Eurogroup agrees to reduce tax burden on labor in members


Xinhua, Brussels :

Top Eurogroup officials said Monday that the Eurogroup financial ministers are determined to push forward the work on reducing high tax burden on labor and reaffirms that it will be a clear policy priority.
The officials made the remarks in a press conference after a monthly Eurogroup meeting in Brussels. “Clearly, reducing the high tax burden, or ‘tax wedge’, on labor is one of the major structural reform priorities for European countries,” said European Commission Vice-President Siim Kallas.Tax wedge is the difference between the salary cost of the workers to their employer and the amount of net income that a worker receives.”This is one of the structural reforms that can make our countries more competitive,” said Jeroen Dijsselbloem, the president of the Eurogroup of euro-zone finance ministers.
“Eleven Euro area Member States have received recommendations of the European Commission to reduce tax wedges on labor. Three of our colleagues namely from Spain, Italy and Netherlands presented their domestic initiatives in this respect to kick off our discussion,” Dijsselbloem added.According to a statement, these 11 Member States are Austria, Belgium, Estonia, France, Germany, Italy, Latvia, Luxembourg, the Netherlands, Portugal and Spain.
Furthermore, the Eurogroup underlined that tax wedge reductions need to be compensated, preferably, by expenditure cuts, or through revenue-neutral tax shifts, away from labor to revenue sources that are less detrimental to growth such as consumption taxes, recurrent property taxes and/or environmental taxes.”In fact, our simulations indicate that a joint tax shift from labor to consumption by euro area countries could add 65 billion euros (88 billion U.S. dollars) to output and create around 1.4 million jobs over the next decade, ” said Kallas.Kallas also mentioned that reforms must be tailored accordingly because each country faces its own specific challenges in terms of the size and composition of the tax wedge on labor.