This paper gives an international comparison of the redistributive effect of personal income taxes in the 15 countries of the EU, using the European tax-benefit model EUROMOD. We focus on the effect of personal income taxes, social insurance contributions and other direct taxes. We present the contribution of progressivity and average tax rate to the reduction of income inequality, as well as the weight of the various types of tax concessions (i.e. exemptions, deductions, allowances and credits). There appears to be a wide variety among countries in the level of inequality reduction as well as in the instruments used to achieve this reduction. Personal income taxes are in all countries the most important source for inequality reduction, which is to a large extent, though not solely, due to the progressive rate schedule. Countries with a high degree of pre-tax inequality do not systematically redistribute more through their taxes; the results indicate rather the opposite.
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Paper provided by EUROMOD at the Institute for Social and Economic Research in its series EUROMOD Working Papers with number
EM5/04.
Length: Date of creation: 01 Oct 2004 Date of revision: Handle: RePEc:ese:emodwp:em5/04
Note: European Union, microsimulation, income redistribution, income taxes, social insurance contributions Contact details of provider: Postal: RAB Butler Building, University of Essex, Wivenhoe Park, Colchester, ESSEX C04 3SQ Phone: +44 (0)1206 872957 Fax: +44 (0)1206 873151 Email: Web page: http://www.iser.essex.ac.uk/research/euromod/ More information through EDIRC
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Find related papers by JEL classification: C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Microeconomic Data D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
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