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Tax to GDP ratio stood at 34% in 2017

29/11/2018 11:40

The overall tax-to-GDP ratio, meaning the sum of taxes and net social contributions as a percentage of Gross Domestic Product, stood at 40.2% in the European Union (EU) in 2017, while in 2016 it stood at 39.9%. In the euro area, tax revenue accounted for 41.4% of GDP in 2017, slightly up from 41.2% in 2016.

Total revenue from taxes and social contributions as percentage of GDP in Cyprus increased from 28.0% in 2002, to 36.1% in 2007, to 31.6% in 2012 and finally to 33.3% , 32.9% and 34.0% for 2015, 2016 and 2017 respectivelly.

In 2017 this 34.0% is structured as follows: 15.9% from taxes on production and imports, 9.5% from VAT, 9.4% from taxes on income, wealth, etc.  (out of which 3.1% form taxes on individual or household income, 5.7% from taxes on the income or profits of corporations) and 8.7% from net social contributions.

The tax-to-GDP ratio varies significantly between Member States, with the highest share of taxes and social contributions in percentage of GDP in 2017 being recorded in France (48.4%), Belgium (47.3%) and Denmark (46.5%), followed by Sweden (44.9%), Finland (43.4%), Austria and Italy (both 42.4%) as well as Greece (41.8%). At the opposite end of the scale, Ireland (23.5%) and Romania (25.8%), ahead of Bulgaria (29.5%), Lithuania (29.8%) and Latvia (31.4%) registered the lowest ratios.

Compared with 2016, the tax-to-GDP ratio increased in fifteen member states in 2017, with the largest rise being observed in Cyprus (from 32.9% in 2016 to 34.0% in 2017), ahead of Luxembourg (from 39.4% to 40.3%) and Slovakia (from 32.4% to 33.2%). In contrast, decreases were recorded in thirteen Member States, notably in Hungary (from 39.3% in 2016 to 38.4% in 2017), Romania (from 26.5% to 25.8%) and Estonia (from 33.8% to 33.0%).

In 2017, taxes on production and imports made up the largest part of tax revenue in the EU (accounting for 13.6% of GDP), closely followed by net social contributions (13.3%) and taxes on income and wealth (13.1%). The ordering of tax categories was slightly different in the euro area. The largest part of tax revenue came from net social contributions (15.2%), ahead of taxes on production and imports (13.2%) and taxes on income and wealth (12.8%).

Looking at the main tax categories, a clear diversity prevails across the EU member states. In 2017, the share of taxes on production and imports was highest in Sweden (where they accounted for 22.7% of GDP), Croatia (19.6%) and Hungary (18.2%), while they were lowest in Ireland (8.5%), Germany (10.7%) and Slovakia (11.1%).

For taxes related to income and wealth, the highest share by far was registered in Denmark (29.7% of GDP), ahead of Sweden (18.9%), Belgium (16.9%) and Finland (16.6%). In contrast, Lithuania (5.4%), Bulgaria (5.7%), Romania (6.1%) and Croatia (6.3%) recorded the lowest taxes on income and wealth as a percentage of GDP .

Net social contributions accounted for a large proportion of GDP in France (18.8%), Germany (16.7%) and Belgium (16.1%), while the lowest shares were observed in Denmark (0.9% of GDP) and Sweden (3.3%).