Smaller states, bigger taxes?
Is it a bird? Is it a plane? No, it’s MELVILLE – that bloke who can actually be bothered trawling through OECD research papers
Is it really true that a separate Scotland, like Norway, could be awash with oil revenues to feed growing and generous public services? For separatists, that future can only look golden. Until that is, the inconvenient truths fly home to roost.
One way of testing those golden claims is to examine the ratio of tax revenues to the national incomes across Europe’s small states and compared with large ones like the UK, Germany and France. According to comparable data published by the OECD, all EU States, bar the Netherlands, increased their tax share of GDP between 1995 and 2006.
The UK’s tax share increased by just 1.9 per cent in ten years to a modest 37.1 per cent of our national income as both debt interest and unemployment fell and NHS spends rose. Denmark increased its tax share by a whopping 10.7 per cent to 49.1. Finland’s tax take grew by seven percent to 43.5, Belgium by five percent to 44.5 and Sweden by 7.9 to 49.1. Norway increased its tax share by a more modest 4.7 per cent to 43.9, despite being flush with its North Sea oil revenues, burgeoning oil prices and a rich income from the world’s second largest sovereign fund.
German taxes rose less than in the UK – by 1.4 per cent to just 35.6 per cent of income in 2006, and France by 8.8 per cent over the ten years to 42.4. Switzerland increased by 5.7 per cent to 29.6 per cent of GDP.
Two small rich states kept their taxes close to the low levels of the UK and Germany: the Netherlands managed to decrease its tax share over the ten years by 1.4 per cent to 39.3, and Luxembourg, the world’s wealthiest small state increased taxes by 3.1 per cent to 35.9 per cent of income, and just a fraction greater than the UK’s tax share. But most states do not include their health services within their tax charge, and the UK does.
Compiling and checking the comparability of data is a tedious process, which is why the OECD data is not recent. But that is unlikely to change the overall conclusion: small states tax you more, not less, as separatists posit.
There are large economies of scale in the governance of states, so that most small European states pay much more tax for their privilege of being separate. I wonder whether they know that in Holyrood?
For further studies go to: http://www.oecd.org/dataoecd/48/27/41498733.pdf
LabourHame would like to reveal the true identity of “Melville” but if we did we’d have to kill you.