Taxation trends in the European Union – Data for the EU Member States, Iceland, Norway and United Kingdom. 2021 edition

Summary:

This report analyses the possible impact of the pandemic on future public finances. According to the latest forecast (Spring 2021), tax revenue in the EU is expected to have decreased in 2020, but less than GDP. Therefore, the tax-to- GDP ratio would have increased in 2020 but it will fall significantly in 2021, with further decreases in 2022. In 2019, the taxation structure remained stable in the EU. Revenue was almost equally distributed among indirect taxes, direct taxes and social contributions. The distribution of revenues by tax base (consumption, labour and capital) was very similar to those of previous years (around 52 % from labour, 28 % from consumption and 20 % from capital).

Revenue derived from consumption in the EU-27 represented 11.1 % of GDP in 2019, just slightly below the value in 2018. The implicit tax rate (ITR) on consumption continued to increase in 2019, continuing the trend started in 2009. The value added tax rates have remained almost unchanged since 2013. Labour taxes, which provide the largest share of revenues, remained unchanged in 2019, at 20.7 % of GDP. At the same time the ITR on labour is roughly unchanged since 2013. Moreover, the top personal income tax rates across the EU do not present major changes at the beginning of 2021. The tax wedge for low earners continued its downward trend in 2020, with a significant cumulative decrease since 2012.

The latest data confirm the development towards lower rates on corporate taxation (nominal and effective), but at a very slow pace, while revenues from corporate income stagnated in 2019 after several years of sustained growth that stopped in 2017. At EU level, environmental taxes displayed a quite stable picture in 2019. However, at national level, there were some significant changes over the last decade. In that time, several countries significantly increased their environmental revenues, in particular thanks to energy-related revenues.

As in previous editions, the 2021 Taxation Trends in the European Union report is based upon harmonised and comparable taxation data from the national statistical institutes, transmitted to and validated by Eurostat. It draws upon government finance statistics and more detailed national tax lists for each country. These data are compiled in accordance with the harmonised European System of National and Regional Accounts (ESA 2010).

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