Consumption taxes play a key role in the tax-benefit systems of EU Member States. Combined, VAT and excises account for more than a fourth of total tax revenues in the EU, or 11% of GDP in 2021. Hence, they serve as a significant source of fiscal revenues for governments to fund public services, social welfare programs, and infrastructure development. Moreover, consumption taxes are an effective policy tool to influence behaviors such as drinking, smoking, and polluting. By imposing higher taxes on unhealthy or environmentally harmful products, governments can discourage excessive consumption and promote healthier and more sustainable choices.
At the fiscal policy analysis unit, we support evidence-based consumption tax policy. Our work involves conducting cross-country comparative analyses of the structure and redistributive effect of consumption tax systems across EU member states (e.g. Energy taxation). By analyzing the differences in tax structures and their impact on income distribution, we can explore the effectiveness and fairness of different tax regimes. Furthermore, we conduct both ex-ante and ex-post analysis of consumption tax reforms (e.g., in the context of the European Semester) providing insights into the potential effects of policy changes before they are implemented, as well as evaluating their outcomes once implemented. We address questions like “is it a reform budget neutral?”, “who are the main winners/losers of the reform?”, “is the reform contributing to a fairer tax system?”, etc. Through these comprehensive analyses, we strive to inform policymakers and contribute to the effective reform of EU tax-benefit systems.
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