A new report from the European Commission shows that the tax burden continues to climb. The only silver lining to this dark cloud is that tax competition is forcing politicians to lower corporate rates and to consider lowering tax rates on labor. A Dow Jones report notes that Eastern European nations are having a good effect since their low‐rate tax systems are forcing reforms elsewhere in Europe:
Eurostat said the E.U.‘s tax burden remained below the high of 41.0% reached in 1999. The tax burden last increased in 2003. Taxes on work rose to 35.2% from 35.1% in the E.U., and to 36.8% from 36.2% in the euro zone. Eurostat said the decline in labor taxes that began at the turn of the century had come to a halt “despite a wide consensus on the desirability of reducing labor taxes.” E.U. governments have agreed that persuading more Europeans to work is essential if the bloc is to remain economically competitive with the U.S. and Asia. Cutting taxes on work is seen as a vital step in that direction. Eurostat said that although taxes on work remained below the 2000 high of 36.5%, they are “much higher…than in the other main industrialized economies.” …there is growing evidence of tax competition between E.U. members that is pushing tax rates down. In general, new E.U. members from eastern Europe have lower top rates of income and corporation tax. Fearing that companies may move production to the new members, some older members of the E.U. have begun to cut corporation tax rates, including Germany and the U.K..