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According to Eurostat’s new tax report, spreads between tax rates in the EU’s 27 member nations are remarkably wide. The difference between the highest top personal income tax rate, Sweden, at 56.4%, and Bulgaria, at 10%, is a whopping 46.4 percentage points.

Spreads are also wide for other forms of taxation. The average tax on capital is 10.7% in Estonia and 45.9% in the U.K. Tax on consumption was lowest in Spain, 14.1%, and highest in Luxembourg, 27.1%.

The tax situation is also volatile over the years. Bulgaria’s top personal income rate, for example, has fallen all the way from 40% in 2000. Romania’s has fallen to 16% from 40% and Slovakia’s to 19% from 42%. The biggest increases: The U.K., to 50% from 40%, and Sweden, to 56.4% from 51.5%.

Thanks to the tax-cutting Eastern Europeans, the overall tax rate on labor in the EU fell to 34.2% in 2008 from 35.8% in 2000. Consumption and corporate taxes have increased slightly in the last decade.

Despite the huge disparities between taxes in different countries, why don’t people and companies in Europe move more often? EU surveys indicate that language, cultural comfort and salaries are more important to Europeans than tax rates.

Source: Eurostat Tax Report

One thought on “Huge and Volatile Tax Spreads Between EU Nations

  1. I … Several comments about taxation.

    Higher taxes have led to a higher standard in Sweden than in Bulgaria.

    The average tax on capital is low in Estonia because it is the intransigent example of Milton Friedman inspired neoliberalism; and the fact that it is high in the UK had helped the former socialist regime provide social benefits to a vast number of citizens and immigrants. I have more to say on Estonia in part II below.

    The fact that Romania’s personal tax rate has fallen, has literally destroyed the country, as the country’s health service is on the bank of insolvency; the fact that personal taxes have remained high in Sweden has assured a higher standard of living for all than in Romania.

    Tax cutting has been a disaster as it has led to competitive wage deflation, and competitive currency devaluation differentials between the Euro, FXE, based countries and the developing Europe, GUR, countries. The result has been a plummeting standard of living in countries such as Romania and a devastation of Hungary’s currency. And now that the sovereign debt bubble and carry trade currency bubbles have burst, countries such as Greece and Hungary have fast falling levels of gross domestic production. The chart of developing Europe, GUR, compared to Europe, FEZ, shows that investors rapidly sold out of the emerging Europe countries as the European Sovereign Debt crisis started to emerge; and then on April 26, when the currency traders heaving sold off the Euro, FXE, they sold off the developing countries currencies even more, resulting in an ever-widening differential between Europe and its neighbors. Now countries like Hungary have lost their seigniorage capability in the sovereign debt market place and are reliant on the predatory International Monetary Fund, IMF, for money.

    The article mentions: “Despite the huge disparities between taxes in different countries, why don’t people and companies in Europe move more often? EU surveys indicate that language, cultural comfort and salaries are more important to Europeans than tax rates.” My response is that there is indeed language and cultural xenophobia in Europe; and those who have good salaries want to stay put; and one living in Norway or Sweden would never willing accept the developing Europe standard of living and high unemployment.

    II … Estonia was one of the countries that participated in the Milton Friedman inspired neoliberal revolution in developing Europe. The economic philosophy of neoliberalism became government policy in Estonia where privatization, mitigation of collective bargaining, and development of free trade brought carry trade investments and credit from banks in Europe and the developed world. With the 2008, sub-prime driven, economic collapse, came an unwinding of carry trades and a demand for repayment of loans as well as austerity measures and taxes as an internal devaluation. The economic bubble burst and now Estonia has a high level of unemployment, and finds itself difficult to export in spite of competitive wage deflation against the rest of Europe. The entrance of Estonia into the Euro regime, will assure its economic destruction as it participates in the ongoing debt deflation and currency deflation of the Euro. Neoliberalism and it’s political peer, neoconservatism, both originating from the Chicago School of Economics, have been the engines of globalization. Beginning January 1, 2011, Estonia will be tightly integrated into the European Region of Global Governance, one of ten regions called for by the Club of Rome in 1974.

    According to Wikipedia, Friedman allowed the Cato Institute to use his name for its biannual Milton Friedman Prize for Advancing Liberty beginning in 2001. A Friedman Prize was given to former Estonian Prime Minister during 2006.

    Although Friedman never visited Estonia, his book Free to Choose exercised a great influence on that nation’s then 32-year-old prime minister, Mart Laar, who has claimed that it was the only book on economics he had read before taking office. Laar’s reforms are often credited with responsibility for transforming Estonia from an impoverished Soviet Republic to the “Baltic Tiger”. A prime element of Laar’s program was introduction of the flat tax. Laar won the 2006 Milton Friedman Prize for Advancing Liberty, awarded by the Cato Institute. Cato Institute provides a profile of Mart Laar.

    The book Free To Choose empowered a liberation movement according to Naomi Klein: “… indeed the most successful liberation movement of our time, which is the movement by capital to liberate itself from all constraints on its accumulation … So, as we say that this ideology is failing, I beg to differ. I actually believe it has been enormously successful, enormously successful, just not on the terms that we learn about in University of Chicago textbooks, that I don’t think the project actually has been the development of the world and the elimination of poverty. I think this has been a class war waged by the rich against the poor, and I think that they won.”

    III … I am not a Libertarian, yet I do mention that Libertarians, who perceive themselves to be sovereign individuals, do not believe in taxes; in fact they are quite offended by the concept of taxes, much as Christians are offended by sinful activities — they do not want any part of them and view them as death.

    Libertarians do not believe in taxes or any other form of redistributive justice as the HayekCenter.org reveals in their coverage of F. A. Hayek’s The Road to Serfdom, especially his chapter “Planning and the Rule of Law”.

    Mark Amagi writes that in Law Legistlation, and Liberty: The Mirage of Social Justice (Vol. 2, University of Chicago Press, 1976), Friedrich Hayek explores the concept of “social justice” or distributive justice, which he finds wanting and destructive of any real understanding of justice.

    I find it interesting that Libertarianism and Neoliberalism sprang forth, like beasts, from the University of Chicago. And I believe that if Libertarianism would have won out over Neoliberalism, there would never had been any credit bubbles; and society would be even more pyramidal than it is today. ”We the people” would all be serfs beholding to a wealthy few. It’s been far better to have had the Neoliberal Elite and the Neoconservative Elite, than to have had the Libertarian Elite governing. At least we have had comic relief in Mad Magazine fashion with leaders such as the most recent George Bush.

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