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The taxation of savings: the Italian system and international comparison

Author

Listed:
  • Nicola Branzoli

    () (Bank of Italy)

  • Giovanna Messina

    () (Bank of Italy)

  • Elena Pisano

    () (Bank of Italy)

  • Giacomo Ricotti

    () (Bank of Italy)

  • Ernesto Zangari

    () (Bank of Italy)

Abstract

After a brief review of the economic literature, the paper offers a comparative analysis of the main features of capital income taxation in Italy, the EU and the US. The paper also analyses the recent evolution of capital taxation and portfolio allocation in Italy. The findings point to high heterogeneity in the choice of the type of tax system, taxation level and forms of preferential taxation, suggesting no convergence towards a single model of taxation among countries. However, a common feature of most systems is that capital income is taxed more lightly than labour income. The heterogeneity in the tax treatment of households’ savings is likely to persist in the future; recent developments at international level concerning the transparency of taxation are expected to increase governments’ degrees of freedom in choosing their preferred tax system. Empirical evidence for Italy suggests that the tax burden on financial assets has increased in recent years but the evolution of financial assets over time is not particularly sensitive to tax changes.

Suggested Citation

  • Nicola Branzoli & Giovanna Messina & Elena Pisano & Giacomo Ricotti & Ernesto Zangari, 2018. "The taxation of savings: the Italian system and international comparison," Questioni di Economia e Finanza (Occasional Papers) 464, Bank of Italy, Economic Research and International Relations Area.
  • Handle: RePEc:bdi:opques:qef_464_18
    as

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    File URL: http://www.bancaditalia.it/pubblicazioni/qef/2018-0464/QEF_464_18.pdf
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    References listed on IDEAS

    as
    1. Alan J. Auerbach, 1979. "The Optimal Taxation of Heterogeneous Capital," The Quarterly Journal of Economics, Oxford University Press, vol. 93(4), pages 589-612.
    2. repec:eee:finsta:v:31:y:2017:i:c:p:81-92 is not listed on IDEAS
    3. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
    4. Judd, Kenneth L., 1985. "Redistributive taxation in a simple perfect foresight model," Journal of Public Economics, Elsevier, vol. 28(1), pages 59-83, October.
    5. Auerbach, Alan J. & Hines, James Jr., 2002. "Taxation and economic efficiency," Handbook of Public Economics,in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 21, pages 1347-1421 Elsevier.
    6. Diamond, Peter A., 1970. "Incidence of an interest income tax," Journal of Economic Theory, Elsevier, vol. 2(3), pages 211-224, September.
    7. Antonella Magliocco & Giacomo Ricotti, 2013. "The new framework for the taxation of venture capital in Italy," Questioni di Economia e Finanza (Occasional Papers) 167, Bank of Italy, Economic Research and International Relations Area.
    8. Chamley, Christophe, 1986. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives," Econometrica, Econometric Society, vol. 54(3), pages 607-622, May.
    9. Cappelletti, Giuseppe & Guazzarotti, Giovanni & Tommasino, Pietro, 2017. "The stock market effects of a securities transaction tax: Quasi-experimental evidence from Italy," Journal of Financial Stability, Elsevier, vol. 31(C), pages 81-92.
    10. Harrison Hong & Jeffrey D. Kubik & Jeremy C. Stein, 2004. "Social Interaction and Stock-Market Participation," Journal of Finance, American Finance Association, vol. 59(1), pages 137-163, February.
    11. Feldstein, Martin S, 1976. "Personal Taxation and Portfolio Composition: An Econometric Analysis," Econometrica, Econometric Society, vol. 44(4), pages 631-650, July.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    capital income; taxation; savings;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law

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