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Consolidation on the revenue side and growth-friendly tax structures: an indicator based approach

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  • Florian Wöhlbier
  • Caterina Astarita
  • Gilles Mourre

Abstract

The paper examines potential challenges arising at Member State level from the need and scope for either consolidating on the revenue side or shifting taxes away from labour. It uses a systematic indicator-based screening to identify Member States that may face a challenge in each of these two policy areas. The first quantitative screening is applied to identify Member States that have a need and room for shifting taxation away from labour to other tax bases. The analysis of labour taxation looks at overall labour taxation and at taxation of two specific groups considered to be rather responsive to labour supply incentives, namely low-skilled workers and second-earners. A second screening aims at identifying at Member States that might consider using taxation – in addition to expenditure control – to consolidate their public finances and steer them onto a sustainable path. This screening looks into the potential need for substantial fiscal consolidation and the availability of 'tax space'. Robustness checks are carried out to test how far the screening results depend on the screening approach. These checks overall confirm the outcome of the main screening approach. However, both screenings need to be complemented with in-depth country analysis before being able to draw firm policy conclusions.

Suggested Citation

  • Florian Wöhlbier & Caterina Astarita & Gilles Mourre, 2014. "Consolidation on the revenue side and growth-friendly tax structures: an indicator based approach," European Economy - Economic Papers 2008 - 2015 513, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  • Handle: RePEc:euf:ecopap:0513
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    2. Mirdala, Rajmund & Kameník, Martin, 2017. "Effects of Fiscal Policy Shocks in CE3 Countries (TVAR Approach)," MPRA Paper 79918, University Library of Munich, Germany.
    3. Kohler, Pierre, 2014. "Asset-Centred Redistributive Policies for Sustainable Development," MPRA Paper 55357, University Library of Munich, Germany.

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    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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