Hard-pressed Europeans bear most of the tax-raising brunt, while the wealthy get away very lightly.
In the European Union in 2022, the wealthiest 1 per cent held a quarter of net personal wealth, while half of Europe’s population held a mere 3 per cent. This is a direct result of Europe’s great tax divide. Everyday Europeans shoulder the tax burden, while the wealthiest pay far from their fair share.
Taxes on wealth account for less than 60 cent of every ten euro brought into the coffers of EU member states. Governments collect 13 times as much from taxes mainly paid by ordinary Europeans, such as value-added tax or taxes on their salaries, which bring in eight out of every ten euro.
Richer billionaires
This stark disparity did not appear overnight; it has been unfolding over the past few decades. It came from the belief that tax cuts on the wealthiest and corporations would drive growth and prosperity for all—so-called ‘trickle-down’ economics. History has proven this idea wrong. Extreme inequality—the gap between the very rich and ordinary people—increased, and tax has played a key role in it.
From 2020 to 2023, billionaires all over the world became 34 per cent richer, with the five richest men seeing their fortunes more than double. At the same time, almost five billion people worldwide—over 11 times the population of the EU—have seen their wealth shrink.
Europe is no different. The wealth of EU billionaires increased by 33 per cent from 2020 to 2023, and the five richest men increased their wealth at a rate of €6 million per hour. Meanwhile, 99 per cent of the EU’s population have become poorer in aggregate terms.
This is not the result of fate but of bad political choices. Tax systems have become less and less progressive everywhere, including in the EU.
Paying less and less
Between 2000 and 2023, the top average personal income-tax rate in the EU—the highest rate paid by the rich—fell from 44.8 to 37.9 per cent, while the top tax rate for the EU’s largest corporations collapsed nearly 10 percentage points, from 32.1 to 21.2 per cent. On top of that, taxes on the type of income and wealth rich individuals rely on, such as financial assets, remain very low or non-existent or even avoided.
In contrast, taxes on ordinary people have risen. Between 2010 and 2022, the tax rate on labour in the EU increased from 33.3 to 34.8 per cent and the tax rate on consumption went up from 17.7 to 18.7 per cent.
While the wealthy also pay labour and consumption taxes, these hit ordinary citizens much more. Everyday Europeans rely mostly on income from work, unlike the rich, who have other income sources, including financial assets. In addition, ordinary people spend a larger portion of their income on everyday expenses—such as putting food on the table—so they pay more proportionately in consumption taxes.
Today, consumption and labour taxes account for over 27 and 50 per cent respectively of tax revenues in the EU. In contrast, revenues from capital stock (wealth) contribute less than 6 per cent. Revenues from corporate taxation represent slightly more than 8 per cent.
The average European is increasingly shouldering the tax load, while ultra-wealthy companies and individuals have been paying less and less. Rather than tackling the growing inequality crisis, Europe’s tax systems are enlarging the wealth gap by asking more from ordinary people than from the richest.
The money is there
While everyday Europeans bear the burden, decision-makers shoulder the responsibility. EU governments chose to cut taxes on big corporations and rich individuals over the last few decades. Yet we are told again and again that there is not enough money for building schools, hospitals and infrastructure or to fight poverty and the climate crisis.
The facts tell a different story. The money is there: it has just been piling up, non-stop, in the accounts of a few.
It is time to shift the tax burden. A wealth tax is fair and, given the magnitude of the crises we face, urgent. Every hour EU policy-makers fail to act they lose €33 million, adding up to €286.5 billion of lost revenue annually—this is the amount they could collect with a wealth tax of up to 5 per cent. With this money, they could for instance pay the EU’s seven-year aid budget more than three times over.
The good news is that the tide is turning. There is a growing consensus among policy-makers on the need to tax the super-rich. In its annual tax report in July, the European Commission advocated shifting the burden of taxation from labour to, among other things, capital gains, inheritance and wealth. That month, for the first time in history, the G20 finance ministers agreed to co-operate to tax the ultra-rich.
Even the super-rich themselves are calling on governments to tax them: nearly three-quarters of millionaires polled in G20 countries support higher taxes on wealth. European citizens concur: seven in ten agree that governments should tax the rich to support the poor.
In July, Oxfam and other organisations collected 1.5 million signatures from people across the world demanding governments tax the ultra-wealthy. In the EU, economists, activists, politicians and multi-millionaires initiated a petition for a European wealth tax; so far more than 300,000 Europeans have signed it.
The way forward is clear. Decision-makers must catch up and take action.
Chiara Putaturo is deputy head of the Oxfam EU office, where she is adviser on inequality and tax policy. She previously worked at Transparency International in Italy. Her academic background is in political science and development economics.