Brussels, 08/07/2014 (Agence Europe) - With view to improving the introduction and coordination of the European summit's social and economic recommendations to EU member states, eurozone finance ministers examined the tax wedge on labour on Monday 7 July, describing its reduction as a key policy.
“Eleven euro area member states have received the recommendation of the Commission to reduce the tax wedge on labour (that is to say the difference between the salary costs of a worker to their employer and the amount of net income that a worker receives or 'take-home-pay')”, explained the head of the Eurogroup, Jeroen Dijsselbloem. The countries in question are Germany, Austria, Belgium, Spain, Estonia, France, Italy, Latvia, Luxembourg, the Netherlands and Portugal (see EUROPE 11092).
Although reforms are being implemented in member states such as Spain, Italy and the Netherlands, the Eurogroup feels that further effort is needed to make economies more competitive. “We stressed the need for tax wedge reductions to be financed through cuts in less productive expenditure or through revenue-neutral tax shifts. Away from labour to revenue sources that are less detrimental to growth such as consumption taxes, recurrent property taxes and/or environmental taxes”, said Dijsselbloem.
Interim Euro Commissioner Siim Kallas said that the European Commission estimated that shifting tax from labour to consumption would boost GDP in the eurozone by some €65 billion and create 1.4 million jobs.
The Eurogroup will continue this discussion at the meeting in Milan on Friday 12 September based on a proposal from the European Commission setting out common principles on reducing the tax wedge on labour. The aim is to get member states to include the ideas in their draft budgets for 2015 that they are to submit to the European Commission by mid-October.
The ministers will also look at liberalisation of the service market. (MB)