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European taxation during the crisis: does politics matter?

Published online by Cambridge University Press:  05 November 2012

Hanna Lierse
Hanna Lierse*
Affiliation:
School of Humanities and Social Sciences, Jacobs University Bremen, Germany
*
Dr Hanna Lierse Postdoctoral Fellow Jacobs University Bremen Campus Ring 1 Research IV, Room 93 28759 Bremen, Germany Tel.: 0049 (0)421 2003458 Fax: 0049 (0)421 2003303 Email: h.lierse@jacobs-university.de
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Abstract

With the outbreak of the financial crisis in 2008, European governments extensively intervened to avert a severe economic recession. Taxation is a crucial instrument to achieve such economic objectives, but it also represents a redistributive tool in democratic societies. Generally, left-wing parties are more supportive of progressive taxes and redistribution than right-wing governments. As a crisis response, one could assume that European governments, especially social-democratic ones, reinforced a redistributive stance to compensate for the substantial amounts of public money used to bail out financial institutions. Based on the tax reforms introduced between 2008 and 2010, the paper explores the tax strategies adopted by European governments. The findings do not reveal a direct effect of party politics on taxation but rather show that pressures from the capital markets significantly restrained governments’ policy capacities to act.

Keywords

CrisisEuropean Unionfiscal stresspolitical partiestax policy
Type
Research Article
Information
Journal of Public Policy , Volume 32 , Issue 3 , December 2012 , pp. 207 - 230
Copyright
Copyright © Cambridge University Press 2012

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