Tax burden in EU countries - A comparative study

• Author: M. Ka?tan - Z. Machová
• Position: Department of National Economics, V?B - Technical University of Ostrava.
• Pages: 264-270

Bulletin of the Transilvania University of Braşov • Vol. 3 (52) - 2010

Series V: Economic Sciences

TAX BURDEN IN EU COUNTRIES –

A COMPARATIVE STUDY

M. KAŠTAN1 Z. MACHOVÁ1

Abstract: The paper is focused on the overa ll tax burden and tax policy of

Europea n countries. The theoretical par t of the paper expla ins the term of tax

burden and summarizes its measuring possibilities. It especially deals with

the tax quota as the most generally applied indicator but some alternative

indicator s, such as the ta x freedom day or tax misery index, a re also

mentioned. The empirical par t of the paper is aimed on the comparison of tax

burden of “old” and “new” EU member states following mentioned

indicator s. Certain tax policy recommendations are for mulated on the basis

of performed comparison.

Key words: tax burden, ta x quota, tax policy.

1 Department of National Economics, VŠB - Technical University of Ostrava.

1. Introduction

Tax is compulsory payment paid to

public budget. Tax theory analyses not

only the effects of discrete tax types on

different types of economic activity and

economic entities, it also analyses total

taxation and its effects from the point of

macroeconomic view.

Supply side economists, represented

mainly by Arthur Laffer, agree with strong

relation between public budget revenue

and taxation rate [12]. Positive relation

between taxation rate and budget revenues

turns into the negative relation as the tax

burden exceed tolerable amount. In fact

there are two effects: arithmetic and

economic one. [8] Thus the optimal tax

burden in view of fiscal policy is the one

which yields the maximal revenue.

Concept mentioned above, known as

Laffer curve, is widely accepted in

theoretical world, but evokes plenty of

disputes on its empirical evaluation. Aim

of this paper is neither to certify nor to

falsify empirical findings of Laffer curve;

this paper summarizes approaches to the

tax burden measurement and evaluates tax

policy of European countries.

2. Tax Burden Indicators

As we tried to find out how tax burden is

measured, we traced up criteria which

helps us to break indicators into several

groups [7].

These criteria are as follows:

1) type of data,

2) measured area,

3) type of rate,

4) form of indicator.

Ad 1) Indicators use hard data, soft data

or combination of both. Hard data are

those which are not subject to subjective

errors e.g. value of GDP or nominal tax

rate set by law. Soft data capture individual

point of view and transform it into a single

number. The question sounds whether it is

good or not to use soft data to determine

tax burden. Those who agree to use soft

data claims that tax burden influences

economic activity of respondents, that´s

why they should be able to evaluate it.

Ad 2) Tax burden indicators can be

fractionated to those which determines

total tax burden of all economic activities