This chapter looks at the alternative sources of financing for social protection in Europe. The main source is payroll taxation. Two issues are often raised: that of the regressivity of payroll taxation and that of enlarging a tax base that is increasingly restricted to salaried work. Given that shrinking base, European governments are searching for alternative sources of finance, mainly consumption tax and income tax. In most countries, payroll taxation is an integral part of the social insurance compact, which involves unions and management. To the extent that payroll taxes are perceived as contributions or premiums paid for an insurance service, they are expected to be better accepted than other taxes.
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