spiritsNEWS December 2023

EU Tax Symposium 2023 - The role of behaviour tax in the policy mix

spiritsEUROPE attended the 2023 EU Tax Symposium last October, jointly organized by the European Commission and the European Parliament, centered on the theme “Prospects for Taxation in the EU”. Gerassimos Thomas, the Director General of DG TAXU inaugurated the symposium with a statement emphasizing the objective to "deliberate on current challenges in preparation for the future." Representatives from the Commission, the European Parliament, OECD, IMF, national tax authorities, business sectors, academia, and various stakeholders contributed their perspectives on shaping the future of our tax systems and the tax mix needed to reach our goal of fair, efficient and sustainable taxation in the decades ahead. To this aim, discussions covered a broad range of topics including those related to business taxation, VAT, personal income taxation, wealth taxation and the role of behavioural taxes.

On the role of behavioural taxes, we saw a solid and balanced debate on the opportunities and inherent limits of such taxes. Overall, the panel agreed that behavioural taxes have limited revenue potential and a limited role to play in the overall tax mix. In addition to the classic challenges for such tax - being regressive, volatile and success depending on hard-to-estimate elasticity effects – it was clear that the moment you accept the behavioural tax logic for real, you need to also accept the self-defeating revenue logic that comes with it (or loose acceptance). As a consequence, behavioural taxes require a quite advanced, well-functioning tax administration to constantly evaluate and adapt such taxes. Although not mentioned by the panel, one can wonder if such taxes are a suitable tool for developing countries. The debate revealed the opposing view between the tax and the public health authorities, with tax authorities preferring to tax few entities upstream and public health preferring to tax all at the point of sale. Finally, the evidence is mixed on whether behaviour taxes should be earmarked. It seems that earmarking is more useful for the acceptance narrative than for the technical implementation or the effectiveness of the tax.

Are there other options than behavioural taxes? In some cases, changing attitudes may be more effective than new taxes. For instance, when certain behaviours carry reputational risk, Ms Manal Corwin from OECD noted that transparency can drive behaviour more impactfully than taxes.

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