Proceedings from the ECFIN Workshop "The budgetary implications of structural reforms" - Brussels, 2 December 2005

Figure 15: Primary balance with and without
reform

Source: Velfærdskommissionen (2005d).

The contribution of the various reform elements to the improvement in public
finances is shown in the table below.

Table 1: Decomposition of the contribution of the various reform
elements to the change in the primary budget position

Velfærdskommissionen (2005d)

Assessed in terms of fiscal sustainability the reform package solves the prob-
lem²⁷ The contribution of the various elements to the fiscal sustainability prob-
lem is: i) retirement 82.6% , ii) labour market 14%, iii) education 12.6%, iv)
integration 10.4%, while iv) the tax reform worsens sustainability by -21% .

The reform package includes one element where the timing plays a very cru-
cial role, namely the tax reform.The tax reform is motivated by both concerns
for asymmetries in the existing tax structure as well as the need to make the sys-
tem more robust to globalization. The particular tax reform considered involves

²⁷ Exactly 99.6% of the sustainability problem identified in the base case is eliminated.

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