Malta experienced the second highest increase in taxes in the EU in the period between 2001 and 2008, according to a new study published by the European Commission yesterday. Although this increase is substantial – four per cent of GDP – the Maltese taxpayers are still taxed significantly less than the average EU citizen.
The study, Monitoring Tax Revenues And Tax Reforms In EU member States 2010, focuses mostly on the development of taxation trends in the EU during that eight-year period when data is available and comparable for all member states.
According to the study, Cyprus experienced the steepest rise in taxation in the EU, almost eight per cent of GDP, during this period.
However, with a tax burden of 34.5 per cent of GDP in 2008, Malta registered an increase of four per cent on its 2001 levels, the second steepest increase among the 27 member states.
The report also shows that contrary to Malta, the EU’s average tax burden decreased, although by a mere 0.25 per cent.
“The recent increase in Malta’s tax burden is quite high when compared to the other EU member states,” an EU official told The Times.
“However, Malta is one of those member states which until a few years ago was considered to have a low taxation regime, particularly when compared to its generous social, health and educational services. The recent increase seems to point towards adjusting this imbalance,” the official said.
According to a breakdown of Malta’s taxation regime in 2008, the report show that the bulk of Maltese taxes are concentrated in indirect forms, particularly consumption, including VAT, taxation on energy and duties on tobacco and alcohol.
This is followed by direct taxes, particularly taxation on labour and social security contributions by both employers and employees.
Taxes from business and capital form the smallest of the three-pronged pillars of Malta’s current taxation system.
Other member states which during the 2001-2008 period increased their tax burden by more than two per cent include many member states that joined the EU alongside Malta, namely Bulgaria, the Czech Republic, Estonia, Hungary and Poland. On the other hand, Luxembourg and Slovakia reduced their tax burden by four percentage points, while Sweden and Austria followed suit with a 2.5 per cent drop.
This is only one side of the story, as the report shows Maltese taxpayers are still contributing less than their average EU counterparts to their country’s coffers.
In 2008, Malta’s overall tax burden, which includes all the taxes collected by the exchequer, stood at 35.5 per cent of GDP, or 5.2 per cent less than the EU average.
The most highly taxed citizens in the EU are the Scandinavians. Denmark’s overall tax burden in 2008 stood at 48.2 per cent, followed by Sweden (47.1). The EU citizens taxed the least in 2008 were Romanians (28 per cent) and Latvians (28.9 per cent).