Taxation in Europe - statistics & facts
Benjamin Franklin famously declared that there are two certainties in life: death and taxes. Citizens of European countries may be inclined to agree, as they live in some of the most highly taxed countries on the planet. Since the early 20th century, many European countries have developed complex systems of taxation which are used to fund the activities of the government, such as the provision of social welfare programs, national defense, infrastructure development, as well as to service the national debt. While many countries in Western and Northern Europe have earned their reputation as high-tax jurisdictions - Denmark has a top income tax rate of 55.9 percent in 2024 - not all European countries have such systems of taxation. Notably, formerly communist countries in Central and Eastern Europe (CEE) have much lower income taxes on average, with the top statutory income tax rate in countries such as Bulgaria and Romania being only 10 percent.
The highest corporate tax rates are found in larger Western European countries such as Germany, where the rate is 30 percent, and the Netherlands, where it is 25.8 percent. Some European countries have been criticized for causing a 'race to the bottom' in terms of corporate taxation due to low overall rates and lax regulations which allow companies to shift profits from high tax jurisdictions into their country. This is particularly the case for Ireland, which has a corporation tax rate of 12.5 percent and which has been accused of allowing large American multinational companies such as Apple, Facebook, and Airbnb of minimizing their corporate taxation burdens through their Irish subsidiaries.
Tax rates for employees, consumers, and businesses
The average effective rate of income taxation for a single person in the EU was 29.62 percent in 2022, while for a couple with children it was 25.33 percent of their gross earnings, however, this figure represents only the amount paid in income taxes, which may miss out on the large amount of taxes levied through social security contributions and other indirect taxes. The implicit tax rate on labor income - that is, the amount taken from an individuals gross labor income by all direct and indirect taxes - in the EU was 37.8 percent in 2022, while for consumption taxes it was 17.2 percent, while taxes on the profits of corporations tend to be substantially lower in most European countries compared with other forms of taxation.The highest corporate tax rates are found in larger Western European countries such as Germany, where the rate is 30 percent, and the Netherlands, where it is 25.8 percent. Some European countries have been criticized for causing a 'race to the bottom' in terms of corporate taxation due to low overall rates and lax regulations which allow companies to shift profits from high tax jurisdictions into their country. This is particularly the case for Ireland, which has a corporation tax rate of 12.5 percent and which has been accused of allowing large American multinational companies such as Apple, Facebook, and Airbnb of minimizing their corporate taxation burdens through their Irish subsidiaries.
