Cause and Effect in European Politics and Law

Bulgaria has the highest indirect taxes in the EU

Adelina Marini, June 21, 2009

Tax burden across the Eu is high, according to the latest report of Eurostat for 2008 - 39.9% of GDP on average. This is with over 12 percentage points over US and Japan. The high taxes, compared as a % of the GDP, are not a new phenomenon. Such trend has been seen in the 1970s, a bit less during the 1980s and the beginning of the 1990s which is related to the growing share of the public sector in the economy in those years.

The report covers 2005 and 2006 and for Bulgaria it shows an increase, although small, from 34.1% of the GDP in 2005 to 34.4% for the following year. This is with social securities included. And without the social securities the tax burden was 23.8% for 2005 and for 2006 - 25.6%. Most countries in the EU have gradually increased the taxes instead of decreasing them. But there are no abrupt movements in any of the member states.

In general the direct taxation is lower in the new member states which is normal, given their need to attract more investments so as to catch up with the economic status of the old members. With regard to the private income taxation the average rate seems good - 38.7% but the imbalances are pretty large. For example, In Romania the private incomes taxation is 16% which in Denmark it is 59%. Bulgaria and Cyprus have to lowest corporate tax - 10%. The highest is in Malta - 35% for 2008. Eurostat notes though that, in general, since the 1990s there is a drop in corporate taxation across EU.

Because of the different consumer habits the excise incomes also vary across the Union. For example Bulgaria collects from alcohol and tobacco almost 5 times more excise than the Netherlands. The situation with the VAT and other taxes over consumer goods also varies but, as a whole, there is a slight increase.

Another thing that puts Bulgaria first is that it is the only country that relies too much on indirect taxation. Their share, compared to the general taxation, is 56.5% or 17.5% above the average. This is due to the VAT and the high excise, explains the Eurostat.