Fundamental Tax Reform in The Netherlands
The 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.
|Date of creation:||2000|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo.de
More information through EDIRC
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.:
- Alan A. Auerbach & David F. Bradford, 2001.
"Generalized Cash Flow Taxation,"
NBER Working Papers
8122, National Bureau of Economic Research, Inc.
- Alan J. Auerbach & David F. Bradford, 2001. "Generalized Cash Flow Taxation," Working Papers 131, Princeton University, Department of Economics, Center for Economic Policy Studies..
- Alan Auerbach & David Bradford, 2001. "Generalized Cash Flow Taxation," CESifo Working Paper Series 425, CESifo Group Munich.
- Alan J. Auerbach, 1988.
"The Deadweight Loss from `Non-Neutral' Capital Income Taxation,"
NBER Working Papers
2510, National Bureau of Economic Research, Inc.
- 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.
- David F. Bradford, 1996. "Fixing Capital Gains: Symmetry, Consistency and Correctness in the Taxation of Financial Instruments," NBER Working Papers 5754, National Bureau of Economic Research, Inc.
- Bovenberg, A.L. & Ter Rele, H.J.M., 1998. "Reforming Dutch capital taxation," Other publications TiSEM f4e7e5f8-be95-4d55-a903-9, Tilburg University, School of Economics and Management.
- 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.
- Auerbach, Alan J, 1991.
"Retrospective Capital Gains Taxation,"
American Economic Review,
American Economic Association, vol. 81(1), pages 167-78, March.
- 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.
- 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.
When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_342. See general information about how to correct material in RePEc.
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.