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Reforms In Tax-Benefit Systems In Order To Increase Employment Incentives In The Eu

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Author Info
Giuseppe Carone (European Commission-DG ECFIN)
Aino Salomaki (European Commission-DG ECFIN)

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Abstract

In this paper we discuss the role of tax and benefit systems in the context of the functioning of the labour markets and review recent progress made by EU Member States in reforming tax and benefit systems with a view to increasing economic incentives for higher employment and job creation. On the basis of the most recent comparable data and indicators, we try to assess whether concrete measures are being taken by Member States to alleviate the tax pressure on labour and especially on the low paid. We also examine benefit systems (especially unemployment benefit systems) with a view to evaluating recent reforms to increase employment incentives. Our main conclusions are that while Member States have started to ease the tax burden on labour, progress on reforms has been unequal between tax and benefit systems: the emphasis has clearly been on the tax side while benefit reforms have mostly been relatively minor, and without adequate attention to the interaction between tax and benefit schemes. In view of the goal of full employment, to which the Union and the Member States are committed, it has become more urgent to speed up reforms of tax and benefit systems in order to increase labour supply and reduce structural unemployment. Further reforms aimed at making work pay should take a more comprehensive approach. This approach could help to move people from benefit dependency to work, while preserving an adequate level of social protection for those in need.

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Paper provided by EconWPA in its series Labor and Demography with number 0410005.

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Date of creation: 06 Oct 2004
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Handle: RePEc:wpa:wuwpla:0410005

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Related research
Keywords: Reforms; Tax; tax-benefit sytems; unemployment benefits; labour market reforms; METRs unemployment trap; poverty trap;

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Find related papers by JEL classification:
J - Labor and Demographic Economics

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Kari E. O. (ed.) Alho, 2008. "Tax/benefit Systems and Growth Potential of the EU," Discussion Papers 1122, The Research Institute of the Finnish Economy. [Downloadable!]
  2. Immervoll H, 2002. "The Distribution Of Average And Marginal Effective Tax Rates In European Union Member States," EUROMOD Working Papers EM2/02, EUROMOD at the Institute for Social and Economic Research. [Downloadable!]
  3. Kari O. E. Alho, 2006. "Labour Market Institutions and the Effectiveness of Tax and Benefit Policies in Enchancing Employment: A General Equilibrium Analysis," Discussion Papers 1008, The Research Institute of the Finnish Economy. [Downloadable!]
  4. Herwig Immervoll, 2003. "The Distribution Of Average And Marginal Effective Tax Rates In European Union Member States," Public Economics 0302005, EconWPA. [Downloadable!]
  5. Brian Ardy & Iain Begg & Waltraud Schelkle & Francisco Torres, 2002. "How will EMU affect cohesion?," Intereconomics: Review of European Economic Policy, Springer, vol. 37(6), pages 300-314, November. [Downloadable!] (restricted)
    Other versions:
  6. Giuseppe Carone & Aino Salomaki & Herwig Immervoll & Dominique Paturot, 2004. "Indicators of unemployment and low-wage traps (Marginal effective tax rates on labour)," Labor and Demography 0409007, EconWPA. [Downloadable!]
  7. Immervoll H, 2004. "Average And Marginal Effective Tax Rates Facing Workers In The EU. A Micro Level Analysis Of Levels, Distributions And Driving Factors (Revised Version Of EM2/02)," EUROMOD Working Papers EM6/04, EUROMOD at the Institute for Social and Economic Research. [Downloadable!]
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