Child-targeted tax-benefit reform in Spain in a European context: A microsimulation analysis using EUROMOD

Spain has one of the lowest expenditures on family social protection, the third highest child poverty and the second lowest fertility rate in the EU. The objective of this paper is to identify and assess tax-benefit reforms that could improve this situation. Using the European microsimulation model EUROMOD, this paper compares the child-targeted policies of four EU countries to those recently reformed in Spain. It also analyses the effect that the policies of these countries would have if applied in Spain. Results show that recent reforms have increased considerably the expenditure on child-targeted policies. However, in contrast to the other analysed countries the new Spanish system mainly benefits higher income families and has a low poverty reduction effect

Income and Wealth Inequality in OECD Countries

This paper summarises some of the key findings and policy recommendations of the latest OECD report on income inequality - "In It Together: Why Less Inequality Benefits All". In particular, the paper presents new findings regarding the trade-off between inequality and growth, as well as with regard to the impact of the economic crisis and of female employment on the distribution of income and the distribution of wealth. Key policy recommendations derived from these findings are the need to promote employment and good quality jobs, to further improve female participation, to invest in education and skills, and to foster well-designed redistribution policies

Alternative Tax-Benefit Strategies to Support Children in the European Union. Recent Reforms in Austria, Spain and the UK

We compare three EU countries that have recently experienced substantial but very different reforms of their family support systems: Austria, Spain and the UK. The structure of these systems is different: Austria emphases universal benefits, Spain tax concessions and the UK means-tested benefits. First the paper compares the distributional implications of these three approaches. The recent reforms have reinforced existing structures while increasing the amount of spending for children. The second step is to ask: What would have happened if these countries had transformed the architecture of their systems in either of the other two directions? We use EUROMOD, the European tax-benefit microsimulation model that is designed for making cross-country comparisons and answering “what if” questions such as these. We find that the three factors that can be distinguished – the level of spending, its structure, and the way it impacts in a national context – are all important to varying degrees.Children, European Union, Policy Reform, Microsimulation

Inequalities within Couples: Market Incomes and the Role of Taxes and Benefits in Europe

In spite of there being few elements of tax or cash benefit systems in developed countries that are any longer explicitly gender-biased in a discriminatory sense, it is well recognised that they have significant gender effects. To the extent that women earn less than men on average under tax-benefit systems that are progressive, there is some redistribution from men to women overall. However, an aggregate perspective is insufficient for understanding how earning opportunities and public policies affect living arrangements at the family level in general and the circumstances of men and women in particular. Arguably, it is within the household that a gendered division of labour is most relevant. It is difficult to observe how income and other resources get allocated within households. We can, however, observe the incomes brought into the household and to what extent taxes and benefits mitigate (or indeed exacerbate) any inequality of income between men and women. We explore the effects of tax and benefit systems on differences in income and in incentives to earn income between men and women within couples in a selection of the member countries of the European Union (EU) using EUROMOD, the EU tax-benefit microsimulation model. This comparative perspective allows us to establish the relative effects of different policy regimes, given the underlying characteristics of each national population, using a consistent approach and set of incidence assumptions across countries.within-household inequality, tax-benefit systems, Europe, gender

Retenciones a cuenta, número de declarantes y simplicidad en el nuevo IRPF

Uno de los objetivos de la reforma del Impuesto sobre la Renta de las Personas Fisicas, llevada a cabo en 1998, era reducir su complejidad. Una de las principales estrategias seguidas pretendia reducir el numero de declarantes mediante el ajuste de las retenciones a cuenta a la cuota liquida del impuesto de los contribuyentes con rendimientos del trabajo por cuenta ajena. En este trabajo se estudia hasta que punto la reforma consigue cumplir sus propositos, haciendo uso de EspaSim, un modelo de microsimulacion de impuestos y subsidios sociales para Espana. El numero de individuos no obligados a declarar se reduce significativamente con la reforma hasta aproximadamente un 40 por 100 del total de contribuyentes. No obstante, la cantidad de declaraciones de renta remitidas a la Agencia Tributaria se reduce mucho menos, puesto que el nuevo sistema de retenciones ajusta correctamente la cuota liquida de solo el 37 por 100 de los contribuyentes no obligados a declarar. Ademas, el nuevo sistema aumenta hasta 7,6 mil millones de euros las sobrerretenciones. Se constata que ni los cambios normativos mas recientes (Ley 46/2002) ni una reduccion del numero de tramos de la escala de gravamen a un tipo unico (dejando el resto de parametros inalterados) consiguen una reduccion significativa del numero de declarantes ni de la brecha retencion-cuota liquida.One of the aims of the Personal Income Tax reform introduced in 1998 was precisely to reduce the former's complexity. One of the main strategies implemented was designed to reduce the number of taxpayers filing returns by adjusting the direct deductions on taxable amount for persons obtaining remuneration for salaried employment. This work uses EspaSim, a micro-simulation model for taxes and social subsidies in Spain, to study the degree to which the reform achieved its purpose. The reform significantly reduced the number of individuals who are not obliged to file tax returns, to approximately 40 per 100 of the total number of taxpayers. Nevertheless, the number of tax returns submitted to the Tax Authority fell by considerably less than this figure, since the new system of deductions correctly adjusts the taxable amount for just 37 per 100 of taxpayers who are not obliged to file returns. Furthermore, the new system increases the amount of excess withholdings to 7,6 bn euros. It is noted that neither the most recent legal amendments (Law 46/2002) nor a reduction in the number of income bands in the tax scale at a single-rate (leaving the rest of parameters unaltered) achieve a significant reduction in the number of taxpayers filing returns or serve to close the withholdings-taxable amount gap

A basic income for Europe's children?

This paper explores the prospects for a guaranteed income for every child in the European Union and its potential effects on child poverty, taking as one starting point the ideas set out in Atkinson (2005). It examines the extent to which existing levels of financial support for children through national taxes and benefits fall short of a series of illustrative minimum levels of income corresponding to proportions of median income. It estimates the cost of bringing the amount of support up to these levels for all children as well as the corresponding impacts on income poverty among EU children. From this the cost in each country of providing basic incomes for children is estimated such that potential EU child poverty reduction targets are met. This cost could be met at national level or, alternatively, at EU level and we investigate the effect of financing the guaranteed child income using a European flat tax (Atkinson, 1995). The analysis uses EUROMOD, the European tax-benefit microsimulation model and illustrates the implications of the choices that must be made when designing such a scheme for the extent of redistribution between countries and towards children

Alternative tax-benefit strategies to support children in the European Union

We compare three EU countries that have recently experienced substantial but very different reforms of their systems to support families with children: Austria, Spain and the United Kingdom. The structure of these systems is different: Austria gives emphasis to universal benefits, Spain to tax concessions and the United Kingdom to means-tested benefits. As a first step the paper compares the distributional implications of these three approaches. The recent reforms have reinforced these existing structures while increasing the amount of public resources directed towards children. The second step is to address the question whether the chosen strategies are the best for each country. What would have happened if instead of reinforcing the existing types of policies these countries had completely transformed the architecture of their systems in either of the other two directions? We use EUROMOD, the European tax-benefit microsimulation model that is designed for making cross-country comparisons and answering “what if” questions such as these to explore the effects of budget-neutral alternatives on the position of children in the income distribution as a whole, the proportions gaining and losing and the effects on child poverty. The three factors that can be distinguished – the level of spending, its structure, and the way it impacts in a particular national context – are all important to varying degrees

Alternative tax-benefit strategies to support children in Poland

Eurostat data shows that children and elderly are especially at risk of being in poverty. In 2004 the average rates of poverty risk in the European Union for these groups were about 19%. In Poland, the rate was 29% for children and only 7% for the elderly. We examine the role of the tax-benefit system in explaining this situation and analyse how much child poverty figures could change under several reform scenarios. In 2005, families with children were mainly supported by a means-tested family allowance and some supplements. This was extended in 2007 with the introduction of a non-refundable child tax credit. Making use of the European tax-benefit microsimulation model EUROMOD, this paper assesses the consequences of the recent reform in Poland. We examine the outcome in comparison to child policies in three other European systems and show that poverty reduction would have been more pronounced, if child policies were changed along the lines of the system in France or the United Kingdom. The Austrian system - relying primarily on universal benefits - would bring about a similar reduction in the poverty rate but with much greater reduction in the poverty gap. The paper presents detailed distributional analysis under the different systems assuming the cost of importing each of them to be the same as that of introducing the 2007 reform