<p>This paper examines how taxes and benefits have contributed to reducing market income inequality across all EU countries since the early 2000s. We aim to deepen understanding of the redistributive effects of tax-benefit systems beyond the use of relative inequality. Building upon existing studies, we explore the extent, composition, and evolution of tax-benefit redistribution in the EU, considering both relative and absolute views of inequality. Our results show that EU countries rank differently in tax-benefit redistribution depending on the inequality view adopted. Across all countries and years analysed, we find that taxes contribute more to redistribution than benefits when adopting an absolute view of inequality, while relative inequality shows more balanced contributions. We emphasise that policy recommendations for enhancing tax-benefit redistribution vary depending on whether they are assessed in a relative or absolute view of inequality. Tax-benefit redistribution trends also differ depending on the inequality criteria used. We discuss challenges in measuring tax-benefit redistribution, including the choice of pre-fiscal income, the role of pensions, and the impact of employers’ social insurance contributions.</p>

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Unpacking absolute and relative tax-benefit redistribution in the EU

  • Adrián Hernández

摘要

This paper examines how taxes and benefits have contributed to reducing market income inequality across all EU countries since the early 2000s. We aim to deepen understanding of the redistributive effects of tax-benefit systems beyond the use of relative inequality. Building upon existing studies, we explore the extent, composition, and evolution of tax-benefit redistribution in the EU, considering both relative and absolute views of inequality. Our results show that EU countries rank differently in tax-benefit redistribution depending on the inequality view adopted. Across all countries and years analysed, we find that taxes contribute more to redistribution than benefits when adopting an absolute view of inequality, while relative inequality shows more balanced contributions. We emphasise that policy recommendations for enhancing tax-benefit redistribution vary depending on whether they are assessed in a relative or absolute view of inequality. Tax-benefit redistribution trends also differ depending on the inequality criteria used. We discuss challenges in measuring tax-benefit redistribution, including the choice of pre-fiscal income, the role of pensions, and the impact of employers’ social insurance contributions.