Dr. Tom McDonnell:

Sure, yes. Ultimately, the marginal rate for self-employed above €100,000 is the highest rate. Personally, I find the debate on marginal tax rates to be somewhat problematic. The effective tax rate is much more relevant. From what I have seen, what is more important is effective tax rates at the bottom of the income distribution where there is a choice about labour market entry at all. I have not seen the evidence about whether I will work if my marginal tax rate is 47% or 48% and I am on €80,000 or €90,000. People tend to talk about a guy in a pub who said he would not move back to Ireland because of this. I have not seen econometric evidence that suggests it is relevant although I would be very interested in seeing it.

Again, cross-country comparisons are extremely problematic because even the 28 member states of the EU are very different from each other. The only way one can do any kind of analysis is of a single country over time where the institutional structure and the structure of the labour force are similar. One could do state by state where relevant. We have seen very good research on the minimum wage, for example. That is the level at which one has to do it or one will otherwise fail the like-with-like test required in any scientific analysis. As a final point, I note that while I say the marginal tax rate is not hugely important, it would be wrong to say it is of no relevance at all. Clearly, all taxes have some impact on the economy.