![]() Some of these countries have maintained this system (Bulgaria, Estonia, Hungary, Lithuania and Romania), but several of them have abandoned it by introducing one or two additional marginal rates (Czech Republic, Latvia, Slovakia). Namely, in the period from 1994 to 2008, many EU countries – all of which belonged to the ex-communist bloc – adopted the single-rate PIT regime. Another trend is the relinquishment of single-rate PIT systems in EU countries. One trend in the OECD countries is to decrease the PIT burden for lower and middle classes (OECD, 2017). Having different starting positions and tax reform goals, different countries perform opposing changes e.g., some countries are cutting, while others are raising, their top PIT rates some are broadening their PIT and SIC bases, while others are narrowing them. All these changes, however, have an impact on the distribution of income, which must also be taken into account. Reducing the progressivity of the PIT schedule can benefit both the quantity and quality of labor supply. Lowering marginal tax rates may be preferable for increasing hours worked. The participation rate can be stimulated by lowering the average tax wedge, which can be achieved by decreasing tax rates, increasing personal allowances, or introducing ‘make work policies’, such as earned income tax credits. The lowering of the tax burden on labor income can increase labor utilization. MEDIUM INCOME SLAVANIA HOW TOIn its highly influential publication, OECD provides recipes for policy makers on how to implement successful ‘growth-oriented tax reform’ (OECD, 2010). Many of these tax changes occur in the field of labor taxes – namely, personal income taxes (PITs) and social insurance contributions (SICs) – which represent the most important sources of tax revenues in OECD countries (OECD, 2017), as well as in the EU (European Commission, 2018b). According to these reports, each year, a number of countries introduce larger or smaller changes to their tax systems, searching for the optimal combination of parameters and adapting to ever-changing internal and external circumstances. MEDIUM INCOME SLAVANIA SERIESAs the series of reports Tax Policy Reforms (OECD, 2016, 2017, 2018a) demonstrates, some of these reforms provide a fiscal stimulus to ‘spur the GDP growth’, some are ‘enhancing fairness’ by redistributing the tax burden from lower and middle income classes to higher income classes, and others are ‘encouraging work’ through provision of tax relief for low-wage workers. In the context of sluggish economic growth, high unemployment and rising income inequality, countries in the EU and around the world are implementing tax reforms. ![]()
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