Tax Competition and the Enlargement of the EU
A. Jevcak, Universty of Dortmund
Introduction
In the debate about potential benefits of differentiated tax systems in the current and future
EU member countries arguments against tax competition rely predominantly on the models
originated by Zodrow and Mieszkowski (1986) and Wilson (1986), and surveyed by Wilson
(1999) which show that in the situation where governments can only attract more capital by
lowering capital tax rates tax competition leads to under-provision of public goods.
These models assume that countries levy taxes on capital in order to finance the provision of
public goods for their citizens whose welfare increases in the level of public goods provided
to them.1 It is not surprising that under such system a higher tax rate represents no benefits to
capital which therefore moves to countries with lower tax rates decreasing welfare in the
countries with higher tax rates.
With respect to the design of the tax system Charles McLure (1986, pp. 342f) suggests that
taxes should more closely reflect benefits received by taxpayers. Thus when providing public
goods that benefit only citizens governments should rely more on taxes paid by individuals
and less on capital taxation. This proposition is similar to Pascal Salin’s (1990, p. 201) view
that the tax structure in a country should match the expenditure structure. Public goods
provided to increase the welfare of citizens should therefore be paid for by taxation of citizens
and supply of public goods to capital should be financed by capital taxation. Salin argues that
different tax rates lead to capital flows only if there is a distortion between the expenditure
and the revenue side, as decisions on capital location depend on the combination of taxes and
benefits offered by the different countries.
These arguments are in line with the perception usually shared in the U.S. which considers
competition among states as a key element of federal system. According to Janeba and
Schjelderup (2002, p. 3) this positive view of tax competition is perhaps a reflection of the
influential article by Tiebout (1956) who argued that fiscal autonomy leads to an efficient
outcome by allowing citizens to choose (“vote with their feet”) the combination of taxes and
public goods best reflecting their preferences.
In the light of these arguments it is not clear whether in the context of the enlarged European
Union (EU) lower tax rates in the future member countries from central and eastern Europe
(CEE) would by themselves lead to capital inflows into these countries as the level and
quality of public goods in these countries is also lower.
On the other hand, models of tax competition that assume that tax revenues are used for the
provision of so-called industrial public goods/public inputs nevertheless suppose that
governments are flexible in setting the levels of provided public goods and that they set these
levels in a way to maximize the utility of citizens. 2 However, public inputs like infrastructure,
1
Zodrow, G.R. and P. Mieszkowski (1986), Wildasin, D. E. (1988), Wilson, J.D. (1991), Bucovetsky, S. (1991),
Razin, A.and E. Sadka (1991), Persson, T. and G. Tabellini (1992);
Zodrow and Mieszkowski (1986) consider both a model with consumable public goods and a model with
industrial public goods.
2
Zodrow and Mieszkowski (1986), Bayindir-Upmann, Thorsten (1998), Fuest, Clemens (1995), Rauscher,
Michael (1997), Rauscher, Michael (1998).
education, national defence or effective police and legal system have to be built up over many
years and thus their levels cannot be adjusted instantaneously.
Moreover, although public inputs can be expected to benefit all primary (private) factors of
production the models with public inputs usually assume that capital taxation is the only
source of government revenue.3 Furthermore, these models consider a number of small
identical jurisdictions which take the world rate of return on investment as given. In the
context of the EU enlargement it might however be more interesting to analyse how the
distribution of capital located in two unevenly-developed groups of countries could change
after the creation of a single market.
Hence, the issue of tax competition is reconsidered in this paper using a two-country
framework where capital and labour tax revenues are used exclusively on the provision of
public inputs while countries differ in the levels of public inputs accumulated over time. It is
shown that when public inputs are financed both through capital and labour taxation then tax
competition does not necessarily have to lead to under-provision of public goods. The
analysis furthermore rises some doubts about the effects and the efficiency of possible capital
tax harmonisation in the EU.
A simple model
There is an industrial public good which consists of a stock of public inputs accumulated over
the years (GS) and of public inputs financed through primary input taxation (G T) with GT =
TK + (1  )TL where T and (1  )T are tax rates on a unit of capital and labour
employed in the given country, thus
G = GS + TK + (1  )TL.
(1)
A two-country framework is modelled where a more developed country has a larger stock of
government provided inputs than a less developed country, GS > GS*, where * denotes the less
developed country. Capital stock is normalised to unity and perfectly mobile across the two
countries (K = K, K* = 1 – K) while labour force although of equal size (L = L* = 1) in both
countries is mobile only within a single country. Initially, more capital is located in the more
developed country, that is K > 1/2.
Public inputs can basically be divided into pure sometimes also called “factor-augmenting”
public inputs and congestible public inputs. Pure public inputs are freely and fully available to
all producers without being subject to congestion, either in the number of producers or in the
quantities of input or output. Basic research, national defence, legal system or flood control
could be considered as examples of pure public inputs. For this type of public input it seems
appropriate to assume a production function with constant returns to scale in primary inputs
(private) and increasing returns to scale in all inputs of production (private and public).
On the other hand, the degree to which a congestible public input benefits each producer
varies with the amount of utilisation by other producers. Infrastructure, education system or
public administration are usually given as examples of congestible public inputs. In case of
such public inputs a production function with diminishing returns to scale in primary factors
and constant returns to scale in all factors of production should be more suitable.
3
Zodrow and Mieszkowski (1986), Bayindir-Upmann, Thorsten (1998) and Rauscher, Michael (1997).
Fuest (1995) and Rauscher (1998) suppose different tax instruments but still do not introduce labour taxation.
2
As a result two versions of the model are considered in this paper with the specification of the
production function determined by the type of public input.
The case of pure public inputs
There is a single aggregate good which can be either consumed or used as a production input.
The aggregate good is produced according to a neoclassical production function Y(K,G,L)
exhibiting constant returns to scale in primary inputs (K,L) and increasing returns to scale in
all production inputs (K,G,L), with YK,YG,YL > 0, YKK,YGG,YLL < 0 and YKG,YKL,YGL > 0.
As capital is perfectly mobile within the two countries after tax profit per unit of capital has to
be the same in both countries, that is
YK – T = YK* – T*
(2)
where subscripts indicate derivatives. Differentiating this capital market arbitrage condition
with respect to the tax rate in the less developed country while substituting for G and G * from
eq. (1) and solving for KT* gives
KT*

(1  K )   (1   )
  YKG



YKK  YKG T  YKK
 YKG
T 
(3)
In case of a production function of the form Y = KGL with  +  = 1,  >  and  >  the
denominator is always negative.4 Hence, an increase in T* leads to a decrease in K when  –
YKG*((1 – K)  + (1  )) < 05 which can be rewritten as
1
 (1  K ) 1
G
1 
(1  K )   (1   )     (1   ) YG

(1  K )  
(4)
This result implies that in case of a relatively small G* or a small  an increase in the tax rate
in the less developed country can actually induce a capital inflow into this country. This is
caused by the fact that the lower is G* the higher is the positive impact of additional public
expenditures on capital productivity while the lower is  the more are the cost of public inputs
provision carried by labour. Tax competition thus does not necessarily have to lead to a race
to the bottom as it is often argued.
Furthermore, differentiating the right hand side of the condition (4) with respect to  leads to
4
The denominator can be split into two parts which can be both shown to be negative as
YKK  YKG T   (  1) K (  2) G   K ( 1) G (  1) T  K (  2) G (  1) ((  1)G  KT )
where G > KT while (1 – ) =  > .
Zodrow and Mieszkowski (1986) reach the same result in a model where  =1. They arbitrarily assume that
this condition is not fulfilled.
5
3
( /  )(1  K ) 1 G 
 1
((1  K )   (1   ))  ( /  )  (1  K ) 1 G 
 1
((1  K )   (1   )) Log[G  ].
This term is positive as long as 1  Log[G ]  0 that is as long as G  e


S


1

. Hence, if a
1
lower bound on G S is assumed such that GS  e  which seems to be a reasonable
assumption6 then an increase in the efficiency of the public sector () improves the chances
that an increase in the capital tax rate will lead to a capital inflow into the given country.
The model thus emphasises the importance of the size and the effectiveness of the public
sector, which are often omitted from the tax competition debate.
Welfare Maximisation
Lets assume that the government of the less developed country is trying to maximise the level
of capital located at home while taking the tax rate in the other country as given. The less
developed countries might be interested in maximising capital inflows because they seek the
technology transfer or a better access to foreign markets associated with foreign direct
investment or just because they see it as the only source of job creation.
The equation (3) implies that in the situation where

(1  K )   (1   )  and thus 1     (1   ) YG
  YKG
(1  K )  

(5)
the government of the less developed country does not have an incentive to adjust T* if at the
same time this situation is a stable equilibrium. This is shown to be the case in Appendix 1.
If  + (1 – )/((1 – K)) > 1 that is if (1  K) or  are sufficiently small then the equation (5)
implies that YG* < 1. However, the optimal provision of public goods in autarky is given by
YG = 1 as in this case domestic production maximising governments increase capital tax rates
until the marginal product of industrial public good provision equals its marginal cost.
Hence, it seems that in the model where public inputs are financed both by capital and labour
taxation7 tax competition might actually lead to over-provision of public goods.
If governments instead of capital inflows maximised the net national income without
engaging in any wasteful public expenditures that is MaxT*(Y* – YK*((1 – K) – KL) – T*(1 –
K) – (1 – )T*L where KL is the stock of capital owned by the residents of the less developed
country then
YK ( K T  )  YG (  (1  K )  (1   ) L  T  K T  ) 


 (YKK
( K T  )  YKG
(  (1  K )  (1   ) L  T  K T  ))((1  K )  K L )  YK ( K T  )   (1  K )  T  K T   (1   ) L  0

1

 0,0000454; even if  = 0,5 then e
6
If  = 0,1 then e
7
The equation (5) reduces to 1  Y

G

G
=> Y

1

 0.13.
 1 /   1 if it is assumed that public inputs are financed solely
through capital taxation that is if G = GS + TK.
4
and thus



K T  ( T *  YG T *  (YKK
 YKG
T * )((1  K )  K L ))  YKG
(  (1  K )  (1   ))((1  K )  K L ) 
 (YG  1)(  (1  K )  (1   ))  0
(6)
This equation holds for YG*= 1, if (1 – K) = KL, hence, if such a situation was a stable
equilibrium (which according to Appendix 2 cannot be ruled out) the net income maximising
government would not have an incentive to change T* while government goods were provided
in an optimal quantity.
The case of congestible public inputs
The aggregate good is now produced according to a neoclassical production function
Y(K,G,L) exhibiting decreasing returns to scale in primary inputs (K,L) and constant returns
to scale in all production inputs (K,G,L), with YK,YG,YL > 0, YKK,YGG,YLL < 0 and
YKG,YKL,YGL > 0.
The assumption of decreasing returns to scale in primary inputs implies that factor payments
do not fully exhaust revenues and thus an economic rent is generated. The existence of a
positive excess profit in a competitive market would however attract more private inputs until
the excess profits were fully dissipated.
It is therefore assumed that capital receives a share s of the economic rent generated by the
public input. As capital is perfectly mobile within the two countries after tax profit per unit of
capital has to be the same in both countries, that is
YK + sYG(G/K) – T = YK* + sYG*G*/(1–K) – T*
(7)
where subscripts indicate derivatives while * denotes the less developed country.
Differentiating this capital market arbitrage condition with respect to the tax rate in the less
developed country now implies that
1 
1 


)  YKG
(  (1  K )  (1   ))  sYGG
G  ( 
)
1

K
1

K
KT*  

sY TK  G  s(YGG T  YGK )G s(YGG
T   YGK )G  sYG (G   (1  K ) T  )

YKK  YKK  YKG T  YKG
T   G 2



K
1 K
K
(1  K ) 2
  sYG (  
Lets denote this expression as equation (8). The denominator of this expression can again be
shown to be negative (Appendix A1) thus an increase in T* leads to a decrease in K as long as
  sYG (  
1 
1 


)  YKG
(  (1  K )  (1   ))  sYGG
G ( 
)
1 K
1 K
This condition can be rewritten as (Appendix B1)
1  (1  K ) G (  1) (
  s
1 
  s
1 
)(  
)  YG (
)(  
)

1 K

1 K
5
(9)
This result again shows that in case of a relatively small G* or  an increase in the tax rate in
the less developed country can actually induce a capital inflow into this country. The
difference between equation (4) and (9) is the term s/ in the equation (9). As in the case of
congestible public inputs capital receives the share s of the economic rent generated by the
public input a higher s or  imply a stronger positive impact of a tax increase on capital
income. If s = 0, equation (9) reduces to (4) which is not surprising as in this case returns on
capital are formally identical for both types of public inputs.
Differentiating the right hand side of the condition (9) with respect to  gives

(  (1  K )  (1   )) 

 1
 1


 (1  K ) 1 G  (  s )(  (1  K )  (1   ))   (1  K ) 1 G  (  s )(  (1  K )  (1   )) Log[G  ]


(1  K ) 1 G 
 1
s
that is
(1  K )  1 G 
 1
s
 1


(  (1  K )  (1   ))  (1  K )  1 G  (  s )(  (1  K )  (1   ))(1  Log[G  ])



S

S

1

The lower bound on G assumed in the previous case, G  e , is thus again the sufficient
condition to ensure that an increase in the productivity of the public sector () improves the
chances that an increase in the capital tax rate will lead to a capital inflow into the given
country.
Welfare Maximisation
Lets assume again that the government of the less developed country is trying to maximise the
level of capital located at home while taking the tax rate in the other country as given. The
equation (8) implies that in the situation where
  sYG (  
1 
1 


)  YKG
(  (1  K )  (1   ))  sYGG
G ( 
)
1 K
1 K
and thus 1  (1  K ) G (  1) (
  s
1 
  s
1 
)(  
)  YG (
)(  
).

1 K

1 K
(10)
the government of the less developed country does not have an incentive to adjust T* if at the
same time this situation is a stable equilibrium. This is shown to be the case in Appendix 3.
If (/)( + (1  )/(1  K)) > 1 that is if  is sufficiently small then the condition (10)
implies that YG* < 1 for any value of s. Hence, when public inputs are financed both by
capital and labour taxation8 then tax competition might lead to the over-provision of public
goods both in the case of pure and in the case of congestible public inputs.
8
The condition (Y) reduces to 1  YG (  s )  YG  1 /(  s )  1 if it is assumed that public inputs


are financed solely through capital taxation that is if G = GS + TK.
6
Empirical Evidence
These conclusions seem not to contradict the empirical evidence which does not confirm any
significant decreases in corporate income taxation despite deepening economic integration.
Schulze and Ursprung (1999) surveyed a large number of empirical studies that examine the
relationship between economic integration and corporate income taxation. They conclude that
although a moderate downward trend in capital tax rates in the 1980s can be observed capital
tax revenues have remained stable and governments continue to levy substantial capital tax
rates (Schulze and Ursprung (1999), p. 321).
Devereux, Griffith and Klemm (2002) analyse the development of taxes on corporate income
in EU and G7 over the 1980s and 1990s. They show that while statutory tax rates fell over the
1980s and 1990s tax bases were on average broadened between the early 1980s and the end of
the 1990s. As a result, the effective marginal tax rate has remained stable over the last two
decades. Furthermore, although tax revenues on corporate income have declined as a
proportion of total tax revenue since 1965 they have remained broadly stable as a proportion
of GDP (Devereux, Griffith and Klemm (2002), p. 487). This finding is also supported by the
Eurostat data on corporate income tax revenues in 14 EU countries between 1995 and 2001
(Table 1).
Moreover, general government expenditure classified by the function of government
(COFOG) can be divided into those that benefit both capital and labour and those that only
benefit labour. The former group includes general public services, defence, public order and
safety, economic affairs and environment protection while the latter consist of housing and
community amenities, health, recreation, culture and religion, education and social protection.
Table 2 shows that except for the housing and community amenities the relative average
shares of labour benefiting categories of government expenditures in the EU increased
between 1995 and 2001 (the share of the EU government expenditures on housing and
community amenities would however remain unchanged if Netherlands which had an
unusually high expenditure in this category in 1995 was not considered).
The EU governments thus do not seem to experience significant problems neither with capital
tax revenues nor with provision of labour benefiting public goods. Observed decreases in
corporate tax rates might furthermore be attributed to ceasing of the inefficient industrial
public good provision while an increased reliance on personal income taxation might be
explained as an effort not to finance public goods benefiting citizens through corporate
income taxation. In order to confirm this interpretation a precise empirical analysis of public
expenditures is necessary but such study is difficult to perform.9
Capital Tax Harmonisation
9
Hines (1999, p. 309) states that one of the reasons why no significant link between taxes and FDI might be
found is that governments imposing high tax rates may indirectly compensate firms with difficult-to-measure
investment incentives such as worker training and infrastructure.
7
Does this model provide any support for capital tax harmonisation in the EU? No. Firstly, the
optimal autarky condition for industrial public good provision YG = 1 is in this model
associated with a different optimal tax rate (TO) in each country as
YG  
K
1
(GS  TO K )1 
implies that
1
TO 
 1 
( K )
 GS
K
A harmonised tax rate would therefore by itself not result in an optimal provision of public
goods in each country if autarky situation is taken as a reference point.
And secondly, YKG > 0 implies that an increase in GS makes the given country a more
attractive location for investment. Hence, if capital tax rates were the same in both countries,
more capital would be located in the country which offered more industrial public goods.
Therefore, if capital tax rates in the EU were equalised before the stock of industrial public
goods reached the same level in all member states the less developed countries would not end
up with the same amount of capital as the more developed ones. As a result, capital tax
revenues in the less developed countries would be lower. The EU would then have to rely on
fiscal transfers from the more developed countries if it wanted to equalise the stocks of
industrial public goods and thus capital in all member states.
Conclusion
The simple model presented in this paper shows that when industrial public goods are
financed both through capital and labour taxation then tax competition does not necessarily
have to lead to under-provision of public goods. In their effort to attract more capital
countries might actually over-provide industrial public goods. The model also implies that
when tax rates in two regions are harmonised before the stock of accumulated industrial
public goods is the same in both regions then it is impossible for a less developed region to
build up its stock of public goods without fiscal transfers from the more developed region.
(Although a closed form solution of a Nash game between the two welfare maximising
governments would be very nice I do not think this is possible or at least I do not know how
to reach such solution. I will try to come up with some reasonable limitations that would
allow for a further analyses of the model. Some numerical simulations could be performed but
I do not think they would be very persuasive.)
jevcak@gmx.de
8
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Salin, Pascal (1990), ‘Comment on Vito Tanzi and A. Lans Bovenberg, “Is There a Need for
Harmonizing Capital Income Taxes within EC Countries?”’, pp.198 – 205 in: Siebert, Horst
(Ed.) (1990), Reforming Capital Income Taxation, Tübingen-Mohr.
Janeba, Eckhard and Guttorm Schjelderup (2002), ‘Why Europe Should Love TaxCompetition and the US Even More So’, NBER Working Paper 9334
9
Appendix A1
1 
1 


)  YKG
(  (1  K )  (1   ))  sYGG
G  ( 
)
1 K
1 K


sY TK  G  s(YGG T  YGK )G s(YGG
T   YGK
)G  sYG (G   (1  K ) T  )

 YKG T  YKG
T   G 2



K
1 K
K
(1  K ) 2
  sYG (  
KT*  

YKK  YKK


YKK  YKK
 YKG T  YKG
T  


sYG TK  G  s(YGG T  YGK )G s(YGG
T   YGK
)G  sYG (G   (1  K ) T  )



0
K
1 K
K2
(1  K ) 2
The denominator can be split into two equivalent parts which can be shown to be negative.
Y

KK


s(YGG
T   YGK
)G  sYG (G   (1  K ) T  )
 Y T 

0
1 K
(1  K ) 2

KG

 (  1)(1  K ) (  2 ) G     (1  K ) ( 1) G (  1) T  

s ((1  K )  (   1)G (  1) T    (1  K ) ( 1) G  ) s(1  K ) G (  1) (G   (1  K ) T  )

0
1 K
(1  K ) 2


(1  K ) ( 2) G (  1)  (  1)G   (1  K ) T  (  s(   1)  )  sG   s (G   (1  K ) T  )  0


(1  K ) ( 2) G (  1)  (  1)G   (1  K ) T  (  s )  s(  1) G   0


(1  K ) ( 2) G (  1)  ((  1)G    (1  K ) T  )  s ((1  K ) T   (  1)G  )  0
Since per definition G* > (1  K)T* while (1 – ) >  the expression in brackets and thus the
whole term is negative. The same procedure can also be applied to the second part of the
denominator.
Appendix B1
  sYG (  
1 
1 


)  YKG
(  (1  K )  (1   ))  sYGG
G ( 
)
1 K
1 K


  ( sYG  YKG
(1  K )  sYGG
G  )(  
1 
)
1 K
10
  ( s(1  K ) G (  1)   (1  K ) G (  1)  s(1  K )  (   1)G (  1) )(  
1  (1  K ) G (  1) (
1 
)
1 K
  s
1 
  s
1 
)(  
)  YG (
)(  
)

1 K

1 K
Appendix 1
Differentiating the Equation (3) with respect to T* at the point where KT* = 0 gives

(1  K )   (1   ) 
YKGG

0


YKK  YKG T  YKK
 YKG
T 
2
K T *T *
As both the numerator and the denominator are negative, this expression is always positive.
As a result, K(T*) is convex at KT* = 0 and thus the less developed country does not have an
incentive to change T* at this point.
Appendix 2
Differentiating the Equation (6) with respect to T* at the point where YG*= 1 and (1 – K) = KL
gives



K T  (YKK
 YKG
T * )( K T  )  YKG
(  (1  K )  (1   )( K T  )  (YGk ( K T  ) 

 YGG
(  (1  K )  (1   )  T * K T  ))(  (1  K )  (1   ))
that is



KT  (YKK
 YKG
T * )(KT  )  YGG
(  (1  K )  (1   )  T * KT  ))(  (1  K )  (1   ))
While the first term is always positive (see footnote 7) the second term is negative if K T* is
negative which as implied by equation (5) can not be ruled out for YG* = 1. As the relative
size of the two terms is unclear it is not possible to tell whether the whole expression is
positive or not.
Appendix 3
Differentiating the Equation (8) with respect to T* at the point where KT* = 0 gives
1 
1 


)  YKGG
(  (1  K )  (1   )) 2  sYGGG
G  (  (1  K )  (1   ))(  
)
1

K
1

K


sY TK  G  s(YGG T  YGK )G s(YGG
T   YGK )G sYG (G  (1  K ) T  )

YKK  YKK  YKG T  YKG
T   G 2



K
K
1 K
(1  K )2

2sYGG
(  (1  K )  (1   ))(  
KT *T 
Using
11


G YGGG
  (   1)(   2)G (  2) K   (   2)YGG
leads to
1 

)  YKGG
(  (1  K )  (1   )) 2
1 K

0

sYG TK  G  s(YGG T  YGK )G s(YGG
T   YGK )G sYG (G  (1  K ) T  )



YKK  YKK  YKG T  YKG T 



K2
K
1 K
(1  K )2

sYGG
(  (1  K )  (1   ))(  
KT *T 
As both the numerator and the denominator are negative, this expression is always positive.
As a result, K(T*) is convex at KT* = 0 and thus the less developed country does not have an
incentive to change T* at this point.
12
Table 1: Taxes on the income or profits of corporations as percentage of
GDP
Belgium
Denmark
Germany
Greece
Spain
France
Ireland
Italy
Luxembourg
Netherlands
Austria
Portugal
Finland
Sweden
United Kingdom
2001
3.2
3.1
:
3.2
3.0
3.1
3.6
2.9
7.5
4.4
3.3
3.6
4.3
3.7
3.3
2000
3.3
2.4
:
4.4
3.2
2.8
3.8
2.4
7.2
4.4
2.2
4.1
6.0
2.9
3.3
1999
3.3
3.0
:
3.3
3.0
2.7
3.8
2.8
7.0
4.6
2.0
3.8
4.4
2.9
3.3
1998
3.4
2.8
:
3.1
2.6
2.3
3.4
2.5
7.8
4.5
2.3
3.3
4.3
3.0
3.6
1997
2.9
2.6
:
2.6
2.8
2.3
3.2
4.2
7.9
4.6
2.2
3.3
3.5
2.7
3.4
1996
2.7
2.3
:
2.3
2.1
2.0
3.1
3.8
7.7
4.1
2.2
2.9
2.8
2.9
2.7
1995
2.4
2.0
:
2.6
1.9
1.8
2.8
3.4
7.5
3.3
1.7
2.5
2.3
1.9
2.4
Source: TAX_AGR Main national accounts tax aggregates, EUROSTAT, LUXEMBOURG
13
14
Table 2: COFOG
Percentage of
Total General
Government
Expenditure
General
public
services
1995
Be Belgium
22,7
Dk Denmark
7,3
De Germany
11,9
gr Greece
43,7
es Spain
..
fr France
11,4
ie Ireland
8,4
it Italy
26,4
lu Luxembourg 10,1
nl Netherlands 17,7
at Austria
16,4
pt Portugal
19,3
fi Finland
11,6
se Sweden
17,6
Uk UK
13,1
2001
20,0
8,1
13,1
33,7
..
12,2
10,4
19,7
11,8
17,6
16,4
14,3
13,0
14,9
10,9
Defence
1995
2,8
3,0
2,5
5,7
..
5,4
2,7
2,2
1,3
3,4
1,7
4,9
3,4
3,8
7,1
EU-14 Average 17,0 15,4 3,6
2001
2,4
3,1
2,5
6,7
..
4,6
2,1
2,3
0,8
3,4
1,7
3,7
3,0
3,8
6,6
3,3
Housing
Public
Recreation,
Economic Environment
and
order and
Health culture and Education
affairs
protection community
safety
religion
amenities
1995 2001 1995 2001 1995 2001 1995 2001 1995 2001 1995 2001 1995 2001
2,8 3,2 8,9 8,9 1,3 1,4 0,6 0,8 11,7 13,4 1,7 2,0 12,1 12,6
1,7 1,8 7,6 6,5 0,0 0,0 1,5 1,6 8,5 9,8 2,8 3,1 12,8 15,0
3,0 3,3 20,3 8,9 1,8 1,2 1,6 2,3 11,4 13,1 1,4 1,5 8,0 8,7
2,2 2,3 3,5 6,2 1,0 0,8 0,8 0,8 4,7 5,4 0,4 0,6 6,3 7,9
..
..
..
..
..
..
..
..
..
..
..
..
..
..
1,8 1,9 11,6 9,9 2,0 2,5 1,6 1,9 14,3 15,0 1,5 1,5 11,4 11,4
4,1 4,5 26,7 21,4 0,0 0,0 4,3 6,8 14,9 18,8 1,0 1,8 12,3 12,8
3,9 3,9 8,6 8,3 1,3 1,7 1,7 1,9 10,3 13,0 1,5 1,9 9,2 10,6
1,8 2,3 11,6 7,2 3,3 3,3 2,4 2,1 12,3 12,6 3,7 4,4 11,0 12,1
2,5 3,2 8,7 12,0 1,4 1,5 12,1 3,2 6,9 8,8 1,6 2,4 9,0 10,3
2,6 2,7 10,1 10,5 2,1 0,8 1,7 1,9 13,8 11,1 1,6 1,9 11,0 11,1
4,7 4,1 12,4 13,2 0,9 1,5 1,6 1,9 11,8 14,7 2,4 2,6 14,4 14,9
2,5 2,8 11,8 9,3 0,5 0,6 1,7 1,2 10,4 12,2 2,2 2,4 12,3 13,0
2,2 2,4 9,0 7,7 0,3 0,5 4,3 1,7 9,4 11,5 2,8 1,9 10,5 13,5
4,8 4,8 7,4 5,9 0,7 1,3 2,5 1,0 12,9 15,5 1,4 1,3 10,3 11,7
2,9
3,1 11,3 9,7
1,2
1,2
2,7
2,1 11,0 12,5 1,9
Source: PUBL_EXP General government expenditure by COFOG function and by type, EUROSTAT, LUXEMBOURG
Social
protection
1995
35,2
44,4
38,0
32,0
..
39,0
25,3
35,0
42,2
36,7
38,6
27,8
43,8
40,3
39,8
2001
35,2
43,8
45,2
35,8
..
38,9
21,4
36,6
43,6
37,6
41,9
29,0
42,1
41,8
40,7
2,1 10,8 11,8 37,0 38,1