The taxman's take in Europe began creeping back up in 2005, halting a gradual decline in rates in the world's most highly taxed region, according to an official EU report published Tuesday.
The overall tax ratio, the total amount of taxes and social security contributions, increased to 39.6 percent of gross domestic product (GDP) in 2005 from 39.2 percent in 2004, according to the EU's Eurostat data agency. "The downtrend which had started in 1999 in most countries stopped in 2005," Eurostat said in the report.
After peaking at 41 percent in 1999, taxes in the currently 27-nations belonging to the European Union had been gradually coming down, although they still stand out ammong the highest in the world "EU tax levels remain generally high in comparison with the rest of the world, with the EU-27 tax ratio exceeding those of the USA and of Japan by some 13 percentage points," Eurostat said.
However, it noted that the overall tax ratio varied widely among member states, from as high as 51.3 percent in Sweden and 50.3 percent in Denmark to as low as 28 percent in Romania and 28.9 percent in Lithuania. Taxes were also broadly higher by type, with the average implied rate on labour, inching up to 35.2 percent in 2005 from 35.1 percent.
"The decline registered since the turn of the century stopped in 2005, despite a wide consensus on the desirability of reducing labour taxes," Eurostat said. Meanwhile, the average implied tax rate on consumption rose to 22.1 percent in 2005 from 21.6 percent in 2004 while the average rate levied on capital rose to 27.3 percent from 25.3 percent.
Bucking the trend, environmental taxes eased to 2.6 percent - the lowest in 10 years - from 2.7 percent. "Despite intense public interest in environmental issues, environmental tax revenues have been declining since 1999," Eurostat said. "This drop is due to lower energy taxation, as revenues from the other environmental taxes have remained stable."
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