%

35%

36%

37%

38%

39%

40%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

EU-27 EA-17

20European Commission Taxation and Customs Union

Trends in environmental tax revenues,2000-2009, % of GDP

2.3%

2.4%

2.5%

2.6%

2.7%

2.8%

2.9%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

EU-27 arithmetic averages EU-27 weighted averages

21European Commission Taxation and Customs Union

Tax revenue per unit of energy used, deflated2000-2009, % of GDP

120

125

130

135

140

145

150

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

EU-27 arithmetic EA-17 arithmetic

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Summing up

REVENUES

Sharp decline in tax revenues in 2009, due to recession

To fight the recession, Member States relied more on expenditure increases than tax cuts,

… but even at the height of the crisis, a number of Member States were able to introduce tax cuts, and these focussed on labour taxes

Energy tax revenues and ITRs on Energy up in 2009, breaking long trend

RATES

Clear trend towards increases in indirect taxes, right up to present

Corporate tax rates seem to be stabilising

Average top PIT rates pick up in euro area, decline slightly in EU average

23European Commission Taxation and Customs Union

Additional information

The full report and a booklet with the main results are available at the following address:

http://ec.europa.eu/taxtrends

Thank you!