Economy: The astonishing tax disparities between EU countries!

The tax and social security burden on employees in the European Union is a major topic of debate, especially in a constantly changing economic context. Every year, the Molinari Institute of Economics, in partnership with EY, publishes a study detailing the real burden of taxes and social security contributions 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 fiscal and social pressure in Europe

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

THE compulsory leviesoften perceived as abstract by the general public, group together 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 financed by the employer and reduce the real purchasing power of employees.

Real impact on the average European employee

The study by the Molinari Institute of Economics reveals that tax and social pressure varies significantly from one country to another within the EU. For example, in France, compulsory deductions represent a substantial part of the full salary, directly affecting the purchasing power of employees. On the other hand, countries such as Denmark, where social contributions represent only a small percentage of deductions, show a different situation.

The calculations made in this study take into account the “full salary” or “super gross”, 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 makes it possible to determine the symbolic day of “social and fiscal liberation”, from which employees are free to use their income as they wish.

The impact of this tax and social pressure on average wage earners has major economic and social implications. Tax and social policies must be continually evaluated to ensure a fair distribution of burdens. In addition, transparency and understanding of levies are essential to maintain citizens' trust in the tax system. Governments must therefore work to simplify these systems and clearly inform citizens about the distribution of tax and social burdens.