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Economic crisis and taxation in Europe

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  • Luigi, Bernardi

Abstract

The recent economic crisis and taxation in the advanced countries - especially in the European nations - are linked in several ways. The tax systems may have exacerbated the crisis, and this raises the question of the need for a better system of taxation in certain economic sectors, especially in the banking sector. It is worthwhile examining the various different effects of the crisis on different kinds of tax revenue, as a result of both the automatic stabilizers and the discretional measures which were adopted to sustain the economies. We are going to show that while the former have had a relatively substantial impact, the latter have been of negligible effect. The paper initially offers a critical overview of the just mentioned topics. The European countries are now faced with a difficult trade - off between further tax reductions to sustain economic recovery, and the raising of taxes in order to help stabilize public budgets and debts. Broadly speaking, the most suggested solution consists in the idea of raising taxes whilst making them more growth - friendly. With this in mind, the paper then reconsiders and compares the latest, authoritative proposals for tax reform which in recent years have been proposed not only by international economic organizations, but also by studies in the field. The longstanding principles of broadening the tax base, reducing rates and simplifying the tax system still appear to be at the order of the day. The idea of shifting the tax burden away from labour and capital, whilst increasing taxes on consumption, properties and environmental resources, has also received large support. It is again suggested that efficiency - induced neutrality should characterize the design of the main taxes. While those political factors that have impeded reforms in recent years are still at work, we should remember that tax systems also have other targets than that of favouring neutrality - efficiency, and that in some countries (including Italy) the most urgent, radical reform required is the downsizing of an abnormal level of tax evasion.

Suggested Citation

  • Luigi, Bernardi, 2011. "Economic crisis and taxation in Europe," MPRA Paper 31007, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:31007
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    References listed on IDEAS

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    Cited by:

    1. Bernardi, LUIGI, 2013. "Recent findings regarding the shift from direct to indirect taxation in the EA-17," MPRA Paper 47877, University Library of Munich, Germany.
    2. Bernardi, Luigi, 2014. "Tax reforms in EU Member States subce rhe turn of the New centuri: selected observations," MPRA Paper 56856, University Library of Munich, Germany.
    3. 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.
    4. Luigi Bernardi, 2014. "Tax Reforms in the EU Member States Since the Turn of the New Century: Selected Observations," Working papers 2, Società Italiana di Economia Pubblica.
    5. Bernardi, L., 2012. "Heterogeneity of taxation in EA Member countries and some implications for EA fiscal governance," MPRA Paper 40050, University Library of Munich, Germany.

    More about this item

    Keywords

    Economic Crisis; Taxation; Europe;

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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