Cut taxes and spending to boost economic growth, says Eurogroup

 
Tim Wallace
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CUTTING taxes on employment will create jobs and growth, making Europe’s economies more competitive, Eurozone finance ministers – the Eurogroup – said yesterday.

Europe’s taxes on labour – including income tax and social contributions – are among the highest in the world, and the Eurogroup urged each nation to take more action.

It listed 11 of the Eurozone’s 18 members which needed to act particularly quickly, including Germany, France and Spain.

“A high tax burden on labour is an impediment to the objective of supporting economic activity and increasing employment,” the Eurogroup said, describing the move as “a clear public policy priority”.

And to make up for the cuts in taxes, countries should chop back spending to avoid running up a higher deficit, the finance ministers said.

“Tax wedge reductions need to be compensated, while taking into account member states’ fiscal margin of manoeuvre, respecting the fiscal targets,” the group said. “This may be achieved, preferably, by expenditure cuts, or through revenue-neutral tax shifts, away from labour to revenue sources that are less detrimental to growth such as consumption taxes.”

The ministers next meet in September, when they hope to create a plan for all the Eurozone countries to follow so that they work in tandem and build up some momentum to cut taxes and spending together.