Will Higher Taxation save the West from its Failures?

Will Higher Taxation save the West from its Failures?

The deepening debt crisis in Europe, made finance ministers seek solutions. Greece, whose economy failed in 2009 and since then had received numerous financial aid packages from IMF and ECB was urged to increase taxes, especially among the wealthy citizens.  Athens was accused of avoiding tax collection and not prosecuting thousands of taxpayers suspected of sending money illegally abroad. This inaction costs Greece near €28 billion or $36.93 billion, which is nearly 15% of the country’s economic output.  The continuing debt crisis is threatening Greece’s presence in the single currency union and causing severe recession.

Portugal’s President Anibal Cavaco Silva has signed a law introducing big tax increases. The new budget tool effect on Tuesday January 1st, but according to correspondents it might be challenged in the constitutional court. The standard income tax rate is rising from 24.5% to 28.5%. Analysts predict 3% economy decrease in 2012, while the expectations for 2013 are at least 1%, which will bring a third consecutive year of recession. Meanwhile savings have dropped to €78 billion and unemployment rate has risen almost 16%.

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