Accounting for the Family: The Treatment of Marriage and Children in European Income Tax Systems [antikvár]

Executive Summary In some countries family status has little or no impact on the amount of tax that an individual pays. In others the income tax system plays a major role in the redistribution of income among families of different types. The question this paper addresses is whether, out of the wide range of practices in Western Europe, there are tax arrangements which are particularly family friendly. Are there existing tax systems which perform well in terms of the welfare of families and, especially, of children and which could be used as blueprints for the design of new systems? Failing that, are there lessons about the advantages and disadvantages of alternative approaches that we can learn through an understanding of the effects of tax instruments in existing systems? Tax systems are expected to achieve many things and in practice have to reconcile conflicting aims, most notably in this context the wish to support the traditional family, while ensuring equality of treatment among individuals in different circumstances. In evaluating the success of different approaches in achieving the appropriate level of support to families, we are hampered by the absence of any universally accepted notion of a "neutral" tax system. In addition, there is no consensus about the desirable size of any concession for a child or children or how it should relate to family income. We do not take a view in these areas of ambiguity about equity. Instead, we focus on the implications of each approach to policy for horizontal and vertical redistribution. We review the main features of the current systems in the 15 European Union countries and categorize them into four distinct types: (i) those with independent taxation of couples and few family instruments within the income tax system, (ii) those with independent taxation, combined with family-related instruments such as credits or allowances for children, marriage or lone parenthood, (iii) systems with optional joint taxation and (iv) systems with mandatory joint taxation. However, the striking feature of our survey is the wide variety of instruments and combinations of them in use. An understanding of the relative tax burdens of families of different types needs to consider not only allowances for children and the form of taxation of the couple, but also such mechanisms as reliefs on family-related expenditure and income sources. Indeed, the distinction between a tax expenditure and a cash transfer payment can be blurred, and, although the focus of this paper is income tax, it should be remembered that in many countries social welfare systems play a complementary - or even a major - role in accounting for the needs of children. To establish the extent of the redistribution accomplished by a tax system, we need to look further than the existence of family-related instruments. We also need to take account of the size of the income tax system, the relative