Transcript Tax competition and coordination within the EU – the case of the EU

Tax competition and
coordination within the EU –
the case of the EU-10
Zoltán Pitti and Magdolna Sass
(Corvinus University, Budapest and
Institute of Economics of HAS, Budapest)
Outline
Selected problems addressed by the article
• Characteristics of the tax systems of EU10
• Roots of tax system differences in EU-10
• Raising efficiency of tax collection – one
way of mitigating the EU’s tax problems
Characteristics of the EU-10 tax
system
• EU-10 tax capital at a lower rate than the EU average
• this is compensated for by either a higher labour tax
(Czech Republic and Hungary)
• and/or by a higher consumption tax (Hungary, Estonia
and Slovenia)
• or by the overall lower taxation of economic activities
and consumption, entailing smaller state involvement
(Latvia, Lithuania and Slovakia)
• Only gradual changes, the only country which turned its
tax structure ‘upside down’ was Slovakia, which reduced
all taxes significantly
Implicit tax rates by economic function (%)
50
45
40
35
%
30
25
20
15
10
5
0
1996
2007
Implicit tax rate on capital
1996
2007
Implicit tax rate on consumption
1996
2007
Implicit tax rate on labour
Bulgaria
Czech Republic
Estonia
Latvia
Lithuania
Poland
Romania
Slovenia
Slovakia
EU-25 or EU-27
Hungary
Structure of taxes by economic function (% of GDP)
25
20
%
15
10
5
0
1996
2007
1996
Capital
2007
1996
Consumption
2007
Labour
Bulgaria
Czech Republic
Estonia
Latvia
Lithuania
Poland
Romania
Slovenia
Slovakia
EU-25 or EU-27
Hungary
Taxes and social contribution as a % of GDP
45
40
35
30
EU-15
%
25
EU-12
20
EU-27
15
10
5
0
2000
2008
2000
2008
2000
2008
taxes
taxes
taxes
Indirect
Direct
Capital
2000
2008
Social contributions
2000
2008
Total tax revenue
Roots/factors
1. the heritage of the Socialist period
2. half of EU-10: new states
3. transition-related issues, esp. being in a
catch-up phase
4. certain conditions of EU accession
5. global developments
U-27: fiscal problems becoming
ever severe
• We acknowledge the need for further tax
harmonisation, but realistically list the
factors against it
• Conflicting demand towards fiscal policy:
more welfare state – meaning higher
taxes, but it should not harm
competitiveness
• The way out?
• Not a solution but mitigating the problem
Tax competition and tax coordination:
raising a related question of efficiency
• VAT comprises on average around 1/3 of total tax
revenues and amount on average to 7-8 % of GDP,
ranging from below 6 % (LU, ES) to above 10 % (BG,
CY, DK)
• Our very rough estimation reveals significant gaps
between collected and ‘potential’ value added taxes
(presumably not all related to the black/grey economy)
• High ‘reserves’ for increasing collected taxes
• we expect there may be similarly high ‘reserves’
(uncollected taxes) for other taxes as well
• Improving the efficiency of tax collection could improve
quite significantly fiscal positions of governments
38,6
40,0
LV
EL
RO
49,9
45,1
45,6
44,3
52,5
53,5
54,5
54,7
75,4
90,0
LT
57,7
56,1
52,1
47,3
50,0
IT
ES
PL
FR
PT
UK
SK
MT
BE
67,1
62,4
61,1
68,8
67,8
63,7
59,0
60,0
BG
CZ
HU
EE
SI
FI
SE
69,7
70,0
69,0
70,0
NL
DE
DK
IE
76,4
80,0
AT
CY
89,9
compliteness index (%)
Calculated VAT effectiveness index in
the EU-27, 2000 and 2007
100,0
2000
2007
30,0
20,0
10,0
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Thank you for your attention!