Acta Univ. Agric. Silvic. Mendelianae Brun. 2015, 63(6), 2127-2135 | DOI: 10.11118/actaun201563062127

Tax Shift by Economic Functions and Its Effect on Economic Growth in the European Union

Irena Szarowská
Department of Finance and Accounting, School of Business Administration in Karvina, Silesian University in Opava, Univerzitní námìstí 1934/3, 733 40 Karviná, Czech Republic

The aim of the paper is to examine effects of tax shift on economic growth and provide a direct empirical evidence in the European Union (EU). It is used the Eurostat's definition to categorize tax burden by economic functions and implicit tax rates of consumption, labour and capital are investigated. First, paper summarizes main development of tax shift in a whole EU till 2014 and followed empirical analysis is based on annual panel data of 22 EU Member States in years 1995-2012 (time span is divided into a pre-crisis and a post-crisis period). Explanatory variables are not examined in individual regressions, but the study uses Generalized Method of Moments applied on dynamic panel data and estimations are based on Arellan-Bond estimator (1991). Results confirm positive and statistically significant impact of consumption taxes and weaker but negative effect of labour taxation on economic growth. In a post-crisis period, findings report raising labour taxes as the strongest and the only significant variable. It suggests that harmful effect of labour taxation is enlarging in a time of unfavorable economic conditions. A tax shift on capital taxation has negative but often statistically insignificant impact on economic growth.

Keywords: tax, tax burden, tax shift, implicit tax rates, growth conductive system, economic growth
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This paper was supported by the Ministry of Education, Youth and Sports Czech Republic within the Institutional Support for Long-term Development of a Research Organization in 2015.

Prepublished online: December 26, 2015; Published: January 1, 2016  Show citation

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Szarowská, I. (2015). Tax Shift by Economic Functions and Its Effect on Economic Growth in the European Union. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 63(6), 2127-2135. doi: 10.11118/actaun201563062127
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