major revaluation of 4.9 million properties for the new property tax regime and the base value for real estate property tax purposes was raised. In Greece, where the construction sector grew the most, and subsequently fell the most, the Unified Property Tax (ENFIA) entered in force in January 2014. The tax base has now been broadened to include urban and non‐urban land as well as residential, commercial, and industrial buildings. A capital gains tax on property sales, a special tax on property income and a property transfer tax were introduced.

In terms of tax revenue structure, despite the fact that corporate and personal income tax rates are much lower for Ireland than for Greece or Portugal, these together account for a much larger share of revenues in Ireland (40%) than in Greece (24%) or Portugal (31%). Spain’s tax rates are higher, and the share is also higher. These higher shares for income and corporate taxes probably reflect their better tax collection capability and/ or threshold or exemption effects. Greece and Portugal rely more heavily on indirect taxes. Spain has the highest share of social security contributions in revenues and Greece and Portugal have the highest share from indirect taxes, particularly the VAT (which are easier to collect than income taxes).<sup>3738</sup>

**Table 7: Efficiency of tax collection, 2008, %**

|||**Effective r**|**ates**||**Statutory**|**rates**|**(Ta**|**Tax effici**<br>**x collectio**|**ency**<br>**n ratio)**|
|---|---|---|---|---|---|---|---|---|---|
||VAT/<br>CP<sup>1</sup>|SSC/<br>WSSS<sup>2</sup>|Corporate/<br>GDP|VAT|SSC<sup>3</sup>|Corporate|VAT|SSC|Corporate|
||[1]|[2]|[3]|[4]|[5]|[6]|[1]/[4]|[2]/[5]|[3]/[6]|
|Greece|9.74|15.8|2.48|19|28.06|25|0.51|0.56|0.10|
|Ireland|13.94|7.41|2.82|21|10.75|12.5|0.66|0.69|0.23|
|Portugal|12.55|15.14|3.63|21|23.75|25|0.60|0.64|0.15|
|Spain|9.04|18.07|2.80|16|30.15|30|0.57|0.60|0.09|

1: Ratio of the revenue from value added taxes to private consumption.

2: Ratio of revenue from employers’ social security contributions to compensation of employees.

3: Employer’s social security contributions. Source: OECD Economic Surveys: Greece. August, 2011.

Where high tax rates in GPS are resulting in a relatively low share of revenues in taxes, improving collection, reducing exemptions, or increasing the base would help. Table 7 shows a measure of efficiency in tax collection, comparing tax revenues that would be obtained from application of statutory tax rates and actual collection rates. The most “efficient” is Ireland, followed by Portugal and Spain. With relatively lower statutory income tax rates, Ireland has higher corporate income taxes relative to GDP than either Spain or Greece. While tax rates have risen, tax revenues in real terms have not risen relative to 2007 in any country, being 78%, 88%, 96% and 80% of their 2007 levels respectively in GIPS. Only in 2014 is an upward movement visible, save in Greece. Figure 10 shows the relative importance of social security taxes, corporate taxes and VAT for GIPS.

_<u>Composition affects “success” in the long term.</u>_ A line of research related to the longer run impact of fiscal consolidation asks if the composition of the adjustment package (Giavazzi and Pagano, 1990, Alesina and Ardegna 1998) stabilizes or reduces the debt ratio. Alesina and Perotti (1995) and Alesina et al (1998) find that fiscal consolidations are more likely to stabilize the debt/GDP ratio when the budget improvement occurs through cuts in public wages and transfers. They explain that cutting these items affects expectations: government’s efforts become more credible, signaling a regime shift. Large spending

> investors and the availability of generous mortgage tax relief all further influenced an increase in demand and hence prices. (Drudy and Collins, 2011).

> 37 Note that the tax wedge on labor stands at over 40% for GPS compared to 28% for Ireland.

> 38 Total taxes less cash benefits at the average wage, no child. IPS are much lower for married couples with children.

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