Euronews Business examines the proportion of income taxes to average annual gross earnings across Europe. Tax rates vary significantly by country, with Nordic nations and Belgium generally facing the highest burdens.
How much of their gross salaries do workers actually pay in taxes?
Euronews’ has crunched the numbers, analysing how much the average earner pays across Europe. Using Eurostat data, this article focuses on EU member states, three EFTA countries, and one EU candidate country.
Our examination considers average annual gross earnings and deducted income taxes under different scenarios, taking into account marital status, the number of income earners in a household (for couples), and the number of dependent children, if any.
The dataset enables us to track gross earnings, net earnings, family allowances, and employees’ social security contributions and income taxes.
1) Taxes for single person without children
In 2023, a single average worker without children in the EU had annual gross earnings of €41,004, with €7,075 deducted for income taxes. This means that income taxes accounted for 17.3% of gross earnings.
This proportion varied significantly across the 31 countries listed, ranging from 3.2% in Cyprus to 36% in Denmark.
For instance, in Denmark, average annual gross earnings came to €65,506, with €23,757 deducted in income taxes.
In Cyprus, a single average worker without children earned €26,689 in gross annual earnings but paid only €853 in income taxes.
Denmark is the only country where income taxes exceeded 30% in this scenario, while Iceland and Belgium recorded tax rates above 25%.
The proportion of income taxes to gross earnings was also above 20% in five more countries: Ireland, Italy, Finland, Luxembourg, and Norway.
On the other end of the spectrum, besides Cyprus, the tax proportion was also below 10% in Poland (5.7%), Romania (7%), Bulgaria (8.6%), and Czechia (9%).
Among the EU’s ‘Big Four,’ Italy (22.1%) is the only country exceeding the EU average, followed by Germany (17%), France (16.2%), and Spain (15.6%).
Switzerland: Low taxes driven by intense local competition
Switzerland stands out as a remarkable case, as shown in the chart above. The country reports the highest average annual gross earnings at €105,105. However, with a tax proportion of just 12.2% (€12,796 in taxes), Switzerland ranks 22nd overall.
Alex Mengden, Global Policy Analyst at the Tax Foundation, told Euronews Business that the intense local tax competition between cantons and municipalities is the key factor.
“Local tax competition of this sort can be beneficial by allowing individuals and businesses to choose more attractive combinations of tax rates,” he added.
Examining geographical trends, the following key findings emerge:
Nordic and Western European countries have the highest tax proportions, with extensive welfare programs being common in these regions.
Eastern and Southern European countries tend to have lower tax proportions, alongside lower wages and earnings in these regions.
Central Europe aligns closer to the EU average.
2) Taxes for two-earner couple without children
In the EU, a two-earner couple without children had an average gross annual earning of €81,732, with €14,000 paid in taxes, representing 17.1% of their earnings.
The percentage of earnings paid in income tax for this group ranged from 3.3% in Cyprus to 35.5% in Denmark.
The rates closely mirror those of a single person without children, with the largest difference being less than two percentage points.
3) Taxes for one-earner couple with two children
Having dependent children significantly affects the proportion of income taxes in gross annual earnings. The rates are notably lower for households with a single-earner couple.
In the EU, the average annual gross earnings for a one-earner couple with two children amounted to €41,043, with €3,311 deducted in taxes. This corresponds to a tax rate of 8.1%.
In this scenario, the tax proportion ranged from -14.1% in Slovakia to 32.3% in Denmark.
Four countries apply negative income tax policies
A negative tax rate means that taxes were refunded rather than deducted. This refund is not part of the family allowance, as family allowances are recorded separately in the dataset.
For example, Slovakia’s -14.1% tax rate meant that the couple received a tax refund of €2,381 instead of paying any income tax. Additionally, they were granted a family allowance worth €1,440.
Besides Slovakia, tax proportion was also negative in Czechia (-6.5%), Poland (-1.1%) and Germany (-0.2%) for one-earner couples with two dependent children.
Nordic countries have the highest tax burdens in this category whereas Eastern and Southern Europe have lower tax rates.
4) Taxes for two-earner couple with two children
In the EU, a two-earner couple with two children had an average gross earning of €81,732 in 2023, with €11,931 deducted in taxes.
That results in a tax rate of 14.6%.
The tax rates ranged from 1.3% in Slovakia to 35.5% in Denmark.
Where does the taxman hit hardest?
From our analysis, we can see that Denmark ranks first in tax proportion across all household types and dependency statuses.
Belgium ranks third in three categories, except for one-earner couples with two children.
Nordic countries, on the other hand, generally have the highest tax rates across all household types, even though they do not always rank in the top five.
Eastern and Southern European countries generally have the lowest tax rates, with some offering strong tax benefits for families. This is the case for Slovakia, Poland, Czechia.
Germany, Slovakia, and Portugal, meanwhile, show the largest ranking drops for one-earner families, indicating strong tax incentives for households with children.
