Re: Who pays for low taxes?, By Marta Ďurianová, May 24 - 30, Vol 10 No 20
Wealth must be created before it can be redistributed. The health care system, pensions, and all the other elements of what I'll refer to as the western European welfare state are possible because citizens of countries like Belgium have the skills and an economy that deliver high wages - wages that can support the level of taxation necessary to provide social benefits.
It is perfectly sensible for the new eastern EU entrants to offer low tax rates, in addition to their low labour costs, as a method of attracting new investment. However, it makes even more sense as a method of increasing the rate of wealth creation by working Slovaks. The more money Slovaks have in their pocket to spend, the faster the domestic economy will harmonise with the wealthier EU economies. Then Slovakia can begin to extend its social programmes. No state has ever taxed itself into prosperity.
If I were a western European, I'd be less worried about how little Slovaks are paying in taxes and worry more about how my country will be able to afford paying theirs, as its population starts to decline and age.
As for the Germans, most people admire their work ethic and their productivity. But please spare me the notion that they carry the rest of Europe on their backs. Reunification was basically a reshuffling of money within Germany - a big public works programme from which many in Western Germany profited.
Spain has worked very hard to make economic progress in the last decade, and any help from Germany was mostly in the form of jobs that were moved south because they were no longer sustainable (and which are now going to Slovakia). Ireland can thank its low taxes, its abundance of skilled English-speaking workers, flexible work rules, and, because of these things, the billions of dollars in American investment they attracted.
Actually, Slovakia appears to be a good study of how to grow within the EU, and they are on the right path.
7. Jun 2004 at 0:00