Comparative View on Tax Incentives for Promoting Educational Programs and Professional Training in the European Union

By Făinişi, Florin; Gruia, George | Contemporary Readings in Law and Social Justice, July 1, 2017 | Go to article overview

Comparative View on Tax Incentives for Promoting Educational Programs and Professional Training in the European Union


Făinişi, Florin, Gruia, George, Contemporary Readings in Law and Social Justice


1. Introduction

Human capital is considered the essence of economic growth, labour force and social cohesion. During the 2000 European Council in Lisbon, government leaders set the goal of the European Union: to become the most competitive and most dynamic knowledge-based economy in the world, capable of long-term economic growth, with more and better jobs and a higher level of social cohesion. Lifelong learning is at the core of the strategy set in Lisbon, its main objectives being the continuous improvement of knowledge and the permanent increase of people's skills - two key elements of the EU Agenda.

The main goal of the policy regarding education and professional training is to increase the level of knowledge and to improve the abilities and competences of citizens involved in any learning process. A higher level of qualification increases the chances for a person to enter the labour market and retain a job. The first strategic challenge for the European Project of Cooperation in the Field of Education and Professional Training (European Commission document, 2008) until 2020 is to promote lifelong learning and to foster mobility regarding the approach to the field of study. Creating and supporting learning opportunities throughout a person's life is both an objective, as well as a means to achieve quality and efficiency, fairness in regards to access to schooling, innovation and creativity on all levels of education and professional training. The Bordeaux Communication, (European Commission, 2008) regarding European cooperation in the field of education and professional training (EPT) in close connection to general and higher education, confirms the fact that education and professional training are essential for lifelong learning strategies. The question is how to allocate enough financial resources for lifelong learning, as well as for the mobility of the learning process?

Several European countries have adopted tax incentives in order to encourage national educational programs and professional training projects. The need to offer continuous professional training for the workforce has brought about several co-funding schemes throughout Europe, including tax incentives, credits, funds for professional training and individual accounts dedicated to learning. Hence, tax policies have also included a few initiatives to improve incentives and several means to finance lifelong learning and professional training.

According to OECD, there are two main ways in which fiscal policies can influence investments in education and professional trainings: either with the help of tax policies applied to income earned from selling educational services and professional training, or tax incentives applied to expenses related to education and professional training (paid either by individuals, or by companies).

The former refers to the value added tax pertaining to the provision of services and to profit taxes, if such taxes lead to a difference between what buyers pay for those services and what the providers receive for such services (especially in the case of VAT).

The latter approach refers to tax policies which may influence investments in lifelong learning and professional training. Tax incentives may come in different forms, such as introducing tax deductions which leads to cost cutting by the fact that these expenses are deducted from the income, offering credits for certain basic expenses or applying tax exemptions for incomes earned by certain specific groups (such as apprentices). The first two types of incentives may have certain lower limits (when expenses are below a certain limit, taxes do not apply) and upper limits (taxes do not apply if expenses exceed such a limit).

Out of all the existing taxes, this study takes into account two main types of taxes:

(a) value added tax which mainly affects companies involved in performing and providing education/training services (impact on income). …

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