According to a study that was conducted by Bocconi University in Milan for the European Parliament’s Subcommittee on Tax Matters (FISC) and published on Friday, 22 September, the Member States of the European Union reduced the tax burden on businesses in response to the Covid-19 pandemic but failed to reduce the number of people at risk of poverty.
The study provides a comprehensive analysis of the impact of national tax measures implemented in response to the Covid-19 pandemic so as to provide policy recommendations for how to address future crises effectively.
With regard to personal income tax—in particular, taxes on labour—reforms focused on permanent changes to the tax rate, both downwards and upwards, as well as temporary tax-base reductions. Certain targeted reductions in tax on labour were able to boost employment.
Tax rates on social security contributions were mostly reduced, with the exception of a few countries that opted for permanent tax-base increases. Some countries also introduced tax benefits.
With regard to corporate taxes, changes were made to the tax base, which resulted in decreases and tax benefits. Ten countries reduced their corporate tax rates. This decrease in taxes on companies was accompanied by a modification of the tax system, which exhibited greater competitiveness. In this respect, the tax-base reductions appear to be the most effective measures, according to the authors of the study.
Other policies were adopted, such as lowering the value-added tax (VAT) rate in a majority of countries.
Nevertheless, policy initiatives aiming to modify the tax system did not really exhibit higher purchasing power parity. Likewise, the introduction of policies targeting low-income earners did not enable the number of people at risk of poverty to be reduced.
Read the study: https://aeur.eu/f/8qx (Original version in French by Anne Damiani)