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Structural Challenges for Europe

Edited by Gertrude Tumpel-Gugerell and Peter Mooslechner

The main thrust of the book is that the sharing of mutual experiences is important for generating an acceptable policy mix, both at EU and national levels. The contributors highlight key financial issues, including the role of FDI and of foreign banks in the still ‘under-banked’ acceding countries, the re-launch of social security systems and the fiscal challenges of financing the catch-up process. They also examine the ongoing EU debate surrounding the application of the Stability and Growth Pact in Central and Eastern European Countries (CEECs) and go on to explore the contrasting evidence that some CEECs have shown more extensive privatisation efforts than some EU countries.
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Chapter 18: Taxation in the European Union – the harmonization issue

Roger Guesnerie


Roger Guesnerie INTRODUCTION Taxation regimes differ across European countries, both in terms of the tax burden (tax rates) and the global structure of tax income. Figure 18.1 shows the dispersion of taxes per capita as a function of GDP per capita. The average level of the tax burden in the EU, as measured by 25 20 15 10 5 0 P UK Taxes per capita DK GDP per capita EU Figure 18.1 Taxes per capita and GDP per capita: a sample of countries and average for Europe 329 330 Taxes and benefits/fiscal structures the ratio of government tax receipts to GDP, is 43 per cent. This is high by international standards and reflects the comprehensiveness of the public welfare system and the level of social security spending in the wealthier countries. Table 18.1 displays ratios of tax income to the corresponding tax base, specifically the rate at which labour, capital and consumption are taxed. It shows in particular the high level of the effective labour tax rate, which accounts for 40 per cent of the wage bill, with 70 per cent mainly related to social security contributions (non-wage labour costs). Table 18.1 Effective taxes in Europe Non-wage labour costs Belgium Germany Spain France Ireland Italy Luxemburg Netherlands Austria Portugal Finland EU-11 Denmark Greece Sweden UK EU-15 United States Japan 26.5 31.8 21.9 32.1 12.2 23.1 20.9 28.3 26.2 19.9 23.6 28.1 5.64 22.9 25.4 11.9 24.8 11.6 16.5 Personal income tax rate 24.9...

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