Taxes 2025, the EU ranking. Italy challenges Irpef and VAT rates

The first quarter of 2025 saw the start of a new edition of the 'European Tax Championships', a fierce comparison of tax rates, reforms and macroeconomic impacts between the main countries of the European Union and the eurozone, in an economic context still marked by moderate inflation, geopolitical tensions and, above all, by pushes towards the digitalisation of tax systems. The Finance Department's International Revenue Bulletin confirms that the European tax game is in full swing, with countries playing different strategies between VAT rate increases, Irpef reforms and, as mentioned, the digitisation of tax compliance.

In the first three months of 2025, it is Ireland that has the lead in tax revenue with +17.5%, showing the best performance among the major countries compared to the same period in 2024. Portugal follows by 5 percentage points with a +12.5% increase in revenue. On the third step of the podium is Spain, where taxes are growing by 9.7%, just ahead of Germany, where tax revenues are +9.5% compared to the first three months of 2024. Growing the most compared to last year, however, is France, which collected taxes and fees for +7.6%. Distant United Kingdom and Italy, respectively at +4.7% and +4.6%, where compared to the first three months of last year they collect less and show, as the Finance Department points out, a decreasing trend compared to the whole of 2024.

Italy, while maintaining a VAT rate within the European average and an Irpef reform that aims to reduce the tax burden on low and middle class incomes by lowering the 35% rate to 33%, as Deputy Minister for the Economy Maurizio Leo reiterated at the Trento Festival of Economics, must deal with a European context in which tax competition is becoming increasingly close and complex. The challenge for Italy and all the governments of the old continent, however, is to find the balance between the need to keep revenues high with economic growth and social sustainability, in a global scenario that remains uncertain and dynamic, especially with the announcements coming from overseas.

One of the hottest areas of European taxation is VAT. The European ranking for 2025 sees Hungary in first place with the highest standard rate, at 27%, followed by Finland, which recently raised its standard rate to 25.5%, surpassing Croatia, Denmark and Sweden (all at 25%). Italy is in 13th place with a VAT rate of 22%, in line with the European average but far from the extreme levels. The highest leap forward in the VAT rate game belongs to Slovakia, which raised the standard rate by a full three points from 20% to 23% and also raised the reduced rates in an attempt to reduce the deficit.

VAT increases and changes reflect the tax strategies of individual countries to cope with budgetary challenges and to adapt to an increasingly digital economy. In fact, digitalisation is at the heart of the 2025 VAT reforms, with the mandatory extension of electronic invoicing across Europe, where in Italy it now also applies to flat-tax VAT returns, and greater flexibility in the application of reduced rates, which now cover up to 29 categories of goods and services, including environmentally friendly products and social services. And Italy may soon extend the list of reduced rates. Also at the Festival of the Trent Economy, organised by the Sole 24 Ore group, Leo announced that the government would be working on a subsidised rate (5% is hypothesised) on works of art, precisely to make the Italian market more competitive in the European Tax Championship. Today, in fact, art in Italy pays 22% against rates of 5 and 7% for other countries such as France and Germany