Tax policy convergence in EU: an empirical analysis

This paper examines the tax policy convergence in the EU-15 during
the period 1965-2005 using a time series approach. The main purpose is
to assess the convergence of the main components of tax revenue -income
and profits, social security contributions, property, general taxes on goods
and services, taxes on specific goods and services- taking as references
Germany, the United Kingdom and the European average. The analysis is
carried out from two complementary perspectives: the tax burden and the
tax structure. Using unit roots and stationarity tests with a structural change,
and also analyzing β-convergence, the results show little evidence of tax
convergence. Convergence appears with similar intensity with respect to the
three benchmarks, and in the years previous to the structural break which, in
general, was situated endogenously at the end of the 1980s or at the beginning
of the 1990s. Moreover, tax convergence is basically centred on income and
profits, and goods and services taxation. The empirical evidence shows that
the autonomy of the countries, their different economic structures and political
preferences regarding the degree of public intervention, prevail over the idea
of fiscal equalization in the EU.
Francisco J. Delgado
María José Presno
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