The importance of a solid system of state finance was not recognised in the early stages of deficit funding and net money was issued, leading to the chronic stagflation of the Seventies. Corrective measures have had a dramatic affect on world levels of inflation. European efforts to achieve fiscal near-neutrality have been driven by the political Euro project. The accounting behind some of these measures is dubious and market reaction to the Euro reflects a general concern that pressures to spend will again increase. As we shall see in a section which follows, spending pressures are almost inevitable.
Taxation is, of course, resented.
The growth in overall tax take as a proportion of all value added has slowed, as Figure 1 shows. This is chiefly due to political pressures to cut taxes , or rather to slow their growth and redistribute their impact. Such pressures will not abate, and have proven a sure vote-catcher in recent elections. Additional forces are the de-localisation of economies and trading, discussed elsewhere , and the effective benchmarking of corporate tax as a result of the growing mobility of capital and intellectual assets. Value added taxes contribute around a third of all tax revenue on average in the OECD nations.