Belgium retains its ranking as the country that taxes labour at the highest rate in the European Union

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At what point in the year does a typical taxpayer keep his earnings and stop paying the state – his “tax liberation day”? The only EU-wide study using consistent methodology calculates how long people have to work in 27 EU member countries in 2012 before they can keep their earnings and stop paying the state. It is published today on the Irish Tax Liberation Day today. British taxpayers have their Tax Liberation Day tomorrow on 12 May. Maltese and Cypriots have already stopped paying into their state’s coffers. Belgians maintain their record of being the worst afflicted and have to wait until 5 August.

Brussels, 11 MAY 2012 - For the third consecutive year an EU wide calendar of “Tax Liberation Days” for typical workers in each of the 27 EU member countries has been released today - on the Irish Tax Liberation Day for 2012. The study is published by New Direction – Foundation for the European Reform and Institut économique Molinari (IEM)with data provided by EY. Using one consistent methodology across all EU member countries, with data reflecting the tax reality experienced by real, working people, the study calculates the Tax Liberation Days for 2012 as follows:

MaltaApril 11DenmarkJune 06RomaniaJune 23
CyprusMay 10SloveniaJune 07LatviaJune 25
IrelandMay 11PolandJune 08ItalyJuly 03
United KingdomMay 12EstoniaJune 11SwedenJuly 08
BulgariaMay 18FinlandJune 14GermanyJuly 12
LuxembourgMay 26Czech Rep.June 18HungaryJuly 13
SpainMay 23LithuaniaJune 18AustriaJuly 16
GreeceMay 31NetherlandsJune 18FranceJuly 26
PortugalJune 03SlovakiaJune 21BelgiumAugust 05

Key findings of the study include:

  • As a single economic entity, typical workers across the European Union saw their average “real tax rate” rise again this year, from 44.23% in 2011 to 44.89% in 2012. The rise of nearly one full percent since 2010 is largely a consequence of VAT increases in 15 EU member states since 2009.
  • Belgium retains its ranking as the country that taxes labour at the highest rate in the European Union; an employer in Brussels spends 2.45€ to put 1€ into a typical worker’s pocket – and that worker’s tax liberation day is August 5. Belgium has held its position since 2011 when Hungary, previously the most severe tax collector, implemented a flat tax scheme. · 43.3% of all payroll taxes collected in the EU countries – employer contributions to social security paid on top of gross salaries – are largely invisible to employees.
  • Retired, disabled, disenfranchised or simply too young, more than half (54.7%) of citizens are not in the labour force. Tax-wise, working people carry most of the weight, that grows heavier as populations grow even older. Since 2010, the proportion of Europeans outside the labour force has grown 0.4%.
  • Flat tax policies have offered considerable tax relief to workers – notably in Hungary, where a new 16% rate has pushed that country’s tax liberation day forward by 25 days in just two years. However, total taxes remain higher in "flat tax" countries (46.2%) than in "progressive" systems (44.3%) – a gap that has widened since 2010. "Belgium seems to win gold once again...France finishes second but 10 days behind. In fact the normal average taxpayer in Belgium needs to work until August 5th to actually start gaining a net salary. By waiting a total of 221 days before actually earning a salary or wage, Belgians thereby are the most taxed species in Europe. Yet the newly formed Belgian government seems determined to prevail with full glamour in this category in future years as well.

"Belgium also wins the gold-medal in the category of having the highest labour costs in Europe. As with the 100m and 200m races, these medals are interrelated - making Belgium a less attractive country for foreign investments. I am afraid that a considerable percentage of foreign investors perceive the recent government tax measures as quite negative for business, thus possibly impacting a decision to dis-invest in Belgium. The first conclusions of our perception analysis, conducted with investors in March as part of EY's yearly attractiveness study, will be released at the end of May", says Herwig Joosten, National Tax Leader, EY Belgium.

EU states spend too much and it is not by increasing Europe's already amazingly high taxes that we will solve the current crisis. It is time to rethink our model and the role of the State,” says Cécile Philippe, director of IEM.

Tax Liberation Days is the calendar day on which a worker theoretically stops working to pay taxes to the state and begins to keep his/her earnings. The data in the calendar reflect t he reality experienced by real, working people in the European Union and the true cost of hiring employees in each state.

Many believe falsely that their payslips show all of the taxes withheld from their salaries. In fact, nearly half of what Europe’s governments collect – social security contributions paid by employers on top of salaries – is invisible to workers,” explained James Rogers, one of the authors of the study.

The study, written by James Rogers and Cécile Philippe of Institut économique Molinari (Paris), analysed annual salary figures for typical workers from Eurostat and the OECD. Payroll tax calculations were made by EY.


Note to Editors 

The Institut économique Molinari (IEM) is an independent, non-profit research and educational organization based in Paris. Its mission is to promote an economic approach to the study of public policy issues by offering innovative solutions that foster prosperity for all.