Economy: The Astonishing Fiscal Disparities Between EU Countries!

The tax and social pressure on employees in the European Union is a major topic of debate, especially in a constantly evolving economic context. Every year, the Molinari Economic Institute, in partnership with EY, publishes a study detailing the real burden of taxes and social contributions weighing on the average employee. This report, particularly relevant in 2024, offers a clear vision of this pressure across the 27 EU countries.

The complexity of tax and social pressure in Europe

The right of citizens to consent to taxation with full knowledge is a pillar of modern democracies since the American and French revolutions of the 18th century. However, the increasing complexity of tax and social systems makes this transparency increasingly difficult. In France, for example, the financing of public social protection has evolved. Now, it includes not only salary-based contributions but also levies on all income, such as the CSG and CRDS.

The mandatory levies, often perceived as abstract by the general public, encompass a range of taxes from income tax to VAT. The distinction between “employer” and “employee” contributions further complicates the understanding of the true cost of social protection for the average employee. In reality, these contributions are all funded by the employer and reduce the real purchasing power of employees.

Real impact on the average European employee

The Molinari Economic Institute’s study reveals that tax and social pressure varies significantly from one country to another within the EU. For example, in France, mandatory levies represent a substantial part of the full salary, directly affecting employees’ purchasing power. In contrast, countries like Denmark, where social contributions represent only a small percentage of levies, show a different situation.

The calculations made in this study take into account the “gross wage” or “super gross wage,” including all contributions and taxes. By deducting employee contributions, income tax, and VAT, we obtain the “real purchasing power” of the average employee. This methodology allows for the determination of the symbolic day of “social and tax liberation,” from which employees are free to use their income as they see fit.

The impact of this tax and social pressure on average employees has major economic and social implications. Tax and social policies must be continuously evaluated to ensure an equitable distribution of burdens. Additionally, transparency and understanding of levies are essential to maintaining citizens’ trust in the tax system. Governments must therefore work to simplify these systems and clearly inform citizens of the distribution of tax and social burdens.