Abstract
In March 2014, the Spanish Prime Minister Rajoy officially announced that his government would engage in a “fiscal devaluation.” It apparently was the first official recognition by the government of an EU member state that tax policies combining a Value-Added-Tax (VAT) rate hike and a cut in social contributions levied on wages were indeed equivalent to a devaluation of the domestic currency:1 import prices are immediately affected by the higher VAT rates, while export prices are not; and domestic labor costs are cut, granting domestic producers a competitive advantage over foreign producers.
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© 2015 Jacques Le Cacheux and Eloi Laurent
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Le Cacheux, J., Laurent, E. (2015). Taxation in the EU: Fiercer Competition?. In: Report on the State of the European Union. Palgrave Macmillan, London. https://doi.org/10.1057/9781137451088_4
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DOI: https://doi.org/10.1057/9781137451088_4
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