Fundamental Tax Reform in The Netherlands
AbstractThe Dutch Parliament has passed legislation for a new income tax that abolishes the current tax on personal capital income and substitutes it by a presumptive capital income tax, which is in fact a net wealth tax. This paper contrasts this wealth tax with a conventional realization-based capital gains tax, a retrospective capital gains tax which attempts to charge interest on the deferred tax, and a capital accretion tax which taxes capital gains as they accrue. None of the approaches meets all criteria for a 'good' income tax, i.e., equity, efficiency, and administrative feasibility. We thus conclude that the effective and neutral taxation of capital income can best be ensured through a combination of (a) a capital accretion tax to capture the returns on easy-to-value financial products, (b) a capital gains tax with interest to tax the returns on hard-to-value real estate and small businesses, and (c) a broad presumptive capital income tax, i.e., a net wealth tax, to account for the utility of holding wealth. We favor uniform and moderate proportional tax rates in the context of a dual income tax under which capital income is taxed separately from labor income.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 342.
Date of creation: 2000
Date of revision:
Capital income taxation; capital gains taxation; tax reform; wealth tax;
Other versions of this item:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Auerbach, Alan J., 1989.
"The deadweight loss from `non-neutral' capital income taxation,"
Journal of Public Economics,
Elsevier, vol. 40(1), pages 1-36, October.
- Alan J. Auerbach, 1990. "The Deadweight Loss from `Non-Neutral' Capital Income Taxation," NBER Working Papers 2510, National Bureau of Economic Research, Inc.
- Peter Sørensen, 1994. "From the global income tax to the dual income tax: Recent tax reforms in the Nordic countries," International Tax and Public Finance, Springer, vol. 1(1), pages 57-79, February.
- Auerbach, Alan J, 1991.
"Retrospective Capital Gains Taxation,"
American Economic Review,
American Economic Association, vol. 81(1), pages 167-78, March.
- Bovenberg, A.L. & Rele, H.J.M. ter, 1998. "Reforming Dutch capital taxation," Open Access publications from Tilburg University urn:nbn:nl:ui:12-76543, Tilburg University.
- Alan A. Auerbach & David F. Bradford, 2001.
"Generalized Cash Flow Taxation,"
NBER Working Papers
8122, National Bureau of Economic Research, Inc.
- Gerald E. Auten & Joseph J. Cordes, 1991. "Policy Watch: Cutting Capital Gains Taxes," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 181-192, Winter.
- David F. Bradford, 1997. "Fixing Capital Gains: Symmetry, Consistency and Correctness in the Taxation of Financial Instruments," NBER Working Papers 5754, National Bureau of Economic Research, Inc.
- Alan J. Auerbach, 1988. "Capital Gains Taxation in the United States: Realizations, Revenue, and Rhetoric," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(2), pages 595-638.
- José Mª Durán Cabré & Alejandro Esteller Moré, 2007.
"An empirical analysis of wealth taxation: Equity vs. tax compliance,"
2007/1, Institut d'Economia de Barcelona (IEB).
- José Mª Durán Cabré & Alejandro Esteller Moré, 2007. "An empirical analysis of wealth taxation: Equity Vs.tax compliance," Working Papers XREAP2007-03, Xarxa de Referència en Economia Aplicada (XREAP), revised Jun 2007.
- Sijbren Cnossen, 2002. "Tax Policy in the European Union: A Review of Issues and Options," CESifo Working Paper Series 758, CESifo Group Munich.
- Bernd Genser, 2006. "The Dual Income Tax: Implementation and Experience in European Countries," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0625, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra).
If references are entirely missing, you can add them using this form.