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N° 232 |
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| March 2004 |
| Less Tax in the East |
Agnès Bénassy-Quéré
Delphine Prady |
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| The tax cuts which have been introduced in most European countries in recent years have led to fears of tax competition which could worsen inequalities, weaken the quality of public infrastructure and public services, or lead public finances to be unsustainable. The enlargement of the European Union has deepened such concerns. Taxes in Eastern Europe are generally far lower than in the eu15, and these countries seem to have adopted a low-tax strategy for mobile tax bases, so that companies are taxed relatively little, often far less than their distance from “the heart of Europe” would justify. In contrast, taxes on labour and vat are generally at levels close to those observed in the former eu. Such a tax strategy by the new members, which favours foreign direct investment, is debatable as it risks favouring tax optimisation rather than employment. |
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