Follow-up to study on revenue-neutral method of reducing unemployment


What is the intention of the new Commission with regard to the follow-up on the study completed at the request of the previous Commission entitled ‘The employment effect of subsidies’ (SOC 94 100018 05A01)?


The Commission continuously monitors and analyses the topics examined in the study referred to by the Honourable Member. This study is part of a pool of research that provides input for various policy initiatives and recommendations of the Commission.

The study in question was published in 1995 and analysed the impact of giving all employers a fixed subsidy per worker, to be financed by a 5% rise in VAT. The paper estimates that this measure would increase output by up to 2.8% and employment by up to 4.0%, with expansion stimulated most in the low-paid low-skill sectors.

There has been further research regarding the subject of ‘revenue neutral ways of reducing unemployment’ in several studies done by or for the Commission. In 2014 the Commission issued in the context of the Semester exercise Country Specific Recommendations to eleven Member States regarding shifting taxation away from labour.

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