European Tax Report - Utility Bidder

European Tax Report

Whether you are a business energy supplier or a restaurant, all businesses across the UK begin to prepare their tax returns as the financial year approaches. Ordinarily, this means by the start of April, the finance team has to calculate business expenses, income, revenue, assets, investments, equity, and more.

Whilst the end of the financial year may vary across countries, the stress on the finance team will be fairly similar. Each country has different rates and laws when it comes to taxes.

That’s why we wanted to know which European countries depend most on tax revenues. To reveal Europe's tax capitals, we’ve looked into tax revenue, taxes on goods and services, income and profits, and social security contributions as a share of the country’s GDP. We’ve also looked at the regions in the UK where the most people are paying the higher tax rate.

Tax report

Finland is the tax capital of Europe, with a tax score of 8.26

To reveal Europe's tax capitals, we’ve looked at tax revenue, tax on goods and services, income and profits, and social security contributions, all as a percentage of the country's GDP.

1

Finland

8.26/10

Tax Score

Finland takes the top spot with a tax score of 8.26 out of 10. Finland scored highly across our categories, ranking particularly high for total tax revenues, taxes on goods and services, and taxes income and profits as a percentage of GDP.

2

France

7.50/10

Tax Score

France takes second place with a tax score of 7.50 out of 10. Although France’s tax on goods and services and income and profits aren’t exceptionally high, its social security contributions and total tax revenue put the country in second place on our list.

3

Austria

7.27/10

Tax Score

Our top three is completed by Austria, with a tax score of 7.27 out of 10. Austria’s tax on goods and services may not be the highest. However, its social security contributions and total tax revenues as a percentage of its GDP are among the highest in Europe.

The top 10 European countries with the highest tax score

key: Total Tax Revenues, % of GDP Taxes on Goods & Services, % of GDP Taxes on Income & Profits, % of GDP Social Security Contributions, % of GDP Tax Score /10

Country

Denmark’s government has the most significant control of its economy, with almost 50% of its GDP sourced through tax revenue

Total tax revenue as a percentage of GDP shows how much of a country’s output is gained through taxation. The higher the percentage, the more the government controls the economy’s resources.

1

Denmark

47.4%

Tax Revenue as a Share of GDP

Denmark has the highest tax revenue in Europe, with a 47.4% share of its GDP. Denmark’s lowest tax rate is just under 40%, with the first DKK46,000 (€6,172) deductible. The highest marginal rate in Denmark is 57%, with VAT standing at 25%.

2

France

45.2%

Tax Revenue as a Share of GDP

France takes second place with a 45.2% tax revenue as a share of GDP. France’s standard rate of VAT is 20%. However, it varies with the industry, with restaurants, transportation, and tourism services charging a rate of 10%. The highest marginal rate is 49%, which applies to incomes of more than €500,000.

3

Austria

43.3%

Tax Revenue as a Share of GDP

Completing our top three once again is Austria, with tax revenue accounting for 43.3% of its GDP. Similarly to France, Austria’s VAT varies across industries. Its standard rate is 20%, with 13% and 10% VAT for tourism services and basic items, respectively. Austria’s highest marginal tax rate is 55%, which applies to those earning more than €1 million.

Croatia’s taxes on goods and services account for 18.6% of its GDP, more than any other European country

Taxes on goods and services cover production, sales, deliveries, and permission to use goods and perform activities. But which country’s goods and services tax accounts for the largest percentage of its GDP? Below, we reveal all.

1

Croatia

18.6%

Tax on Goods & Services as a Share of GDP

Croatia takes the top spot, with goods and services taxation making up 18.6% of its GDP. Croatia’s standard rate of VAT is 25%, however, for accommodation services, newspaper/magazine publishers, and public services, a reduced rate of 13% applies.

A reduced rate is where the government applies a lower tax rate in special circumstances, meaning businesses in these industries in Croatia will pay 13% in tax. For bread, milk, scholarly books, and medical equipment, an even more reduced rate of just 5% applies.

2

Hungary

15.9%

Tax on Goods & Services as a Share of GDP

In second place is Hungary, with goods and services tax making up a 16% share of its GDP. Hungary’s standard rate of VAT sits at 27%, with exceptions. A reduced rate of 5% applies to chicken and pork meat, internet services, medicine, and books.

3

Greece

15.4%

Tax on Goods & Services as a Share of GDP

Greece completes our top three, with taxes on goods and services making up a 15.4% share of GDP. In 2016, Greece’s VAT rose to 24%, a 1% increase from before. A reduced rate of 13% is applied to basic necessities, with a super reduced rate of 6% applicable to specific items.

Denmark’s tax rate on income and profits is higher than any other European country, totalling a 31.5% share of its GDP

Taxes on income and profits cover the net earnings of individuals and the financial gains made from businesses and enterprises. We’ve revealed the European countries with the highest share of GDP coming from taxes on income and profits.

1

Denmark

31.5%

Tax on Income & Profits as a Share of GDP

Taking the top spot is Denmark, with taxes on income and profits totalling a 31.5% share of GDP. In Denmark, corporate tax is between 22-25%, depending on the business. However, capital gains tax (CGT) is much higher, at 42%.

2

Norway

20.8%

Tax on Income & Profits as a Share of GDP

In second place is Norway, with tax on income and profits making up a 20.8% share of GDP. In Norway, income and corporate tax is set at 22%, slightly lower than the OECD average of 23.6%. Most of Norway’s tax revenue is spent on healthcare, transportation, and education.

3

Iceland

17.5%

Tax on Income & Profits as a Share of GDP

Completing our top three is Iceland, with taxes on income and profits totalling a 17.5% share of its GDP. The income tax rate in Iceland is 17% for those earning up to ISK 370,482, which is almost €2,500 a month. The highest income tax rate is 31.8%, applicable to those earning more than ISK 1,040,106, just over €7,000.

Czech Republic and Slovenia have the highest social security contributions in Europe, with a 16.4% share of their respective GDPs

Social security contributions are compulsory payments made to the government to entitle you to a future social benefit. Social security benefits vary between countries, but they often include unemployment insurance, healthcare, and pensions.

1

Czech Republic & Slovenia

16.4%

Social Security Contributions as a Percentage of GDP

The top spot is shared between the Czech Republic and Slovenia, with social security contributions covering a 16.4% share of their GDPs. In the Czech Republic, you are obligated to pay social security if you work for a Czech company, and this covers your pension, unemployment, and sickness. The only difference between the Czech Republic and Slovenia’s social security is that Slovenia also covers parental insurance.

2

Austria

15.3%

Social Security Contributions as a Percentage of GDP

Austria follows, with social security contributions equating to a 15.3% share of its GDP. Austria’s social security contributions cost almost 21% of your pre-tax income. This covers you for sickness, unemployment, accidents, and pension, with the highest percentage being 12.55% to cover your pension.

3

Slovakia

15.2%

Social Security Contributions as a Percentage of GDP

Slovakia’s social security contributions are making up a 15.2% share of its GDP. Only residents of Slovakia are eligible for social security benefits. Social security contributions in Slovakia total 9.4%, with a cap of €796.83 per month.

The top 10 European countries with the highest tax revenues as a percentage of GDP

Country

Total Tax Revenues, % of GDP

The top 10 countries with the highest tax on goods and services as a share of GDP

Country

Taxes on Goods & Services, % of GDP

The top 10 European countries with the highest tax on income and profits as a share of its GDP

Country

Taxes on Income & Profits, % of GDP

The top 10 countries with the highest social security contributions as a percentage of GDP

Country

Social Security Contributions, % of GDP

London has the highest earners, with more than 20% paying the higher rate of tax

The higher rate of tax in the UK is 40% and applies to those earning between £50,271 to £125,140. However, only income between this threshold is taxed at 40%, and anything below is taxed at the basic rate of 20%. We’ve revealed the percentage of residents in each region paying the higher rate of tax.

Scotland has seen the biggest increase in higher rate taxpayers, with a 66% rise

The regions with the highest percentage of people paying the higher rate of tax

key: All Income Taxpayers Savers Rate Basic Rate Higher Rate Additional Rate Percentage of Income Taxpayers that Pay the Higher Rate

Country

The regions with the biggest increase in higher rate taxpayers

key: Higher Rate Taxpayers (2014/15) Higher Rate Taxpayers (2023/24) 10 Year Percentage Change in Higher Rate Taxpayers

Country

Methodology

We used OECD to source the total tax revenues, taxes on goods and services, taxes on income and profits, and social security contributions, all as a percentage of the country’s GDP.

We then combined this data into a weighted table, giving each factor a normalised score out of 10. We then took an average of these scores to get an overall score out of 10.

We then used government data to find the regions with the most taxpayers paying the higher tax rate. We then calculated this as a percentage of each region. We also used this data to find the number of higher-rate taxpayers per region during the 2014/15 financial year to calculate a 10-year percentage increase.

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