Bulgaria with Steepest Income, Corporate Tax Reductions in EU

Bulgaria’s personal income tax dropped from 40% in 2000 down to 10% in 2010, a difference of -30%, while its corporate tax decreased from 32.5% down to 10% in the same period, a difference of -22.5%.

In comparison, the EU 27 average income tax rate dropped 7.2%, from 44.7% in 2000 down to 37.5%; the EU 27 average corporate tax rate decline by 8.7% - from 31.9% in 2000 down to 23.2% in 2010.

The highest top rates on 2010 personal income are found in Sweden (56.4%), Belgium (53.7%) and the Netherlands (52.0%), and the lowest in Bulgaria (10.0%), the Czech Republic and Lithuania (both 15.0%).

The highest statutory tax rates on 2010 corporate income are recorded in Malta (35.0%), France (34.4%) and Belgium (34.0%), and the lowest in Bulgaria and Cyprus (both 10.0%) and Ireland (12.5%).

The overall tax-to-GDP ratio1 in the EU272 was 39.3% in 2008, the first year of the economic and financial crisis, compared with 39.7% in 2007. The EU27 tax ratio was 40.6% in 2000, fell to 38.9% in 2004 and then rose until 2007.

Bulgaria’s tax revenue was 32.5% of the GDP in 2000, 34.2% of the GDP in 2007, and 33.3% in 2008, Eurostat data shows.

The largest source of tax revenue in the EU27 is labour taxes, representing over 40% of total tax receipts, followed by consumption taxes at roughly one quarter and taxes on capital at just over one fifth.

The average implicit tax rate on labour, a broad measure of the tax burden falling on work income, was almost unchanged in the EU27 at 34.2% in 2008 compared with 34.3% in 2007, after having declined from 35.8% in 2000. Among the Member States, the implicit tax rate on labour ranged in 2008 from 20.2% in Malta, 24.5% in Cyprus and 24.6% in Ireland to 42.8% in Italy, 42.6% in Belgium and 42.4% in Hungary. Bulgaria’s was 38.7% in 2000, 29.9% in 2007, and 27.6% in 2008.

The average implicit tax rate on consumption in the EU27, which had risen between 2001 and 2007, dropped to 21.5% in 2008 from 22.2% in 2007. In 2008, implicit tax rates on consumption were lowest in Spain (14.1%), Greece (15.1%) and Italy (16.4%), and highest in Denmark (32.4%), Sweden (28.4%) and Luxembourg (27.1%). In Bulgaria it was 21.8% in 2000, 26.6% in 2007, and 26.4% in 2008.

In the EU27, the average implicit tax rate on capital for the Member States for which data are available was 26.1% in 2008 compared with 26.8% in 2007. The lowest implicit tax rates on capital were recorded in Estonia (10.7%), Lithuania (12.4%) and Ireland (15.7%), and the highest in the United Kingdom (45.9%), Denmark (43.1%) and France (38.8%). The data for Bulgaria is available only for 2007 when its rate was 16.9%.

Tags: corporate tax, income tax, tax burden, capital, labor, consumption, EU 27