Tax reforms in EU Member States - Tax policy challenges for economic growth and fiscal sustainability – 2013 Report

The 2013 edition of the report ‘Tax reforms in EU Member States’ contributes to the tax policy debate in the EU. Compared to previous editions, the report has been streamlined with a stronger focus on the Member State level. The report consists of two parts: (i) an extensive overview of recent tax reforms, and (ii) a discussion of selected tax policy challenges relevant for improving Member States’ tax systems in two analytical chapters. The chapter on recent tax reforms identifies common trends across countries and offers a typology of reforms consistent with the main messages of the European Semester. The first analytical chapter focuses on two wide ranging challenges that EU Member States are facing in the area of tax policy in times of slow growth and high fiscal consolidation needs: the potential contribution of taxation to consolidate public finances – in addition to expenditure control – and the growth-friendliness of the tax structure. Beside updating and refining last year's horizontal screening, various checks have been carried out to see how robust the results are. The second analytical chapter deals with economic challenges that EU Member States are facing with respect to the design of individual taxes and tax compliance. It deepens the analysis of tax expenditure with particular insights on personal income taxation and examines the debt bias in corporate taxation, notably its effects on banks’ capital structures. Applying an indicator-based approach, the report then provides an update of the analysis carried out in previous years on broadening the VAT base, on housing taxation, on environmental taxation and on improving tax governance. Finally, the chapter analyses the influence of taxation on income inequality.