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What is tax?

 
While taxes come in different forms, it is always the government that collects this money from individuals and businesses. This money is then used to finance specific facilities or services such as hospitals, schools, museums, libraries, etc.

Why paying tax is a good thing

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Who decides tax rates?

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What taxes do we pay?

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The amount of tax you pay is decided by elected politicians in your country, who meet in parliament. The fact that representatives of the people decide on tax issues gives tax legitimacy. Tax rates and other tax arrangements (called ‘tax bases’) can be reviewed and changed by your politicians.

Find out who decides what to tax in your country.
Check out your national tax website.

 
 
Personal taxation
When you start working and your salary reaches a certain level, you have to pay ‘income tax’. The amount is based on how much you earn, and varies from country to country.
In Belgium, for example, if you earn between €20 600.01 and €37 750 per year, the income tax rate is 45 %. In Austria, if you earn between €25 001 and €60 000, the income rate is 43.2 %. In Ireland, if you earn up to €33 800 per year, the income rate is 20 %, whereas it is 40 % if you earn over €33 800.
 
Property tax
When somebody possesses or inherits a house, an apartment, a building or land, they are inheriting property. In each EU country, if you own property, you are required to pay tax on it.
 
Corporate tax
Company tax — also referred to as corporation tax — must be paid by companies, clubs, co-operatives and unincorporated associations on the profit that they make. The rules are set by national authorities and are not the same in all countries.
 
Environmental tax
This addresses pollution. The higher the tax you have to pay when buying or using polluting products, the less likely you are to buy or use them. So the tax discourages behaviour that will harm the environment. Most of the time, this tax is applied to energy products, motor vehicles, air and water pollution, etc.
 
Consumption tax, Value Added Tax (VAT)
The EU has standard rules on VAT, but these rules may be applied differently in different countries. Normally you pay VAT on all goods and services.
 
You pay tax every time you buy something online or travel
Usually travellers are allowed to bring in goods up to a certain value or amount. Duty is charged on anything over that limit.
If you are buying goods online from another country, you may have to pay customs duty, depending on where the goods are posted from.

     Customs duties are not charged on goods that come from within the European Union. If you buy a product from a non-EU country, you effectively become an importer. This means you have to pay customs and excise duty as well as Value Added Tax (VAT) payments.

 
 
 

It’s true that there was once a time when we didn’t pay tax. But this was also the age of cavemen! Back then, individuals had to protect their family, hunt, build their house and do a lot more besides – and without any support.

 

From hunter-gatherers to city dwellers

Step by step, people started living together in villages, then in cities. They established a ‘social contract’, providing for community support.

 

This support includes building roads, teaching children, taking care of those who are ill – things that make all of our lives easier. To pay for these services, everyone has to contribute, and they do this through paying tax.

Paying tax is kind of like going on holiday with friends

 

Have you ever been away with friends?

Have you ever been away with friends? Next time you do this, ask everybody to put some money in a piggy bank and use this pooled money for common expenses like food. This is much easier than trying to calculate how much everyone owes after each meal or food shop! In the same way, your government gathers money to simplify citizens’ lives!

NGOs, foundations, charity donations

In some countries, when you give money to non-governmental organisations (NGOs), foundations or charities – from those funding medical research to those maintaining heritage buildings – you can get tax relief.

 

Belgium and Romania are among the countries in which you can mention charitable donations on your tax declaration at the end of the year. Some of what you gave is then refunded to you (provided you donated to a registered charity).

 

What are tax evasion and tax fraud?

The role of the European Union

Both collecting taxes and combating tax fraud and evasion are the responsibility of your national government.

The role of the EU is to supervise the implementation of tax policies decided by your government. At the same time, the EU is also active in areas such as tax fairness among businesses, and VAT.

What are Intellectual Property Rights and counterfeiting?

Help Tina make the right decision!
First example

Tina would like to listen to the new album by Lady Lala.

What would you advise her to do?

  • Go to the shop and buy the album;
  • Download it from a legal download platform;
  • Go to the cool website on which all music is free that a friend told her about;
  • Don't download the album. Tina should listen to it via a legal streaming platform.

If you answered ‘1’, ‘2’ or ‘4’, you can be sure that Lady Lala will benefit from Tina’s choice.

If you answered ‘3’, it is likely that the website made Lady Lala’s music available without her authorisation.

 
Second example

Tina would like to buy the latest "Lady Lala" headphones and a T-shirt.

What would you advise her to do?

  • Go to the ‘Lady Lala’s website and buy the products;
  • Buy it from a market stall that her friend David told her about; the price is amazingly cheap!;
  • Go to the Lady Lala's concert in two months and buy the products there.

If you answered ‘1’ or ‘3’, you can be sure that Lady Lala will benefit from Tina’s choice.

If you answered ‘2’, it is likely that the cheap T-shirt and headphones at the market are fakes.

Sooo... what is a counterfeit product in a nutshell?

A product that imitates another original product (sports shoes for example) and is then sold is a counterfeit product. This is not only about clothes – music, software, medication, car and aeroplane parts, toys, electronics, etc. can also be fake.

...and what about IPR?

As Lady Lala makes her albums, the music is considered as ‘hers’. This is what we call ‘Intellectual Property Rights’.

How can I avoid purchasing fake products?

 
 
 

Facts and figures from around the EU

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  • In 2015, tax revenue (including social contributions) in the EU countries stood at 40 % of Gross Domestic Product, and accounted for around 89 % of total government revenue.
  • In Europe the ratio of 2015 tax revenue to GDP was highest in France (47.9 % of GDP), Denmark (47.6 %) and Belgium (47.5 %).The lowest shares were in Ireland (24.4 %), Romania (28.0 %), Bulgaria (29.0 %), Lithuania (29.4 %), Latvia (29.5 %) and Switzerland (28.1 %).
  • Tax revenues vary from year to year. The main reasons are changes in economic activity (levels of employment, sales of goods and services, etc.) and in tax legislation (tax rates, the tax base, thresholds, exemptions, etc.). This has consequences for the government’s spending budget.