In June 2004, the Government Tax Commission presented its report on the unified taxation system for financial income (hereinafter referred to as “integration of taxes on financial income”). Theoretically, the dual income tax (DIT) discussion introduced mainly in Nordic countries is at the core of the discussion about integration of taxes on financial income. The Tax Commission’s mid-term policy report (hereinafter referred to as “the mid-term policy report”), submitted in June 2002, lists DIT as a key issue for future consideration. Then, in the revised report submitted in November of the same year, the commission argues: “Establishing a tax system that is fair, simple, and easy to understand should be the basis of all taxes on financial assets. From this perspective, which meets the policy demand for a shift ‘from savings to investment,” with regard to the tax structure for financial transactions, the tax authorities should not only strive to ensure neutrality between financial instruments regarding taxes on interest, dividends, and capital gains but also aspire to integrate the various categories of financial income. In this case, the integration of taxes on financial income and the DIT should be considered as a future direction.” Specifically, in the FY 2003 tax reform, dividend income (large accounts excluded), which until then was taxed as part of aggregate income, is taxed as separate income and at the same rate as are capital gains and interest. In this paper, we will first give an overview of the discussions thus far on dual income tax, after which we will take up various issues surrounding the integration of taxes on financial income.
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Paper provided by East Asian Bureau of Economic Research in its series Finance Working Papers with number
484.
Length: 24 pages Date of creation: Jan 2004 Date of revision: Handle: RePEc:eab:financ:484
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Find related papers by JEL classification: H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies D14 - Microeconomics - - Household Behavior - - - Personal Finance H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
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