Shift in tax burden and its impact on economic growth in the European Union

Szarowska, Irena (2013): Shift in tax burden and its impact on economic growth in the European Union. Published in: Acta Universitatis Agriculturae et Silviculturae Mendeleianae Brunensis , Vol. 61, No. 4 (2013): pp. 1153-1160.

Abstract

This article deals with a tax burden in the European Union in as financial and economic crisis has impacted also on tax systems in the European Union. Governments´ tax measure aims to consolidate public finance and promote an economic growth. The article provides empirical evidence on a shift in a tax burden and its structure and analyzes the effects of shift in tax burden on economic growth in the EU. It is used the Eurostat definition to categorize tax burden by economic functions and implicit rates of consumption, labour and capital are investigated. The analysis is based on annual data of the EU member states in a period 1995-2010. Pairwise Granger Causality Test was used for examining relations between economic growth and tax burden by economic functions in short-term. Results confirm that there is two-way causality between change of implicit tax rate of consumption and GDP growth; and also GDP growth Granger-cause change of implicit tax rate of capital and implicit tax rate of labour through one-way causality. On average, labour taxes have decreased by 1.9 p.p., capital taxes have also decreased – by 2.1 p.p., but consumption taxes have mildly increased by 0.4 p.p. in the European Union in a period 1995-2010.

• Item Type: MPRA Paper
• Language: English
• Keywords: tax burden, tax shift, implicit tax rates, growth conductive system, economic functions, economic growth
• Subjects: E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; H - Public Economics > H2 - Taxation, Subsidies, and Revenue; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development

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