## Labor Taxation in the Western Balkan: Looking Back and Forward

_IMF Working Papers, December 2, 2022_

## Source details

**Canonical URL:** [Labor Taxation in the Western Balkan: Looking Back and Forward](https://www.imf.org/en/publications/wp/issues/2022/12/03/labor-taxation-in-the-western-balkan-looking-back-and-forward-526304)

## Other formats

- [Markdown version](/en/publications/wp/issues/2022/12/03/labor-taxation-in-the-western-balkan-looking-back-and-forward-526304/index.md)
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## Bibliographic details
- Authors: Alain Jousten, Mario Mansour, Irena Jankulov Suljagic, Charles Vellutini
- Published: December 2, 2022
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400227769.001

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### Overview
- This paper examines how labor taxation (personal income taxes and social security contributions) in the Western Balkan contributes to labor market outcomes such as high informality and a significant gender gap in participation rates.
- The analysis focuses on the twin equity-efficiency challenge arising from limited progressivity combined with high tax wedge on low incomes, leading to low redistributive capacity and inadequate incentives to enter the job market.

### Key findings
- Limited progressivity of income taxation in the Western Balkan.
- High tax wedge on low incomes contributes to:
  - High informality.
  - A significant gender gap in participation rates.
  - Low redistributive capacity.
  - Inadequate incentives to enter the job market.

### Policy implications and recommendations
- Alleviate excessively high tax wedges on low incomes.
- Improve progressivity of income taxation.
- Policy discussion centers on balancing reductions in tax wedges for low incomes with measures that enhance the redistributive capacity of the tax system.

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## Content in this bundle

- **Working Paper**
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  - [Working Paper (PDF)](/-/media/files/publications/wp/2022/english/wpiea2022239-print-pdf.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/wp/issues/2022/12/03/labor-taxation-in-the-western-balkan-looking-back-and-forward-526304_