‘Fiscal’ ALONE requires a focus on tax efficiency
Asa Gunnarsson 20, Professor of Tax Law, Umea University. Former Coordinator of the Horizon202O Project; 2020; “Fair and Sustainable Taxation—From a European Horizon”; Florida Tax Review, Vol. 23, No. 2; University of Kansas Libraries, Hein Online
Fiscal taxation for economic growth, implemented by tax neutrality as a guiding principle, has since the beginning of the 1980s, become a dominant view on tax sustainability. Fiscal is defined as efficiency in relation to optimal tax theory, which basically is to avoid distorting tax regulations that are regarded to cause unwanted excess burdens in the economy. This has been described as an ideological hegemony, which on a global scale has institutionalized a one-path model for taxing for economic growth in tax law design.8 The main features of these tax reforms can briefly be summarized as follows:
• Broader labour income tax bases but low progressivity;
• A moderate taxation of capital and corporations;
• Uniform tax rates applied on the consumption of goods and services;
• Introduction of in-work tax subsidies;
• A shift from direct taxes to indirect taxes. 9
Neutral taxation benchmarks taxes that distort the economic efficiency of market processes as little as possible, implying a trade-off between efficiency and equity. Redistributive taxes and transfers are regarded as negatively affecting incentives to work, save, and earn income. The idea of a trade-off between equity and efficiency is at the core of the optimal income tax problem.10