Net expenditure on social protection benefits

A pilot study shows that the equivalent of more than one quarter of EU GDP was spent on social protection benefits, but some of these benefits were liable to taxes and social contributions paid by the recipients to general government, so that the net expenditure was less. Eurostat has completed a first pilot data collection, based on 2005 data, to measure the effective rates of taxes and social contributions applied to each different type of benefit, in order to evaluate the net value of expenditure on social protection benefits. The results must be treated as provisional but indicate that, across the EU, 7% of the gross expenditure on social protection benefits was clawed back through the fiscal system. More than half of the benefits issued in the EU were liable to taxes and/or social contributions. The majority of old age and survivors benefits were subject to some form of obligatory levy, whilst only a small proportion of benefits in the case of sickness or social exclusion were affected. The effective combined rate of taxes and social contribution applied to liable benefits averaged around 13% in the EU as a whole compared to 7% on all benefits.

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