Spain Explained

How countries spread the tax burden

Where should the majority of tax be collected from? Countries have, by and large, come to the same kinds of conclusions. We expect to make some contribution to the state purse from our earnings and income. We are also used to having VAT on services and goods that we use. Road tax, council tax, tax on inheritance and capital gains all contribute to the maintenance of our towns, cities and countries.

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There might be some general consensus on the types of tax that are reasonable to inflict on the population, but there are significant differences in the ways in which countries decide to spread the burden. ‘Taxation Trends in the European Union’ is probably not something you would want to read in its entirety. However, we’ve pulled out one or two thought-provoking statistics from this report on tax in the 27 EU countries.

The report identifies the different ways in which countries in Europe spread the tax burden on its citizens. The information is given as a percentage of GDP and relates to 2011. Tax is divided into:

  • Labour – taxes paid on employed labour income
  • Consumption – taxes charged on goods and services
  • Capital – taxes paid on income earned from savings and investments

Taxes overall

The statistics show a vast difference between countries. Denmark has the highest overall tax revenue at 47.7% followed by Sweden (44.3%) and Belgium (44.1%). The lowest was in Lithuania (26%) and Bulgaria (27.2%). The UK burden in 2011 was 36.1% with Spain coming in lower still at 31.4% of tax to GDP.

Consumption and labour tax

Spain has the lowest consumption tax revenue (14%) of all the EU27 countries. In comparison, Sweden is almost double this at 27.3% and the UK comes in at 19.5%.

When it comes to tax on labour, the position is reversed. The UK has the fourth lowest tax rate at 26% and Spain’s rate is 33.2% – still well below Belgium’s top rate of 42.8%

Tax on personal income

The tax on personal income is quite interesting too. The report  compares the highest personal income tax rate between countries across the three years of 2000, 2012 and 2013.

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Top of the tax table in 2013:

  • Sweden 56.6%
  • Denmark 55.6%
  • Belgium 53.7%
  • Portugal 53%
  • Spain 52%

The cheapest place to live if you are a big earner is Bulgaria with a highest income tax of 10%. The UK has a top rate of tax of 45% reduced from 50% in 2012. Whilst the overall average amongst the EU27 is 38.7%.

We should always be cautious in drawing conclusions when using statistics. However, what this data does show is that countries across Europe vary enormously on how much the state decides to take from its citizens and where it takes it from. But perhaps the issue we should be most interested in is not how much is taken but how much better the country is as a result.

To help navigate the bureaucracy of the Spanish tax system, our dedicated advisers are on hand to help at every step of the way. Contact us and we will offer you a free consultation without obligation.

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