Tax burden and economic development: The case of the european union countries

Abstract

The paper presents the research results on the relationship between the tax burden and economic development. The research methods: systemic, logical and comparative analysis of scientific literature, and statistical methods: descriptive statistics analysis, hierarchical cluster analysis, correlation analysis. Empirical analysis of this study focuses on the data of the European Union countries. Implicit tax rates are used to measure the tax burden. The study covers the period from 2003 to 2012 using annual data. The results of this study show that there are large differences in the tax burden in the European Union countries. The tax burden on capital and consumption is higher in the very high economic development countries; but implicit tax rate on capital is higher in the case of countries with lower GDP growth, high government sector and high government debt. Joining the EU in 2004 or 2007 did not have a strong effect on the change in the joined countries tax burden. However, the tax burden on labor has declined, and the tax burden on consumption has increased or remained in the similar level in the majority of countries.