In 2023, the EU’s tax-to-GDP (gross domestic product) ratio fell to its lowest level since 2011, according to the European Commission in its annual report on taxation, published on Tuesday 24 June.
EU tax revenues fell from 40.2% of GDP in 2021 to 39% in 2023. Lower revenues from environmental and property taxes explain 60% of this decline. The EU has also seen high inflation, which is driving nominal GDP growth. Despite a 4.7% rise in tax revenues to €6,712 billion, the faster 6.5% growth of nominal GDP reduced the overall tax burden.
Furthermore, the breakdown of tax revenues by economic function has remained fairly stable, with taxes on labour consistently accounting for more than half of total tax revenues. In 2023, the Member States collected 51.2% of their tax revenue from these taxes, including social security contributions, 26.9% from consumption taxes and the remaining 21.9% from capital taxes. Over the last decade, and particularly from 2021 onwards, revenue from taxes on capital has gained a certain weight in the EU’s tax mix, to the detriment of revenue from taxes on consumption. This trend varies from country to country.
In the longer term, an increasing proportion of tax revenues will have to be devoted to pension spending, if the current tax burden remains constant, according to the Commission.
To read the report: https://aeur.eu/f/hkf (Original version in French by Anne Damiani)