It can be hard to compare actual tax rates as you have to also account for all the payroll taxes. For instance in France for a Software Engineer you would expect about 40~45% payroll taxes [1], and you will still pay income taxes (somewhere between 20% and 40%) on what remains [2]. They go towards different budgets (Social Security and State), so it makes sense that they are collected separately. I don't know how it is in Germany or Italy.
[1] Payroll taxes go towards the Social Security budget, which covers health insurance, retirement pensions, unemployment insurance, etc.
[2] Income taxes (and VAT) go towards the state budget, which covers debt interests payments, education, justice, police, military, etc.
(fictional, simplified) Example for a Software Engineer based in Germany [1]:
Gross income: 100.000 EUR / year [2]
-------------------------
TAXES
- Income tax (28.600 EUR)
- "solidarity premium" (2.300 EUR)
- church tax (1.600 € - cumpolsory until you leave the curch)
SOCIAL SECURITY (compulsory)
- unemployed insurance (1.200 EUR)
- pension insurance (7.300 EUR)
- health insurance (4.500 EUR)
- long term care (800 EUR)
-------------------------
Net income: 53.700 EUR
Add to that what is often called gross-gross-income: Hidden from your paycheck is that social security has to be paid by your employer as well (so in this case amounts to 113.080 EUR which makes for a combined rate of 53%) [3]
[1] Hypothetical young graduate from Italy/Spain/France: Unmarried, no children and catholic
[2] 100k is not the typical pay for freshly graduated-from-school devs in Germany, but an attainable income goal after some working years nonetheless
[3] some exemptions in that employer-part, its a bit less than the employee-part
70-80K € seems attainable just judging by the recruiters' numbers, but most offers of that kind come with strings attached - like moving to one of the most expensive cities (thus being equal to a 50K job in a smaller city) or being a traveling consultant.
Tangenitally, I'm curious about the unemployment insurance. What does it cover? In the United States, unemployment insurance is compulsory for employers, but it only covers two specific cases: laid-off due to inability to pay salary, laid-off due to your skills no longer being required. Quitting / being fired / getting sick puts you out on the street. Is it the same in Europe?
For most western European countries, there are almost no case in which you end up 'on the street'.
Most countries have a system in which this is prevented in a tiered system (like the German example) where there is the utter bottom layer where you get just enough money to fulfil primary needs (health, roof, bed, food, power, water etc). This status often also means you get other things as well, like free education for people that really cannot afford anything. This basic needs for existence tier is no fun to live in as far as I've seen/heard, and is a pretty good motivator to get out of as soon as possible.
As far as I know, this is also why you don't see the same tent camps underneath overpasses you see in the US; unless you completely remove yourself from society (by choice or by mental status), there is no need for it.
Then, on top of that base layer, which is not something you usually get to, there are the layers that deal with cases where injury causes you to not be able to work, as well as simply losing a job (which is usually because your contract expired, the company no longer exists, or you did something yourself -- not the case where the employer simply said "we don't want you" -- they can't , not with a permanent contract). This layer gets you anywhere between 50% and 80% of your last salary in most countries.
Keep in mind, that with most of those constructions, a lot of systems are in place that prevent you from going that low, or staying that low, on the income/self-sufficiency ladder. This is because it was mostly modeled on the concept that enabling people to live is cheaper than having a bunch of people on the street, as well as simple compassion and empathy. A lot of it comes from historical concepts, but it seems to grow in the same direction.
Every country has its own laws. In Germany it is a historically grown two-tier system:
The "basic" one (ALG 2) which amounts to ~9-12 EUR/day + rent (if it is a reasonable flat) [1] It comes with a lot of strings attached, like you have to use up your savings first and can recieve penalties if you don't show up for job interviews etc.
The "premium" one (ALG 1) pays you ~65% of your last 12 months gross income regardless of savings and termination pay. You guessed it, for that to make sense you would have to be employed at least 12 month before becoming jobless and at a sufficient pay-rate. Also it is limited to 1 year (after that -> ALG2)
In Germany, you can also collect unemployment benefits after you've quit or been fired with cause. However, in those cases there is a waiting period of 12 weeks before you can start collecting benefits. If you have been laid off for reasons not related to your performance, including for long-term illness, you can start collecting benefits immediately.
Not any better in the EU. One’s unemployment insurance is basically void if the employment took place in one EU country and then one immediately relocated to another EU country. Theoretically it’s covered, but in practice the local formal requirements are too stringent and contradicting.
In most Central European countries the total salary cost/net salary easily approaches or even exceedes 200% for any software-related profession. Employment contract is a racket contribution-wise and what’s worse, there is no better option (please don’t suggest contracting or freelancing).
Same here (western Europe) but aside from a little complaining, nobody really wants it gone as it has too many benefits for everyone as whole. And as long as you 'know' the true cost of having an employee you can take that into account which makes it more of a math problem and less of a money problem.
> They go towards different budgets (Social Security and State), so it makes sense that they are collected separately.
Kinda beside the point, but that does not actually make sense. My home budget and car budget are different, but I collect them from the same source. I don't get a different job to pay for my car. Many countries pay for social security out of income taxes, or pay for general budget stuff out of payroll taxes.
I don't know what the real reason behind payroll taxes is. Probably it's mostly historical, as opposed to something you would reimplement if you were doing it from scratch today. But it is most definitely not simply because those taxes go into a different budget.
This will become easier to compare as income tax will soon be taken directly from the payroll like most other countries.
However it's important to note that many people don't actually pay that much income tax in France, or at least nowhere near the 20% to 40% number you're giving.
If you're married it depends on your spouse revenue, whether you have kids or not (especially between 0 an 3 yo because you get a tax credit on daycare, etc...)
I think the biggest difference between a Software Engineer in France and UK or Germany is not the taxes, but that the gross salary would usually be much lower in France.
[1] Payroll taxes go towards the Social Security budget, which covers health insurance, retirement pensions, unemployment insurance, etc.
[2] Income taxes (and VAT) go towards the state budget, which covers debt interests payments, education, justice, police, military, etc.