The average burden of taxes and social insurance contributions in the European Union (EU) was 39 percent of the gross domestic product (GDP) in 2011, but there are considerable differences between the various EU member states.
Denmark in first place, Sweden runner-up
With 48 percent of the GDP, Denmark has the highest burden imposed by taxes and social insurance contributions. Sweden is runner-up with 46 percent and Belgium is in third place with 44 percent. In Lithuania, only 26 percent of the GDP is paid in taxes and social insurance contributions, followed by Bulgaria ((27 percent) and Latvia ((28 percent). The five member states with the lowest tax burden are all situated in Eastern Europe. Proportionally, the countries in Eastern Europe spend less on social security than the countries in Northern Europe.
With 38 percent of the GDP, the Netherlands takes up ninth place, just below the European average and approximately the same as in Germany.
Taxes and social insurance contributions in the EU countries
Gap between EU countries remains the same
Notwithstanding the harmonisation of regulations, the burden imposed by taxes and social insurance contributions varies considerably across the EU member states. In most countries with a relatively low tax burden in 1995, the tax burden was reduced further, but in most countries where the tax burden was already high, it remained high. The burden was reduced in many Eastern European countries, but Slovakia constituted an exception with a tax cut from 40 percent in 1995 to 29 percent in 2011. Taxes were raised in the EU countries in and around the Mediterranean Sea.
Tax burden in EU relatively high
Compared to countries with a similar standard of living, taxes and social insurance contributions are relatively high in the EU. In the United States, for example, the burden of taxes and social contributions was around 25 percent of the GDP in 2010, in Australia 26 percent and in Japan 28 percent. The average burden has hardly been reduced in the EU relative to 1995, but has obviously been reduced in the US and Australia. The average burden was raised marginally in Japan.
Taxes and social insurance contributions in the EU, the United States, Australia and Japan
Michel van Kooten and Sidney Vergouw