Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/49488
Authors: 
Castanheira, Micael
Nicodème, Gaëtan
Profeta, Paola
Year of Publication: 
2011
Series/Report no.: 
CESifo working paper: Public Finance 3538
Abstract: 
There is often a gap between the prescriptions of an optimal tax system and actual tax systems, some of which can be neither efficient economically nor efficient at redistributing income. With a focus on personal income taxes, this paper reviews the political economics literature on tax systems and reforms to see whether political mechanisms allow us to better understand why tax systems look the way they look. Finally, we exploit a database of reforms in labour taxation in the European Union to check the determinants of all reforms, on the one hand, and of targeted reforms, on the other hand. The results fit well with political economy theories and show that political variables carry more weight in triggering reforms than economic variables. This shed light on whether and how tax reforms are achievable. It also explains why many reforms that seem economically optimal fail to be implemented.
Subjects: 
political economy
taxation
personal income tax
JEL: 
H11
H21
H24
P16
Document Type: 
Working Paper

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