DG ECFIN
Economic Growth and Taxation
Towards a post-2010 Lisbon strategy
in the EU
Matthias Mors
European Commission,
Directorate-General for Economic and Financial Affairs
International Tax Conference on
European Tax Systems Coordinated for Growth
Confederation of Swedish Enterprise
Stockholm, 15-16 June 2009
DG ECFIN
Improving the quality of public finances
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Agreed need to improve the quality of public
finances (QPF) in the EU as part of the Lisbon
strategy
WG with Member State experts reporting to
Ministers (May 2009 Council conclusions)
Regular national reporting on tax reforms
Efficiency and effectiveness of revenue
systems one element of a multi-dimensional
approach to improving QPF
On revenue side, focus on composition and
efficiency of revenue collection
European Commission, Economic and Financial Affairs
2
DG ECFIN
High tax burden on labour in the EU
Marginal tax wedge on labour income, 2007
80
70
EU average
(%)
60
50
Average
non-EU
40
30
NO
US
CA
CH
AU
JP
NZ
BE
HU
SE
AT
DE
FI
LU
IT
EL
CZ
FR
NL
DK
ES
PT
PL
SK
UK
IE
20
Note: Tax wedge is defined as marginal p ersonal income tax and social security
contribution rates on gross labour income for an average income earner. No data are
available for BG, CY, EE, LT, LV, M T, RO, SI. Averages are unweighted.
Source: OECD, Taxing wages 2006/2007: 2007 Edition .
European Commission, Economic and Financial Affairs
3
DG ECFIN
Efficiency of tax administration differs widely
Administrative burden of tax systems, 2007
80
70
Time to comp ly with tax p ay ments (hours p er month)
60
50
40
EU average
30
Average
20
10
JP
US
NZ
CA
AU
NO
CH
CZ
BG
PL
IT
SK
HU
PT
ES
FI
EL
SI
LV
RO
DE
NL
AT
LT
BE
FR
DK
SE
UK
EE
IE
LU
0
Note: T ime t o prepare, file and pay (or wit hhold) corporat e income t ax, value added or
sales t ax and labour t axes, including payroll t axes and social cont ribut ions based on a
case st udy company. No dat a available for CY and MT . Averages are unweight ed.
Source: World Bank and P rice Wat erhouse Coopers (2008) Paying taxes 2008. The
global picture .
European Commission, Economic and Financial Affairs
4
DG ECFIN
Composition and efficiency of revenue
systems
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Empirically, high-growth countries were in the
past characterised by a lower tax wedge and
lower overall tax burdens than low-growth
countries
Indirect taxes seem less distortive and
detrimental to growth (but concern about equity
aspects)
Efficient tax administration can be supportive
Reducing the overall tax burden will be difficult
over the medium term due to the fiscal costs of
the crisis and the impact of population ageing on
public expenditures
Therefore important to look at efficiency of taxes
and spending
European Commission, Economic and Financial Affairs
5
DG ECFIN
Shifting the tax burden to promote growth?
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Shifting the tax burden from labour to
consumption can increase employment and
growth
Larger employment effects when tax cuts are
targeted
A trend towards higher effective taxation of
consumption can be observed in the EU since
2001
No coordinated policy initiative in the EU
Quantitative positive effects on growth likely to
be modest (even if shift is coordinated)
Tax shifting is no alternative to structural reforms
which thus need to be pursued vigorously
European Commission, Economic and Financial Affairs
6
DG ECFIN
Improving the business environment and
the functioning of the Internal Market
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Reducing administrative burdens on business
->
e.g. VAT and electronic invoicing
Better coordination of national tax systems
in order to reduce tax obstacles (e.g. double
taxation) and ensure compliance with EC
Treaty
->
->
->
Council conclusions on exit taxes
Ongoing work on charitable giving
and anti-abuse measures
Commission initiatives on inheritance
taxes and withholding taxes on crossborder income in preparation
European Commission, Economic and Financial Affairs
7
DG ECFIN
Improving the business environment and
the functioning of the Internal Market (2)
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In the longer term introduction of a Common
Consolidated Corporate Tax Base (CCCTB)
->
CCCTB would enable companies to
follow a single set of rules for
calculating their tax bases in different
Member States of the EU
->
CCCTB would eliminate transfer pricing
within consolidated groups, allow crossborder loss relief, avoid double taxation,
simplify restructuring and reduce
compliance costs
->
Ongoing technical work on a
Commission proposal
European Commission, Economic and Financial Affairs
8
DG ECFIN
Examining the lessons from the financial
and economic crisis
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Excessive leverage of banks has been a key
factor in the current financial crisis
Undercapitalisation makes companies more
vulnerable in the current recession
National tax systems in the EU systematically
favour debt over equity financing
Move to either an allowance for corporate
equity (ACE), a comprehensive business
income tax (CBIT), or a combination of both
could under certain circumstances be welfare
improving
European Commission, Economic and Financial Affairs
9