LABOUR TAXATION: FORMAL AND INFORMAL SOLUTIONS
Assistant professor Ioana Maria COSTEA
The present study aims to create a panora ma of doctrinal, legal and jurisprudential solutions, which
determine the heterogeneity of labour market’s f iscal hypotheses’. The study identifies a progressive series of
interactions between economic and social factors, which gener ate at the jur idical level a specific series of fiscal
solutions, both traditional and innovating for the qualification a nd taxation of labour r evenues. Heterogeneity of
working forms is presently a complex, main direction in business with effects both at economic and lega l level. This
study provides an overview of statutory and ca se-law solutions for the legal cla ssification and ther efore tax
classification of personal income.
Keywords: labour market actor s, entrepr eneuria l activity, employee, dependent activity, independent activity
JEL Classification: K31
I. Interactions and interdependences between labour market and taxation
Interdependence between labour market and taxation ensues, traditionally, from the
circular motion of public resources w ith two particular causes: taxes on individuals’ incomes
from working activities are an important source of financing OECD
member states' budgets, also
state fiscal policies are affecting the labour market: minimum wages, benefits of public insurance
systems, optimization of working statute.
The scale of lucrative activities undertaken by individuals, generically named labour
market, is shaped by a series of interactions with heterogeneous, spontaneous or controllable
factors. These factors show the evolutionary dynamics of more complex contemporary economic
space. The structure of taxation and tax formulas used by the public authority are both a cause
and an effect on t he labour market. The state’s main choice is to impose progressive or unitary
taxation. Progressive taxation is a factor balancing low wages, stimulating minimum wages,
moderating the need for redistribution of resources
. Studies show that „pure increase in the tax
progression may lead to wage moderation and thereby improve employment”
lowers the incentives for high wage claims and „leads to a downward pressure on non-
competitive wages, which in turn reduces involuntary unemployment”
. Unitary taxation, on the
other hand, prompts taxation of marginal revenues, consumption and labour market mobility.
Entrepreneurial dynamic is influenced, according to recent studies
, by individual
incomes tax system, through the autonomy of management decisions, inclusively at fiscal level.
Ioana Maria Costea, „Alexandru Ioan Cuza” University of Iaşi, Law Faculty, firstname.lastname@example.org
Thorsten Upmann, A positive ana lysis of labour mar ket institutions and tax r eforms, in “International Tax and Public Finance”,
no. 16/2009, p. 622.
For details, see: Jon Strand, Effects of Progressive Taxes under Decentralized Bargaining and Heterogeneous Labour , in
“International Tax and Public Finance”, no. 9/2002, pp. 195–210.
Pekka Sinko, Labour taxation, job creation and job destruction—Focusing on the r ole of wage setting, in “International Tax and
Public Finance”, no. 14/2007, p. 585.
Stefan Boeters, Optimal Tax Pr ogressivity in Unionised Labour Markets: Simulation Results for Germany, in “Computational
Economics”, 2012, p. 1.
For details, see: Donald Bruce, John Deskins, Can state tax policies be used to pr omote entr epreneurial a ctivity?, in “Small
Business Economics” no. 38/2012, pp. 375–397.