TMF EU VAT Tracker rises continue in Euro crisis

23 January 2012

In a series of European-wide Value Added Tax (VAT) hikes, shoppers are being squeezed by tax rises as governments attempt to sustain their credit ratings.  This will knock already depressed retail sentiment - the EU says consumer sentiment is at a two-year low.  The annual TMF EU VAT Tracker shows the GNP-weighted average EU VAT rate has risen from 19% to 20% in the last two years, and will leap to 21% in 2012.  This will cost EU households approximately €500 (£425) per annum.

Governments are taxing consumers in favor of job-creating businesses as they seek to retain or grow their share of domestic and foreign investment.

• France and Austria have this month indicated that they will rise their VAT rates in 2012 following this month's credit rating downgrades
• Italy, Ireland, Cyprus in December 2011 each tabled VAT increases of 2% for 2012
• The UK, Greece, Portugal, Spain, Finland, Hungary, Poland, Romania, Switzerland, Slovakia and Czech Republic have been forced to raise their VAT rates in the two years (see table below for details)

Before these latest rises, EU consumer confidence was already at a two-year low according to a European Commission November survey.

Richard Asquith, Head of VAT, TMF Group commented “France's decision this month to consider an emergency VAT rise is an attempt to match Germany's successful 3% VAT hike in 2007 which funded a cut in employment taxes.  European countries are desperate to prove their debt-cutting credentials in a bid to calm the nerves of the financial markets.  Taxes on shoppers -VAT - are a fast, low cost way to show their sovereign creditors that they are serious about tackling domestic resistance to austerity measures."