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Tax Reform in Norway: A Focus on Capital Taxation

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  • Oliver Denk
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    Abstract

    Norway’s dual income tax system achieves high levels of revenue collection and income redistribution, without overly undermining economic performance and while paying attention to environmental externalities. It treats capital and labour income in different ways: capital income is taxed at a single low rate, while labour income is taxed at progressive rates. However, effective tax rates on savings vary widely across asset classes. The favourable treatment of owner-occupied housing relative to financial savings should be reduced, preferably by taxing imputed rents at the standard 28% statutory rate. The wealth tax implies very high effective tax rates on savings, indicating that it either gives rise to tax avoidance or significantly inhibits growth. The government should investigate the issue and, if the growth-equity trade-off is too unfavourable to growth, phase out or lower the wealth tax. To restrain tax avoidance by the wealthy, the base of the gift and inheritance tax should be broadened. Overall, the reform package recommended in this paper would improve the allocation of capital and increase work and investment incentives. It could be designed to be broadly neutral in regard to income redistribution and public revenue. La réforme fiscale en Norvège : Privilégier l'imposition du capital En Norvège, le système d'imposition duale atteint d’excellents résultats en termes de recouvrement des recettes et de redistribution du revenu, sans pénaliser excessivement la performance économique et en prenant en compte les externalités environnementales. Ce système n’applique pas le même traitement aux revenus du capital et du travail : le revenu du capital est soumis à un taux d’imposition unique faible, tandis que celui du travail est taxé à des taux progressifs. Toutefois, les taux d’imposition effectifs de l’épargne varient beaucoup d’une catégorie d’actifs à l’autre. Le traitement favorable des logements occupés par leurs propriétaires devrait être réduit, de préférence en taxant leur valeur locative imputée au taux légal normal de 28 %. L’impôt sur la fortune entraîne des taux d’imposition effectifs de l’épargne très élevés, qui ouvrent la voie à l’évasion fiscale ou qui entravent significativement la croissance. Le gouvernement doit se pencher sur cette question et, si l’arbitrage entre croissance et équité est par trop défavorable à la croissance, éliminer progressivement l’impôt sur la fortune ou réduire son taux. Afin de restreindre les possibilités d’évasion fiscale de la part des contribuables les plus aisés, il faudrait élargir la base de l’impôt sur les donations et les successions. Dans l’ensemble, les réformes recommandées dans ce document amélioreraient la répartition du capital et renforceraient les incitations à travailler et à investir. Elles pourraient être conçues de façon à avoir un impact globalement neutre sur la redistribution des revenus et les recettes publiques.

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    File URL: http://dx.doi.org/10.1787/5k9bls0vpd5d-en
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    Bibliographic Info

    Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 950.

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    Date of creation: 03 Apr 2012
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    Handle: RePEc:oec:ecoaaa:950-en

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    Keywords: capital taxation; own-occupied housing; taxation; Norway; wealth tax; rate of return allowance; allowance for corporate equity; dual income tax system; taux de l'indemnité de retour; déduction pour capital de l'entreprise; fiscalité; impôt sur la fortune; double système d'imposition; Norvège; imposition du capital; propriétaires occupants;

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    Cited by:
    1. Balázs Égert, 2013. "The Efficiency and Equity of the Tax and Transfer System in France," OECD Economics Department Working Papers 1038, OECD Publishing.

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