Advanced Search
MyIDEAS: Login to save this paper or follow this series

Shifting from Social Security Contributions to Consumption Taxes: The Impact on Low-Income Earner Work Incentives


Author Info

  • Alastair Thomas
  • Fidel Picos-Sánchez


This paper investigates the merits of increasing work incentives for low-income workers by shifting part of the tax burden from social security contributions (SSC) to consumption taxes (specifically VAT) in 13 European OECD countries. Simulation results based on household budget survey microdata show that such reforms will increase work incentives for low-income workers at both participation and hours-worked margins. However, these increases will generally be small as part of the VAT increase will still be borne by low-income workers. This, combined with difficulty targeting the reforms and potential equity concerns regarding increasing the tax burden on non-workers, suggests that alternate funding sources to a VAT increase should also be considered to fund SSC reductions. Le remplacement des cotisations de sécurité sociale par des impôts sur la consommation : incidence sur l'incitation des salariés titulaires de faibles revenus à travailler Ce document étudie le bien-fondé des mesures prises dans 13 pays européens de l?OCDE pour renforcer l?incitation au travail des salariés à faibles revenus par un transfert partiel de la charge fiscale des cotisations de sécurité sociale (CSS) vers les impôts sur la consommation (plus précisément la TVA). Les résultats de simulations fondées sur des données microéconomiques obtenues à la suite d?enquêtes sur les budgets des ménages montrent que ces réformes renforcent l?incitation des titulaires de faibles revenus à travailler, aussi bien pour ce qui est du choix d?accepter un emploi que du nombre d?heures ouvrées. Cependant, ce renforcement sera généralement faible, dans la mesure où une partie de l?augmentation de la TVA restera à la charge des salariés à faibles revenus. Ce fait, combiné à la difficulté de cibler les réformes et aux problèmes d?équité que risque de poser l?augmentation de la charge fiscale pesant sur des non-salariés, montre qu?il serait préférable de rechercher d?autres sources que la TVA pour financer des réductions des CSS.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL:
Download Restriction: no

Bibliographic Info

Paper provided by OECD Publishing in its series OECD Taxation Working Papers with number 11.

as in new window
Date of creation: 24 Jul 2012
Date of revision:
Handle: RePEc:oec:ctpaaa:11-en

Contact details of provider:
Postal: 2 rue Andre Pascal, 75775 Paris Cedex 16
Phone: 33-(0)-1-45 24 82 00
Fax: 33-(0)-1-45 24 85 00
Web page:
More information through EDIRC

Related research

Keywords: work incentives; VAT; consumption tax; social security contributions; impôts sur la consommation; incitation à travailler; TVA; cotisations de sécurité sociale;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:


No references listed on IDEAS
You can help add them by filling out this form.


Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Nico Pestel & Eric Sommer, 2013. "Shifting Taxes from Labor to Consumption: Efficient, but Regressive?," SOEPpapers on Multidisciplinary Panel Data Research 624, DIW Berlin, The German Socio-Economic Panel (SOEP).


This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.


Access and download statistics


When requesting a correction, please mention this item's handle: RePEc:oec:ctpaaa:11-en. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.