Part I

Overall tax revenue

1. Development of the overall tax revenue in the

European Union
Level and long-term trends
The EU is a high tax area
The European Union is, taken as a whole, a high tax
area. In 2010, the overall tax ratio, i.e. the sum of taxes
and social security contributions in the 27 Member
States (EU-27) amounted to 38.4 % in the GDPweighted average, more than 40 % above the levels
recorded in the United States and Japan. The tax level
in the EU is high not only compared to those two
countries but also compared to other advanced
economies; among the major non-European OECD
members, only Canada and New Zealand have tax
ratios that exceed 30 % of GDP (2). As for less
developed countries, they are typically characterised by
relatively low tax ratios.

primarily on restricting or scaling back primary public

expenditures, in others the focus was rather on
increasing taxes (in some cases temporarily). By the
end of that decade, however, a number of countries
took advantage of buoyant tax revenues to reduce the
tax burden, through cuts in the personal and corporate
income tax as well as in social security contributions.

t
a
x

Graph 1.2: Long-term trends in the overall tax ratio

(including SSC)
% of GDP
44%

r
e
v
e
n
u
e

42%

40%

38%

Graph 1.1: Overall tax-to-GDP ratio (incl. SSC) in the

EU, US and Japan

36%

2010, %

34%
1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

EU-9 (ESA79)

40%

O
v
e
r
a
l
l

EU-15 (ESA79)

EU-27 (ESA95)

EU-15 (ESA95)

38.4%

Note:

The statistical break is due to the change from ESA79 to ESA95. All data
are GDP-weighted.

Source: 1970-1994: Commission services (reproduced from 2007 edition of

the report); 1995-2010: Eurostat (gov_a_tax_ag)

30%
26.9%
24.8%

The overall tax ratio started decreasing from 2000 but

only for a couple of years. Owing at least partly to the
need, in several countries, to reduce the general
government deficit, efforts to cut taxes petered out. Tax
ratios picked up again until 2007 (see Graph 1.2).

20%

10%

0%
EU-27

Note:

US

JP

EU-27 weighted average

Source: Commission Services and Eurostat (ESA95) (gov_a_tax_ag) for the

EU, OECD (SNA2008) for the US and Japan

Increasing trend from the 1970s until the end

of the century
High EU tax levels are not new, dating back essentially
to the last third of the 20th century. In those years, the
role of the public sector became more extensive,
leading to a strong growth of tax ratios in the 1970s,
and to a lesser extent also in the 1980s and early 1990s.
In the late 1990s, first the Maastricht Treaty and then
the Stability and Growth Pact led EU Member States to
adopt a series of fiscal consolidation packages. In some
Member States, the consolidation process relied
(2)

Tax revenues dropped as a result of the crisis,

but stabilised already in 2010
The first effects of the global economic crisis were felt
on revenues already in 2008 even though in the EU the
annual growth turned negative only the following year.
As discussed in the 2011 edition of this report (3)
mainly measures on the expenditure side were taken by
the Member States during the trough of the recession.
Those countries that introduced tax cuts directed them
at cutting labour taxes and, to a smaller extent, capital
taxation. The overall tax ratio reached its lowest value
since the beginning of the decade in 2009. Initial
consolidation measures and a modest recovery of the
economy stabilised tax revenues in 2010, as
expenditure side saw consolidation in almost all
countries (see Box 1.1).

See OECD (2011).

(3)

See European Commission (2011c)

Taxation trends in the European Union

19