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

2005

2020

2030

2040

2060

Base scenario

^^30

-0.1

-1.5

-2.1

-3.4

Education

0.0

0.1

0.2

0.3

0.5

Labour market

0.0

0.4

0.4

0.4

0.4

Integration

0.0

0.2

0.2

0.3

0.3

Retirement

0.0

0.9

2.0

2.1

2.8

Tax

0.0

-1.2

-0.7

-0.6

-0.6

Other reform elements

0.0

-0.3

-0.2

0.0

0.3

After reform

^^30

-

^^04

^04

^05

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.

30



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