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Explaining European Patterns of Taxation: From the Introduction of the Euro to the Euro-Crisis

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  • Mark Hallerberg

Abstract

This paper reviews developments in Europe from the eve of the introduction of the euro through the euro crisis. The paper begins with a discussion of the tax reform agenda. Although there are differences in the literature on specific taxes, and while European countries vary in their preferred levels of taxation, there is general consensus on the shape reforms should take. The paper then discusses the evolution of tax systems with the overall agenda in mind. It is found that overall revenue levels were broadly stable until just before the crisis, but marginal rates in corporate and top personal income declined almost continuously. During the crisis, however, this trend ended, with countries in the greatest fiscal difficulties raising tax rates and tax burdens. The last section provides a short analysis of why there were reforms in some countries but not others. Key variables include tax competition among member states, partisanship, underlying preferences in the population for redistribution, and the number of partisan veto players.

Suggested Citation

  • Mark Hallerberg, 2012. "Explaining European Patterns of Taxation: From the Introduction of the Euro to the Euro-Crisis," Research Department Publications 4777, Inter-American Development Bank, Research Department.
  • Handle: RePEc:idb:wpaper:4777
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    References listed on IDEAS

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    1. Sinn, Hans-Werner, 1990. "Tax harmonization and tax competition in Europe," European Economic Review, Elsevier, vol. 34(2-3), pages 489-504, May.
    2. Devereux, Michael P. & Lockwood, Ben & Redoano, Michela, 2008. "Do countries compete over corporate tax rates?," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1210-1235, June.
    3. repec:cup:apsrev:v:98:y:2004:i:02:p:261-276_00 is not listed on IDEAS
    4. Michael Keen & Alexander Klemm & Victoria Perry, 2010. "Tax and the Crisis," Fiscal Studies, Institute for Fiscal Studies, vol. 31(1), pages 43-79, March.
    5. Luigi, Bernardi, 2011. "Economic crisis and taxation in Europe," MPRA Paper 31007, University Library of Munich, Germany.
    6. Friedrich Heinemann & Michael Overesch & Johannes Rincke, 2010. "Rate-Cutting Tax Reforms And Corporate Tax Competition In Europe," Economics and Politics, Wiley Blackwell, vol. 22(3), pages 498-518, November.
    7. Philipp Genschel & Achim Kemmerling & Eric Seils, 2011. "Accelerating Downhill: How the EU Shapes Corporate Tax Competition in the Single Market," Journal of Common Market Studies, Wiley Blackwell, vol. 49(3), pages 585-606, May.
    8. European Commission, 2011. "Taxation trends in the European Union: 2011 edition," Taxation trends 2011, Directorate General Taxation and Customs Union, European Commission.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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