Tax structure and economic growth: Evidence from the European Union

Resumen

Optimum design of a tax system depends on numerous factors and differs from country to country. A variety of studies claim that raising consumption taxes while at the same time lowering taxes on labour and capital can stimulate the economy's growth forces. At the same time, other studies note that tax burden and tax structure would have different impacts on economic activity for different countries and periods and under varying circumstances. In this respect the main purpose of this paper is to provide one more estimate and a few more suggestions for growth-conductive taxation. The study is focused on the impact of tax structure on the economic growth in the EU-28 member states for the period 1996–2013. The descriptive analysis is focused on the cross-country differences in terms of total tax burden and design of tax structure, while the empirical analysis studies the impact of taxation on the economic growth through regressions on pooled panel data. The conclusion is that tax structure based on selective consumption taxes, taxes on personal income and property is more supporting to the economic growth.