Tax increases among heaviest in EU - report

With the possibility of another increase in taxes just around the corner, an EU report released in Brussels yesterday revealed that during the last few years Malta registered one of the heaviest tax increases in the EU.

The report, Taxation In The EU From 1995 To 2003, issued by Eurostat, states that although Maltese taxes are still low when compared to the EU, between 1995 and 2003, "Malta experienced a notable increase in taxation (6.7 per cent of GDP).

This stemmed from an increase in VAT receipts resulting from a decrease in the range of goods exempted or taxed at lower rates, increases in personal income tax and corporate income tax arising from the broadening of the base, efforts to improve efficiency in collection and the tax on the capital gains, the report said.

The overall tax burden in Malta, including social security contributions, stands at 33.6 per cent of GDP, comparable with the average for the other new member states (33.9 per cent) but substantially lower than the EU 25 average (38.2 per cent).

The report states that Malta relies heavily on indirect taxes with its share of the total tax take well above the Union's average (42.6 per cent compared to the EU at 37.8 per cent).

"However it should be pointed out that as the Maltese are, on the whole, relatively lightly taxed, indirect taxes absorb a proportion of GDP comparable to the EU average (14.3 per cent). Likewise, direct taxes take in a proportion in line with the average (12.5 per cent) while social security contributions absorb much less than the average, taking roughly half of the EU average in GDP terms (6.8 per cent of GDP, EU25 11.6 per cent).

"Within social security contributions, employees contribute somewhat below the European average (Malta 3.1 per cent, EU25 3.6 per cent), while employers contribute much less than half the EU25 average (Malta 3.1 per cent, EU25 7.1 per cent)."

The report also shows that since 1998, taxes on consumption increased by 2.4 per cent and are now contributing to 12 per cent of GDP. This is mainly due to the widening of the VAT base and the raising of excise duties to bring them in line with EU minimum rates. At the same time, Maltese taxation of labour is among the lowest in the EU amounting to just 11.7 per cent of GDP or seven percentage points lower than the EU average.

In general terms, the report shows that in 2003, the overall tax burden (i.e. the total amount of taxes and social security contributions) in the EU25 stood at 40.3 per cent of GDP.

The lowest taxed countries are Lithuania (28.5 per cent of GDP) and Latvia (28.9 per cent). On the other hand Sweden (50.8 per cent) and Denmark (48.8 per cent) are the most highly taxed countries.