How does globalization affect the tax burden on labour income, capital income and consumption in different welfare regimes? The case of Western and Eastern EU Member States

Markus Leibrecht, Özlem Onaran, Valerie Bösch

Publication: Working/Discussion PaperWorking Paper/Preprint

Abstract

This paper analyzes the effects of globalization on implicit tax rates (ITRs) on labour
income, capital income, and consumption in the EU15 and Central and Eastern European New
Member States (CEE NMS). We find a positive effect of globalization on the ITR on labour
income in the EU15, but no effect on the ITR on capital income, and a negative effect of
globalization on ITR on consumption. In the CEE NMS there is no effect of globalization on
any of the three ITRs. We also find differences among the welfare regimes within the EU15.
Globalization has a particularly strong effect in the social democratic regime on all ITRs.
Globalization has a statistically significant negative effect on the ITR on capital income in the
social-democratic and southern regimes, a marginally significant negative effect in the liberal
regime, and no significant effect in the conservative regime. Regarding the ITR on
consumption, there is a significant negative effect of globalization in the social-democratic,
conservative, and liberal regimes. In the case of the ITR on labour income, globalization
causes an increase in all four welfare regimes.
Original languageEnglish
Publication statusPublished - 1 Apr 2010

Publication series

SeriesSFB International Tax Coordination Discussion Paper
Number35

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