Second highest rise in tax burden

Maltese taxpayers have experienced the second highest increase in their contributions towards state coffers as a percentage of gross domestic product, according to a new study comparing the European Union's taxation trends since 2000.

However, Maltese taxpayers remain among the lowest taxed in the EU and many of their fellow European citizens still have to fork out much more in taxation. The island, in fact, is still considered a low-tax country.

According to the study, Taxation Trends in the EU 2010, and fresh data published by Eurostat, between 2000 and 2008 Malta registered the second highest increase in overall taxation among the 27 member states.

In 2008, Malta's tax burden, which takes into account all taxes as a percentage of GDP, stood at 34.5 per cent, or 6.3 per cent more than in 2000. This increase was only surpassed by Cyprus which saw its tax burden balloon by 9.3 per cent, reaching 39.3 per cent in 2008.

Although Malta raised its tax revenue considerably over the past few years it is still not raking in as much as the average in the EU, which in 2008 amounted to 39.3 per cent of GDP.

Countries with the highest tax burden in the EU in 2008 were Denmark (48.2 per cent) and Sweden (47.1 per cent), while the lowest taxes as a percentage of GDP were paid in Romania (28 per cent) and Latvia (28.9 per cent).

The study shows that Malta's major income from taxation in the past years came from indirect taxation and consumption taxes, including VAT.

In 2007 (latest data available) indirect taxes amounted to 15.2 per cent of GDP while direct taxes, particularly on labour, amounted to 13.6 per cent. During 2007, Malta registered one of the lowest incomes from social security contributions, amounting to just 5.9 per cent, the second lowest in the EU.

Salaried workers have seen their burden fall slightly in the past years. In 2008, the average Maltese worker was passing 20.2 per cent of all earnings to the Inland Revenue Department at the end of the month. In 2000, the average stood at 20.6 per cent.

Though this might sound a large portion of a person's salary, Maltese workers are still "privileged" when compared to European counterparts in other member states, who on average paid 34.2 per cent in 2008.

Italian workers were the highest taxed in 2008, paying 42.8 per cent of their hard-earned incomes, followed by Belgians (42.6 per cent). When it comes to income on labour, Maltese workers on average pay the least in the EU.

Corporate tax in Malta, another important contributor in terms of direct taxation, remained the same, at 35 per cent over the 2000-2008 period. However, this increased steadily over the years to 6.7 per cent of GDP in 2007 from 2.9 per cent in 2000.

As Malta's economy transformed into a consumption driven economy, an increase in indirect and consumption taxation of four per cent has been registered since 2000.

According to Brussels, Maltese consumers paid a fifth (20 per cent) in taxes on whatever they bought and consumed in 2008. They used to pay just 15.9 per cent in 2000.

However, this is still lower than the EU average on consumption which in 2008 was 21.5 per cent, up almost two per cent since 2000. In 2008, the most taxed consumers were the Danes (32.4 per cent), followed by the Swedes (28.4 per cent) and Luxembourgers (27.1 per cent). Spain taxes consumption the least at 14.1 per cent.