Measuring tax burdens in Europe

This paper calculates e®ective macro-economic tax rates for the 25 EU countries following the methodology developed in Mendoza, Razin, and Tesar (1994). The available Eurostat data allow to compute the tax wedge on con-sumption, labor and capital. We show that e®ective tax rates in the 10 new member states of the EU are on average 10 percentage points lower on labor, and 5 percentage points lower on capital and consumption. There is no ten-dency of convergence in e®ective tax burdens on capital. The newly computed tax rates are in line with the e®ective tax rates of the EU Commission for EU 15. E®ective tax rates on capital are only weakly connected to statutory taxrates on corporate income. As they are calculated from macroeconomic datathey provide only limited information on the actual tax burdens of individual corporations or households.