Euronews Business takes a closer look at tax across Europe to see where people are paying the most – and the least.
According to the Tax Foundation, single average wage workers in Europe were paying about one third of their wages in taxes in 2022. Unsurprisingly, tax burdens across Europe vary significantly, with workers in Western European and more developed countries paying considerably more.
Denmark (55.9%), Austria (55%), Portugal (53%), Sweden (52.3%) and Belgium (50%) are some of the countries with the highest personal income tax rates.
On the other hand, Romania (10%), Bulgaria (10%), Bosnia and Herzegovina (10%), Kosovo (10%) and North Macedonia (10%) are the European countries with the lowest taxes.
Why Danish citizens welcome higher taxes
However, surprisingly, not all citizens are unhappy about higher taxes, including in Denmark, where taxes can reach an eye-watering 55.9%.
In this case, many citizens consider the payment to be an investment in the collective future of the country and society, or akin to buying a certain quality of life. To note, Denmark was ranked the second happiest country in the world for the fourth year in a row, according to the 2023 World Happiness Report.
This allows all segments of society, regardless of gender, socio-political or economic standing, to take advantage of the same opportunities, thus considerably reducing economic and social burdens. Most education, especially higher education in Denmark is free, with college students also receiving a grant from the Danish government.
This support continues into the workplace, with parents being entitled to 52 weeks of parental leave, out of which 32 weeks are paid by the state. The Danish labour market model, dubbed the flexicurity model, also provides flexibility for employers and security for workers, while also emphasising active labour participation. This allows both workers and the state to provide a safety net in case of unemployment.
As such, many are quite content to pay their share of taxes, especially if the public services actually being received are of high quality.
However, this also comes with its share of disadvantages, with Denmark also having to offer these education grants to students from other European Union countries, even though they rarely end up staying long-term in the country.
Strong social security systems enough to offset hefty taxes?
For Austria, another country with high taxes at 55%, the social insurance system, which includes the statutory health insurance system, the statutory pension insurance system and the statutory work accident system, is quite prized. Apart from these, it also covers maternity and unemployment.
The country requires all employees to be insured, as well as people on unemployment benefits, on pensions – or receiving any other kind of needs-based funding.
In countries such as Belgium, single childless people bear the brunt of the highest taxes, whereas married couples with children get a slightly lighter burden.
Although the country boasts a high quality of health care, registering for this can be a long and complicated process, involving a social security fund and public health insurance fund registration.
Belgium tax payers see almost 65% of their wages deducted
Monthly social insurance contributions also need to be paid. Therefore, someone living in Belgium on a salary of €45,000, for example, will be taxed at 45% over €24,480 – and 50% over €42,370. Additionally, the employee will have to pay 13.07% on social security contributions.
There’s also a special social security contribution to pay, varying between €9.30 and €60.94 per month. A person on this salary would therefore take home around €1,369 per month, approximately 36% of their pay packet.
Keeping in mind that the minimum wage in Belgium is €1,994.18 per month, before tax, the monthly pay on a €45,000 salary would leave a resident with much less than the minimum wage after deductions.
This has led to increasing frustration among Belgians in recent years, who feel like they are not quite getting what they pay for in taxes, compared to their Scandinavian counterparts.
However, Belgium has been slowly making an effort to reduce wage taxation, according to the OECD, with the average single worker seeing their tax wedge reduced by about 2.7% between 2009 and 2022.
Swedish Tax Agency one of the most trusted in the country
Much like in Denmark, Swedish citizens also don’t mind paying higher taxes, in this case, about 52.3%, for a well-functioning society and high-quality public services. The Swedish Tax Agency, Skatteverket, is one of the most trusted and respected agencies in the country, behind only the Swedish Patent and Registration Office (PRV) and the property division, Lantmateriet.
This is due to the tax agency being involved in most aspects of citizen life, such as births, marriages, moving properties and death, among others – and making sure that a high quality of service is provided. Not only that, it is also very customer-friendly and accessible, thus making it even more trusted.
A young fan holds a Swedish flag on the stands before the Women's World Cup quarterfinal soccer match between Japan and Sweden at Eden Park in Auckland, New Zealand.Abbie Parr/Copyright 2023 The AP. All rights reserved
Less generous tax breaks in nations of Eastern Europe
Lower taxes are one strategy to draw and maybe keep foreign investment in Eastern and Southeastern European nations like Romania, Bulgaria, and Bosnia and Herzegovina, whose economies and infrastructure are still in the early stages of development.
These nations frequently offer lower labor and production costs, tax exemptions, and a plethora of unexplored markets and business potential. They can also frequently offer a higher level of living because their cost of living is far lower than that of the majority of Western European nations.
Furthermore, the economies of Southern and Eastern Europe are among the quickest expanding; North Macedonia, Romania, Bulgaria, and Cyprus are all considered to be the next hotspots for a number of businesses and industries.
Nonetheless, nations like Romania have been attempting to raise taxes on software industry workers in recent months. In an effort to raise tax revenue, the government is also attempting to eliminate the exemption from health insurance payments for workers in the food, construction, and agricultural sectors.
Do some people’s greater salaries make up for their high tax burden?
of certain instances, the average salary of nations with greater taxation, like Denmark and Austria, is likewise higher, which has significantly lessened the financial strain. In 2022, the average wage in Denmark was approximately €62,972.33, while in Austria it was €68,690.65, as reported by Eurostat.
The flexicurity labor paradigm in Denmark has led to more open pay negotiation, for instance, and a greater focus on education and lifelong learning. Demand for workers in high-paying fields like banking, law, medicine, and finance is also higher in some nations.
Could rising rates of inflation make taxes more onerous?
Another element that could make tax burdens seem burdensome is inflation. This is particularly relevant in light of the recent spike in food and energy costs brought on by the Russia-Ukraine war. The price of energy and other items has been further driven up by Red Sea disturbances and other crises like the Israel-Hamas war.
more consumer costs will put additional strain on people’s budgets if this trend keeps up, which will make paying more taxes feel more challenging.
The European Central Bank (ECB) is still pursuing a cautiously optimistic, data-dependent stance before making any decisions about lowering interest rates, even though Eurozone inflation fell to a two-year low of 2.8% in January.