Politics is a slow and strenuous overcoming of hard
difficulties ( but ) the possible would never be achieved if
in the world the impossible had not always been tried again.
MAX WEBER, 1919m
1. Introduction*
From the early 1990s near all the European Countries’ tax systems were subject to a lot of
changes. Many others are currently under way or in the planning stages (for the details see
Gandullia 2003 and Joumard 2001). The forces which shaped the reforms were several (e.g.
Tanzi 2003) and often conflicting. Fiscal systems were requested to raise revenue, in order to
fulfill the Maastrich requirements and then of the Stability Pact (e.g. De Novellis and Parlato
2003). A reduction of fiscal pressure was also called for to boost declining growth and em-
ployment. To sustain this proposal a recurring argument was the comparison with the US
whose growth was higher but taxes very lower. Fiscal competition in an increasingly inte-
grated world affected tax rates and structures of the most mobile bases. Common opinions
called on for more efficiency, thus stressing the need for making taxes more simple and neu-
tral. Political factors however, i.e. the pressure of lobby groups (Profeta 2003), prevented this
process from going very far.
The same constraints were at odds with the most radical proposals of fiscal reforms.
These proposals were thus fated from the outset, possibly lacking electoral support (but also
budget means). As it usually happens, a grater degree of fairness was invoked but on the con-
trary income tax top rates almost anywhere were reduced. The unavoidable result so far has
been a difficult mix of tax cuts and tax increases, reiterate shifts of tax sources and continuous
minor tax codes updates. As a bottom line, a further consequence could not be avoided. Most
1990s European Countries’ tax changes were namely narrow in size and limited in scope, i.e.
“marginal” in Optimal Taxation (OT) language.
m Polik als Beruft, Wissenschaft als Beruft.
* M.C. Guerra, with M. Bernasconi, R. Puglisi and A. Zanardi, gave me an invaluable contribute of careful read-
ing, sharp comments and stimulating suggestions. I have also to thank for helps of various kind the Co-Authors
of the research, G. Arachi, C. Bronchi, I. Joumard, A. Majocchi, F. Osculati and W. Oates. This paper is part of a
research concerning “The European tax system: trends and issues”, fostered by Italian Ministry of Education,
University and Scientific Research as “Scientific research programs of national interest - fiscal year 2002”. Fi-
nancings also from the Fondazione Cassa di Risparmio delle Provincie Lombarde and the Fondazione Banca
del Monte di Lombardia are gratefully acknowledged.