Tax systems and tax reforms in Europe: Rationale and open issue for more radical reforms



The end of the story provides for leaving a reasonably progressive income tax and the
remaining social contributions at national level, where personal distribution function is con-
centrated. It would be appropriate to add excise duties: their cross border shopping distortions
might be relevant at the local level, which does not seem to happen in the VAT case (Cnossen
2002). The circle would be thus closed by allocating to the conglomerate of local tiers present
VAT, benefit taxes and tariffs (including in the category those on making a business) and on
immovable property, the last to be substantially augmented in accord with our reform scheme.
Notice that VAT can be a relatively good tool (at least vs. the possible alternatives) of financ-
ing local (= regional) tiers, to which it may be apportioned on the basis of easy statistical
clearings in accordance with the amount of within boundaries private consumption. Its wide
basis further allows to collect higher or lower yield through minor rate changes. Finally the
basis is evenly enough distributed among regions and thus the need for equalizing transfers is
lower with respect to other eventual resources (e.g. the German case, see Maffini’s chapter).
To conclude, notice that this structure of lower tiers financing would be also in line with a
long theoretical tradition and the main examples of well established Federal States.

5. Some conclusions and the need for further research

A work like this raises many questions, gives some answers and open many further problems
which deserve further research efforts. In my firm opinion, European Countries’ tax reforms
adopted from the 1990s introduced some improvements, mainly by streamlining existing sys-
tems, but they have been mostly narrow both in size and as to the aims. Sound fiscal choices
that are targeted at Europe’s should instead be more radical and intended to cope with our
continent great events and fundamental needs. This, I admit, is a no easy way, nor by now
well defined.

Many years of common market, the single market, and then the monetary union, together
with the harmonization efforts of the (weak) European government, made not the original
1960s very different tax system converging as required by single market efficiency. Reducing
remaining differences raises wide political, institutional and national-identity costs. It is not
clear to which institutions and procedures the task of driving further convergence processes is
to be assigning.

22



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