Reliance on Social Insurance Tax Revenue in Europe

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A recent report on tax revenue sources shows that social insurance taxes—also referred to as social security contributions or payroll taxes—are an important revenue source for European governments. Social insurance taxes, as opposed to individual income taxes, are usually levied at a flat rate. The revenue is generally used to fund specific social programs, such as unemployment insurance, health insurance, and old age insurance.

In 2019 (the most recent data available), social insurance taxes were the second largest tax revenue source in European OECD countries, at an average of 29.5 percent of total tax revenue. Only consumption taxes were on average a larger source of tax revenue, at 32.4 percent.

Author(s): Elke Asen

Publication Date: 25 February 2021

Publication Site: Tax Foundation

Sources of Government Revenue in the OECD

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When comparing average 2019 and 1990 OECD tax revenue sources, the most notable change is a decrease in individual income taxes versus increases in social insurance and consumption taxes. The share of revenues from corporate income taxes has also increased compared to 1990 (despite declining corporate income tax rates[4]). The relative importance of property taxes as a source of revenue has stayed roughly constant.

Author(s): Cristina Enache

Publication Date: 11 February 2021

Publication Site: Tax Foundation