Comparing Different European Income Tax Policies Making Work Pay

Raising the participation at the lower end of the labour market abstract is hindered by the high burden of taxation. Therefore, recently, in some European countries serious efforts have been made to make work pay. In this paper an overview of these current efforts is given. With the exception of Germany there seems to be a consistent policy of making work pay through the introduction of a substantial in-work tax credit and a decrease of the basic rate. In some countries due to distributing aspects the in-work tax credit is targeted to families with children. Moreover, two countries have a back to work allowance or premium for benefit claimants. Given the limited resources for future tax reforms, increase of in-work credits seem appropriate for further progress in making work pay.

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