61 research outputs found
Effects of flat tax reforms in Western Europe on equity and efficiency
The flat income tax has become increasingly popular recently, yet its implementation is limited to Eastern Europe. We analyse the distributional and e? ciency effects of flat tax scenarios for Western European countries. Our simulations show that flat tax rates required to attain revenue neutrality with existing basic allowances improve labour supply incentives. However, they result in higher inequality and polarisation. Flat rates necessary to keep the inequality levels unchanged allow for some scope for flat taxes to increase both equity and e? ciency. Our analysis suggests that Mediterranean countries are more likely to benefit from flat taxes. --Flat tax reform,income distribution,work incentives,microsimulation
Effects of Flat Tax Reforms in Western Europe on Income Distribution and Work Incentives
The flat income tax has become increasingly popular recently, yet its implementation is limited to Eastern Europe. We analyse the distributional and efficiency effects of flat tax scenarios for Western European countries. Our simulations show that flat tax rates required to attain revenue neutrality with existing basic allowances improve labour supply incentives. However, they result in higher inequality and polarisation. Flat rates necessary to keep the inequality levels unchanged allow for some scope for flat taxes to increase both equity and efficiency. Our analysis suggests that Mediterranean countries are more likely to benefit from flat taxes.flat tax reform, income distribution, work incentives, microsimulation
Tax-benefit Systems in the New Member States and Their Impact on Labour Supply and Employment
The Distributional Impact of In Kind Public Benefits in European Countries
International comparisons of inequality based on measures of disposable income may not be valid if the size and incidence of publicly-provided in kind benefits differ across the countries considered. The benefits that are financed by taxation in one country may need to be purchased out of disposable income in another. We estimate the size and incidence of in kind or "non cash" benefits from public housing subsidies, education and health care for five European countries using comparable methods and data. Inequality in the augmented income measure is dramatically lower than in disposable income, with the effects of the three components varying in importance across countries. Adapting equivalence scales to take proper account of differences in needs for health care and education across population members reduces the scale of the effect, but does not eliminate it.inequality, in kind transfers, cross-national comparisons
Europe Through the Crisis: Discretionary Policy Changes and Automatic Stabilizers
Taxâbenefit policies affect changes in household incomes through two main channels: discretionary policy changes and automatic stabilizers. We study their role in the EU countries in 2007â14 using an extended decomposition approach. Our results show that the two policy actions often reduced rather than increased inequality of net incomes, and so helped offset the inequalityâincreasing impact of growing disparities in gross market incomes. While inequality reductions were achieved mainly through benefits using both routes, policy changes to and the automatic stabilization response of taxes and contributions raised inequality in some countries and lowered it in others
A lost decade?: decomposing the effect of 2001-11 tax-benefit policy changes on the income distribution in EU countries
This paper examines the extent to which tax and benefit policy changes introduced in the period 2001-11 had a poverty- or inequality-reducing effect. We assess whether the period was indeed a âmissed opportunityâ for policy changes to make a difference to poverty reduction since the Lisbon Treaty, given the general lack of improvement shown by poverty indicators. Our analysis uses the tax-benefit model EUROMOD and covers seven diverse EU countries: Belgium, Bulgaria, Estonia, Greece, Hungary, Italy and the United Kingdom. We apply the Bargain and Callan (2010) decomposition approach, extending it by separating the effect due to structural policy changes and the indexation effect. We find that the latter was typically more effective in alleviating poverty and inequality than changes to the structure of policies. In fact, most of the structural changes that governments introduced, especially in the 2007-11 crisis-onset period, had poverty and inequality-increasing effects. We find considerable variation between countries in how different policy instruments have been adjusted, and in the effects of these adjustments by income, by age and by household composition, showing the importance of understanding them together, rather than discussing just some in isolation
Demographic Change and the European Income Distribution. ESRI DISCUSSION PAPER SERIES IZA DP No. 11440, March 2018
This paper assesses the effect of key demographic changes (population ageing and
upskilling) that are expected by 2030 on the income distribution in the EU-27 and examines
the potential of tax-benefit systems to counterbalance negative developments. Theory
predicts that population ageing should increase income inequality, while the effect of
up-skilling is more ambiguous. Tax-benefit systems may stabilize these expected changes
though this is largely an empirical question given their typically complex nature. We use
a decomposition technique to isolate the effect of projected demographic change on
income inequality and poverty from the reaction of the labor market to this demographic
change through wage adjustments. Our results show that demographic change is likely to
lead to increasing inequality while related wage adjustments work mainly in the opposite
direction. Changes to projected relative poverty are minimal for most countries. With a few
exceptions, EU tax-benefit systems are able to absorb most of projected increase in market
income inequality
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