The European Commission proposes that member states reduce tax burdens on labor and increase taxes on property, consumption, and environmental taxes to compensate for revenue losses due to lower labor taxes.
The Commission published its annual growth survey last week, recommending economic priorities for the coming year. With the publication of this document, the European semester begins, an instrument for greater coordination of budgetary and economic policies introduced as part of the fight against the crisis. – Economic studies show that certain types of taxes – such as those on labor and income – are not conducive to growth, while consumption taxes and environmental taxes are considered growth-friendly. Therefore, the Commission recommends that member states shift the tax burden from labor and corporate taxes to consumption and environmental taxes – states the Commission.
The Commission particularly recommends reducing labor taxes, especially on low-paid work. – This not only encourages workers to work and employers to hire, but also contributes to a fairer tax system by reducing the tax burden for the most vulnerable – adds the Commission. The European Commission also recommends broadening the tax base, stating that increasing tax rates is not the only way to increase tax revenues.
– A smarter way may be to eliminate or reduce tax exemptions. For example, limiting the use of reduced VAT rates can bring significant new revenues to member states without further increasing the standard rate. Studies show that in some cases, if all reduced rates were eliminated, the standard rate could be lowered without a decrease in tax revenues – says the Commission.
