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The middle class, which pays the highest and lowest taxes in Europe?

2024-03-04 12:09:20Biznes SHKRUAR NGA REDAKSIA VOX

The middle class, which pays the highest and lowest taxes in Europe?

The UK's middle classes continue to face economic hardship despite earning up to £60,000 a year (€70,180), according to a recent report. In many OECD countries, the middle classes have seen their ability to save decline and in some cases fall into debt, as the tax burden on the European middle class becomes increasingly controversial in the current cost of living crisis. living.

The income and tax burden of the middle class varies significantly across European countries. In general, lower-middle incomes are taxed the least, while upper-middle incomes are taxed the most. Family size and number of earners also have an impact on tax rates. Before looking at the data, it is important to look at the definition of some key terms.

According to the OECD definition, the middle class refers to households with incomes between 75% and 200% of the national average income. It is divided into three sub-categories:

Lower middle class: Income between 75% and 100% of the national average income

Upper middle class: Income between 100% and 150% of the national average income

Upper middle class: Income between 150% and 200% of the national average income

Household disposable income is what households have available to spend and save after taxes and transfers. The size of a household and the age of its members are taken into account in weighting households to better compare them. In 2019, the middle class in Luxembourg had the highest disposable income, standing between 30,618 and 81,649 euros, according to EconPol based on the EU Statistics survey on income and living conditions.

On the other hand, Bulgaria had the lowest average household income among European countries. Here, the disposable income of the middle class ranged from €2,908 to 7,755 ruto. The chart above shows the large differences in disposable income between EU member states and the UK in nominal terms.

Looking at the disposable income of households in purchasing power standard (PPS), the level of differences compared to nominal terms has decreased, but there are still large inequalities. PPS disposable income provides a fairer comparison as the cost of living varies widely across Europe. This means that households can consume a different amount of goods and services in different countries with the same income.

In 2019, the middle class in Luxembourg recorded the highest purchasing power in 2019: around twice the EU average. The middle classes in Austria and Germany also enjoyed purchasing power that was around 40% higher than the EU average. France, Ireland, Italy and the UK had a purchasing power close to the EU average.

The middle classes of Eastern European countries took the last quarter. Bulgaria and Romania recorded the lowest average household incomes in the EU, just over 50% of the EU average.

The effective tax burden of middle-class households includes income taxes, statutory social security contributions and social transfers received. An OECD report titled "Under Pressure: Middle Class Squeezed" found that the costs of some goods and services such as housing, which are essential to a middle-class lifestyle, have risen faster than incomes and general inflation in recent decades.

Middle class once meant the security of living in a comfortable home and affording a useful lifestyle for many generations. "However, there are now signs that this foundation of our democracies and economic growth is not as stable as in the past," the OECD warns.

The lower middle class thinks the current socio-economic system is unfair, according to the report, which was published in 2019. "This can be addressed by revising and adapting the tax and benefit system," the report says.

 

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