What is tax?
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.
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.
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.
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.
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.
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.
Usually travellers are allowed to bring in goods up to a certain value or amount. Duty is charged on anything over that limit.
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
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 do we mean when we say ‘shadow
This happens when goods and services are paid for in cash without a receipt, and are not declared for tax.
economy’ or ‘black market’?
Isn’t this easy for me to avoid?Not necessarily. If you buy something in a shop and you don’t get a receipt, it’s possible that the owner is not making a full tax declaration.
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?
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.
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.
Facts and figures from around the EU
- 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.