Budget 1999: How UK Taxes Compare - Still a case of `vive la difference' in EU

THE BUDGET changes will do little to iron out the substantial differences in tax and duty between Britain and other European countries.

Following this Budget the ratio of debt to national income will fall below 40 per cent in the next fiscal year and is forecast to stay below 40 per cent for the rest of the Parliament. On the face of it, this puts the UK at the lower end of the European taxation scale.

Closer inspection reveals that this broad picture masks some important variations. In particular, it disguises the fact that - contrary to popular belief - many taxes in the UK are among the highest in Europe.

"Tax harmonisation is seen as forcing a low-tax hard-working UK to match Europe's uncompetitive level of state dominated inflexibility," said Alison Cottrell, chief international economist at PaineWebber. "All very entertaining and containing more than an element of truth - which still leaves it some distance from reality."

The UK's corporate tax burden, for example, is substantially higher than in Germany, Italy or France, on Organisation for Economic Co-operation and Development calculations. Recent OECD data puts the UK effective rate of company tax - which includes factors such as allowances and depreciation rules - at around 45 per cent. This is despite the fact that the UK's 30 per cent top rate of corporation tax is lower than any other major country in Europe.

"Looking at the tax rate is interesting, but it doesn't tell the whole story," said David Evans, director of international tax at accountants KPMG.

Sales tax is another field where the UK fails to shine. The OECD puts the effective rate of sales tax - which includes excise taxes - at just under 15 per cent; roughly similar to Germany, above Spain, but below Scandinavia. And as far as particular duties - such those on alcohol and tobacco - are concerned, UK consumers pay through the nose. The tax on a pack of 20 cigarettes in the UK, for example, is almost pounds 1.50 higher than the average of other EU states, according to recent calculations by the Tobacco Manufacturers' Association. "We are one of the most highly taxed for the `sin' taxes," said Bill Robinson, a director of the London Economics consultancy.

One area where the UK's reputation as a low-tax, flexible economy does hold true is labour tax. Relatively, the British economy enjoys low rates of personal income tax. UK workers also tend to be cheaper to employ than abroad. Ms Cottrell said: "Continental Europe has on the whole taxed capital far more lightly than labour. In the `Anglo' economies the reverse has been true."

Looking forward, both market forces and greater European integration will smooth out some of the tax differentials, although domestic political and cultural concerns limit how far this can go.

Although some differences will never disappear, budgets in the years to come will increasingly have to take account of the fiscal situation abroad.

Lea Paterson

Suggested Topics
Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
News
Tangerine Dream Edgar Froese
people
News
Rob Lowe
peopleRob Lowe hits out at Obama's snub of Benjamin Netanyahu
News
Davies (let) says: 'Everybody thought we were having an affair. It was never true!'
people'Our friendship flourished online. You can share some very revelatory moments at four in the morning…'
Arts and Entertainment
Over their 20 years, the band has built a community of dedicated followers the world over
music
News
Staff assemble outside the old City Road offices in London
mediaThe stories, the writers and the changes over the last quarter of a century at Britain's youngest paper
Life and Style
The Oliver twins, Philip and Andrew, at work creating the 'Dizzy' arcade-adventure games in 1988
techDocumentary looks back at origins of the computer-games industry
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Arts and Entertainment
Krall says: 'My hero player-singer is Elton John I used to listen to him as a child, every single record
music
News
Friends for life … some professionals think loneliness is more worrying than obesity
scienceSocial contact is good for our sense of wellbeing - but it's a myth that loneliness kills, say researchers
Arts and Entertainment
The Wu-Tang Clan will sell only one copy of their album Once Upon A Time In Shaolin
musicWu-Tang Clan and The Sexual Objects offer fans a chance to own only copies of their latest albums
News
i100
Environment
Number so freshwater mussels in Cumbria have plummeted from up to three million in the 20th century to 500,000
environment
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Recruitment Genius: Outbound Sales Executive - OTE £25,000

£16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Java Developer / J2EE Developer - Watford - £45,000 - £47,000

£45000 - £47000 per annum + bonus + benefits: Ashdown Group: Java Developer / ...

Ashdown Group: Marketing Product Manager - (Financial Services) - SW London

£35000 - £38000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Day In a Page

Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
America: Land of the free, home of the political dynasty

America: Land of the free, home of the political dynasty

These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
A graphic history of US civil rights – in comic book form

A graphic history of US civil rights – in comic book form

A veteran of the Fifties campaigns is inspiring a new generation of activists
Winston Churchill: the enigma of a British hero

Winston Churchill: the enigma of a British hero

A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
Growing mussels: Precious freshwater shellfish are thriving in a unique green project

Growing mussels

Precious freshwater shellfish are thriving in a unique green project
Diana Krall: The jazz singer on being friends with Elton John, outer space and skiing in Dubai

Diana Krall interview

The jazz singer on being friends with Elton John, outer space and skiing in Dubai
Pinstriped for action: A glimpse of what the very rich man will be wearing this winter

Pinstriped for action

A glimpse of what the very rich man will be wearing this winter
Russell T Davies & Ben Cook: 'Our friendship flourished online. You can share some very revelatory moments at four in the morning…'

Russell T Davies & Ben Cook: How we met

'Our friendship flourished online. You can share some very revelatory moments at four in the morning…'
Bill Granger recipes: Our chef serves up his favourite Japanese dishes

Bill Granger's Japanese recipes

Stock up on mirin, soy and miso and you have the makings of everyday Japanese cuisine
Michael Calvin: How we need more Eric Cantonas to knock some sense into us

Michael Calvin's Last Word

How we need more Eric Cantonas to knock some sense into us