This paper explains and discusses in detail the method and information sources used by DG ECFIN services to obtain the effective tax rates on labour, capital and consumption. The paper also compares the informative content of ECFIN indicators
Structures of the taxation systems in the European Union. Tax rates have been calculated for the 15 Member States, the US, Japan, EUR-11 and EU-15 between 1970 and 2001.
It has been explained that the goal of DG ECFIN in working on this databank on effective taxation is to supplement the information in other databanks (EC2000, OECD), which are published with a 2 to 3-year lags, and/or only include too broad indicators of the tax burdens, and/or do not allow for comparisons between EU and non-EU countries. The goal of the ECFIN databank on effective taxation is to carry out early, transparent and detailed assessments of tax reforms in Member States, as requested in the conclusions of the Council of Lisbon. Such assessments can be conducted by adapting effective tax methods to the information available in AMECO. This paper has shown that applying alternative criteria to the same input data does not make much of a difference. It has also been shown that the OECD and ECFIN methods result in quite comparable sets of indicators. However, in some cases the divergences with EC2000 may be significant, especially in the case of capital/“other production factors” taxes. Differences in the ECFIN-versus-OECD case arise because of using different input data, rather than because of applying different criteria. Where divergences between ECFIN and EC2000 are concerned, the reasons have to be found on significant differences in the criteria. Yet, as a general rule, we can conclude that leaving aside capital taxes, divergences between the labour and consumption rates produced in the three databanks analysed here -ECFIN, OECD and EC2000- are either negligible or relatively small and, in any case, much smaller than a priori expected.
Such similarities apply to a wide range of statistical properties of the tax rates. These include across-country relative levels of the tax burdens, their changes, as well as the relative position of countries in orderings obtained on the basis of tax rates. They also include within-country comparisons on the basis of time series analyses, where the series of tax rates are expressed in growth rates. Finally, comparisons of the relationships between tax rates and investment, growth and (un)employment performance also suggest that ECFIN rates reproduce the same effects that those of the OECD and European Commission.
Given this, we think that the approximation proposed by DG ECFIN may be, at least, a good complement for a common set of indicators of effective taxation transparent, replicable, and comparable internationally.
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