quinta-feira, fevereiro 05, 2004
EU: Good Unintended Consequences
According to the European economic growth agenda agreed to a few years ago in Lisbon, by 2010 the European Union should become "the most competitive and dynamic knowledge-based economy in the world." Unfortunately, business regulation in Europe is increasing, in part because of the relentless barrage of new rules emanating from Brussels. The continued regulation of the labor market contributes to pitiful economic growth rates and the perpetual scourge of high unemployment in Europe. Yet, to paraphrase Karl Marx, a strange spectre is haunting Europe and that spectre is falling tax rates. Ironically, the unwitting hero of the European flirtation with sound tax policy is the bureaucracy in Brussels
Why, considering that public debt as a percentage of GDP is rising in most European countries and that their long-term liabilities, such as public pensions, remain unfunded, are Europeans reducing their taxes? Because of the convergence of two factors: growing European bureaucracy and EU enlargement. Vigorous pursuit of harmonization of European rules and regulations by the bureaucracy in Brussels restrains European nations from offering businesses better conditions than their neighbors can. That leaves tax rates, which continue to be determined at a national level, as the primary policy tool to affect competitiveness of European companies. Lower taxes among countries that will join the EU in May 2004 gave the current EU members a further impetus to act.
It is equally bad news for the European Commission President Romano Prodi, who recently received a letter from the six biggest net contributors to the EU budget, informing him that those countries would prefer to cut their contributions from the current 1.24 percent of annual GDP to 1 percent. Judging by that letter, the EU bureaucracy has -- once again -- succumbed to the law of unintended consequences. By harmonizing European regulations, Brussels has forced the member states into a tax-cutting mode, which will result in less revenue for the bureaucrats to play around with. Well done!
posted by Miguel Noronha 3:06 da tarde
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