Taxation of labour, capital and consumption: The role of implicit rates in the analysis of tax policy evolutions

This paper brings previous publications on the taxation of labor, consumption and capital up to date. We use implicit tax rates (ITR). These indicators are computed at the macro-economic level: they are global and backward-looking, while microeconomic effective tax rates are forward looking. They therefore better measure the effect of policies that have been implemented.Implicit tax rates are used by the European Commission, with its own methodology. Our methodology differs on three points: we interpret the taxation of labor by comparing it with the evolution of unchanging policies, which helps us greatly to assess the impact of tax policy. We also take also into account wage subsidies, which are not considered by the European Commission. And lastly, we also conduct a more disaggregated analysis of the taxation of capital.The impact of the tax shift—decided by the government in 2014—is clearly visible in 2015 and 2016. The ITR of labor is going down (1.6 percentage points compared to an unchanged policy scenario), while the ITR on consumption is going up. These changes make a break in the trend of previous years, during which these ITR were more stable. JEL Codes: H2, H24, H25