Employee benefits consultancy, William M Mercer, says that the UK has one of the lowest rates of labour taxation in the EU with only Ireland, Spain and Luxembourg being lower.

The report follows a survey of European countries by the consultancy that discovered that Ireland has the lowest tax on labour burden amounting to some 18% of average earnings. At the top of the league came Belgium where some 42% of average earnings went on taxation.

The UK came in at the fourth lowest position with taxation being 25% of average earnings.

Senior researcher with William M Mercer, David Formosa, said that high taxation countries were unlikely to cut back on taxation in any move towards tax harmonisation as tax reductions would inevitably have to be matched by reduced social security benefits.