The fiscal effects of work-related tax expenditures in Europe

  1. Salvador Barrios
  2. Serena Fatica
  3. Diego Martinez
  4. Gilles Mourre
Revista:
Economic papers

ISSN: 1725-3187

Año de publicación: 2014

Número: 545

Páginas: 1-56

Tipo: Artículo

Otras publicaciones en: Economic papers

Resumen

Work-related tax incentives can have a significant effect on how much, if at all, certain individuals decide to work. This paper examines the fiscal impacts and associated welfare costs of reforms to such tax relief measures in five European countries, France, Spain, the United Kingdom, Hungary and Slovakia. It finds that at least a quarter of the extra tax revenue raised by lowering work-related tax incentives tends to get lost, as individuals react by working less or withdrawing altogether. The revenue gain is particularly limited following the removal of tax incentives targeting the very lowest earners, which may even lead to revenue losses in some cases. Reducing work-related tax reliefs also has significant negative welfare effects.