To support the most modest against inflation, Philip Lane suggests “a tax increase on high incomes or very profitable industries and companies despite the energy shock.”
The chief economist of the European Central Bank, Philip Lane, suggests taxing high income or super-profits of companies to finance aid to the poorest in the face of inflation, thus avoiding increasing public deficits.
For both macroeconomic and equity reasons, as the energy shock hits people through record inflation, “governments should support the income and consumption of households and businesses that suffer the most,” Philip Lane said in an interview. with the Austrian newspaper “the standard“Published Tuesday.
“The big question is whether some of this support should be funded by tax increases for the wealthy,” he continues.
His answer: “This could take the form of higher taxes on high incomes or on industries and companies that are very profitable despite the energy shock,” said this influential member of the governing board of the monetary institute. Defenders of the ECB pointed to state aid to protect households from the impact of inflation, as its president, Christine Lagarde, said again on Monday before the European Parliament.
France wants a European measure
Similarly, “if you support the needy by raising taxes, this has less effect on inflation than if you increase deficits,” Philip Lane justifies. The idea of taxing the richest is already gaining ground within the euro zone, where the Spanish government wants to introduce a temporary and exceptional tax for the richest 1% of the population, in order to finance the measures put in place to mitigate the impact of runaway inflation.
France has not gone that far: the finance bill for 2023 relies on the tariff shield to contain price increases. Divided on the issue of a tax on “super profits”, the government hopes to find a Europe-wide solution. Leaving the European Union, the United Kingdom last Friday announced a massive debt-financed spending plan and tax cuts in the face of inflation at a level not seen in decades, fueling the pound’s record decline.