Commission warns member states against labour tax cash cow

  
Tax rates
[Ken Teegardin/Flickr]

Eurostat has published its annual report on taxation trends in 2012, a year that saw tax burdens increase across the European Union. Brussels has warned member states against high taxation, especially on labour. EurActiv France reports.

The total cost of taxes and compulsory social contributions increased across the EU in 2012, according to the 2014 edition of Taxation trends in the European Union (16 June).

In the report, Eurostat and the EU Commision's DG for Taxation and Customs Union said that the EU28 tax burden jumped from 38.8% of GDP in 2011 to 39.4% in 2012. The same trend was noted for the eurozone, where the tax burden increased from 39.5% to 40.4% of GDP in the same year.

Lithuania had the lowest tax burden at 27.2% of GDP, while it was 48.1% of GDP in Denmark. Along with Belgium (45.4%) and Italy (44.0%), France is one of the European countries where tax burden increased most per year. It shot up from 43.7% to 45.0%.

The upwards tendency is unlikely to change for the following year. Eurostat hinted that the tax burden increased again across the EU and the Eurozone in 2013.

Labour: a cash cow

Although the overall level of taxation in Europe is a concern, the level of tax on labour is particularly worrying.

"Our recent recommendations to member states stressed the need to lower labour taxes in order to create jobs in Europe. Today’s Tax Trends report confirms the Commission’s concerns," said Algirdas Šemeta, EU Commissioner for Taxation and Customs Union.

According to Eurostat's report, labour taxes remain a major source of tax revenue in the 28 EU member states, Iceland and Norway. It represented 51% of all tax revenue in 2012, far more than consumption taxes (28.5%) or taxes on capital (20.8%).

France has one of the highest social burden rates in the EU. Labour tax was 52.3% of France's tax revenue in 2012 while taxes on consumption and capital were at a mere 27.7% and 23.6% respectively.

France

The European Commission stressed that member states should reduce labour taxes. Governments should orientate tax revenue towards environmental taxes and more effective VAT, which are growth-friendly but are under-used in many countries.

This advice was especially directed at France. The Commission called on the French government to prioritise environmental taxes, as they decrease in France every year. It has the fourth lowest environmental tax in the EU.

>> Read: France's €30 billion VAT gap revealed

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