ABSTRACT
Excess wages tax (EWT) is a tax-based incomes policy instrument used in some FSU and East European countries in transition. Under EWT, the government taxes the excess of the wage bill above the norm, calculated typically on the basis of inflation and some multiple of the prevailing minimum wage. The main goal of EWT is to curb inflationary pressures by penalizing through taxation the ‘excessive’ wage awards granted by enterprises in the course of wage and price liberalization. This chapter examines the effect of EWT on enterprise behavior, wages, profits, and its possible impact on inflation.
