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



contributions raised a high size, in order to financing a well generous Bismarckian welfare
state.

(iii) Anglo-Saxon Countries: the fiscal pressure was still close to the European average.
Taxes’ share was largely over that of social contributions. The public health service was paid
out from general tax revenues. The public Beveridgean pension schemes were tightened to
dispense just low-amount social security treatments.

(iv) Mediterranean Countries: the development’s delay kept total fiscal pressure at a still
low level. Tax systems had social contributions close to the European average. Taxes (espe-
cially direct ones’) still stood well below European standards.

European fiscal pressure anywhere increased from the early 1970s to the late 1990s (see Table
1), apart from in Ireland and in the United Kingdom.
5 It was pulled up (six points) by a grow-
ing social expenditure essentially during the 1970s (Eurostat 2000; van den Noord and Heady
2001) and a final Maastricht queue (1.8 per cent in the 1990s). The current total average fig-
ure thus rose to more than 42 per cent of GDP in 2000, thus leaving well behind both that of
Japan (increased to 27.9 per cent) and of the US (near kept still at 28.3 per cent). After the
mythic peak of 1997, just some minor and scattered tax cuts were adopted.
6 The questionable
forces of Stability Pact were and continue to be at work, forcing European Member Countries
to keep up fiscal pressure (e.g. De Novellis and Parlato 2003).

The wide tax levels’ dispersion among countries, already apparent at the early of the
1970s, essentially continued to hold firm. The growth of direct taxes and social contributions
was however very fast, whereas the profile of indirect taxes on the contrary was almost flat.
The main features of tax-clusters did not generally undergo dramatic changes. The shift to the
“Dual Income Tax System” (Soerensen 1994) did not significantly change the fiscal structure
of Nordic Countries. In the Rhine area, fiscal pressure grew yet more. Personal income tax
jumped up and social contributions effected a further upward turn. The Anglo-Saxon

5 Do not forget to be careful when compare international fiscal data sets, mainly when welfare provisions and fi-
nancing show different institutional arrangements. One should take account,
inter alia, of the spread between
gross and net social expenditure and of fiscal pressure’s reduction due to the existing tax expenditures (Adema
2001). Eurostat 2002 data suggest that total (public+ private) welfare demand and supply is very close to a
common figure within European Countries.

6 Among our selected countries, Italy, The Netherlands and, at a very low extent, Germany and Ireland, reduced
total fiscal pressure up to 2001, the remaining three did not cut or increased their taxes (OECD 2002a).



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