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A country's tax system affects its government revenues but also has broader economic and societal implications. The question how to effectively address these different dimensions is at the fore of policy discussions in the EU and its Member States.

Smart Taxation - A winning strategy

Taxes can do more than just fund public services; they can also support growth, employment, investment, economic competitiveness and social fairness. Find out how the European Commission encourages smarter taxation.

Carefully designed tax systems can help redefine the triangle between sustainability, growth and fairness, objectives which have become even more important in the aftermath of the most severe economic crisis since the 1930's.

Key factors in improving the efficiency of tax systems:

  • Lower the tax burden on labour, which is relatively high in the EU. Reducing this burden, particularly for specific groups such as low-income earners would have positive consequences for many Member States. Lower labour taxes need to be compensated by increases in other sources of revenue taxes that are less detrimental to growth, such as taxes on consumption, recurrent taxes on immovable property, and environmental taxes or by a reduction in public spending.
  • Broaden the tax base: a tax system founded on broader tax bases and lower rates is generally more efficient than a system characterised by narrow bases and higher rates.
  • Fight tax evasion: boosting transparency, cooperation and exchange of information among countries is vital.

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