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
PROMOTED VIDEO
News
people

Actress isn't a fan of Ed Miliband

Arts and Entertainment
Rooney Mara plays a white Tiger Lily in forthcoming film Pan
filmFirst look at Rooney Mara in Pan
Life and Style
health

Do you qualify – and how do you get it?

News
Food blogger and Guardian writer Jack Monroe with her young son
people
News
i100
News
Privately schooled, Oxford educated and a former editor of arguably the world's poshest magazine 'The Lady', it's perhaps unsurprising that Rachel Johnson rarely mixes with ordinary Proles.
people

The Mayor of London's sister, Rachel Johnson, apologises for shocking tweet about the PM

News
ebooksNow available in paperback
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

Citifocus Ltd: Newly Qualified Accountants - Risk Mgmt

£Attractive Package: Citifocus Ltd: Prestigious financial institution seeks to...

Citifocus Ltd: Operational Risk Analyst

£Negotiable: Citifocus Ltd: Experienced operational risk professional with ban...

h2 Recruit Ltd: Business Development - Telecommunications - £50,000 OTE

£25000 per annum + £50,000 OTE: h2 Recruit Ltd: London, Reading , Southend, Al...

Recruitment Genius: Call Centre Agent - £22,000 OTE

£18000 - £22000 per annum: Recruitment Genius: As a Call Centre Agent you will...

Day In a Page

Homeless Veterans Christmas Appeal: Drifting and forgotten - turning lives around for ex-soldiers

Homeless Veterans Christmas Appeal: Turning lives around for ex-soldiers

Our partner charities help veterans on the brink – and get them back on their feet
Putin’s far-right ambition: Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU

Putin’s far-right ambition

Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU
Tove Jansson's Moominland: What was the inspiration for Finland's most famous family?

Escape to Moominland

What was the inspiration for Finland's most famous family?
Nightclubbing with Richard Young: The story behind his latest book of celebrity photographs

24-Hour party person

Photographer Richard Young has been snapping celebrities at play for 40 years. As his latest book is released, he reveals that it wasn’t all fun and games
Michelle Obama's school dinners: America’s children have a message for the First Lady

A taste for rebellion

US children have started an online protest against Michelle Obama’s drive for healthy school meals by posting photos of their lunches
Colouring books for adults: How the French are going crazy for Crayolas

Colouring books for adults

How the French are going crazy for Crayolas
Jack Thorne's play 'Hope': What would you do as a local politician faced with an impossible choice of cuts?

What would you do as a local politician faced with an impossible choice of cuts?

Playwright Jack Thorne's latest work 'Hope' poses the question to audiences
Ed Harcourt on Romeo Beckham and life as a court composer at Burberry

Call me Ed Mozart

Paloma Faith, Lana del Ray... Romeo Beckham. Ed Harcourt has proved that he can write for them all. But it took a personal crisis to turn him from indie star to writer-for-hire
10 best stocking fillers for foodies

Festive treats: 10 best stocking fillers for foodies

From boozy milk to wasabi, give the food-lover in your life some extra-special, unusual treats to wake up to on Christmas morning
Phil Hughes head injury: He had one weakness – it has come back to haunt him

Phil Hughes had one weakness – it has come back to haunt him

Prolific opener had world at his feet until Harmison and Flintoff bounced him
'I have an age of attraction that starts as low as four': How do you deal with a paedophile who has never committed a crime?

'I am a paedophile'

Is our approach to sex offenders helping to create more victims?
How bad do you have to be to lose a Home Office contract?

How bad do you have to be to lose a Home Office contract?

Serco given Yarl’s Wood immigration contract despite ‘vast failings’
Green Party on the march in Bristol: From a lost deposit to victory

From a lost deposit to victory

Green Party on the march in Bristol
Putting the grot right into Santa's grotto

Winter blunderlands

Putting the grot into grotto
'It just came to us, why not do it naked?' London's first nude free runner captured in breathtaking images across capital

'It just came to us, why not do it naked?'

London's first nude free runner captured in breathtaking images across capital