Taxing capital income in Hungary and the European Union
Countries seeking membership in the European Union (EU) cannot look to the EU for a blueprint for reforming their system for taxing capital income. Indeed, it is hard to generalize about tax systems in the EU. Most member states apply fairly low tax rates to interest payments and discriminate against profit distributions. But tax rates, exemption levels, and methods of tax integration differ greatly within and across countries, and there is almost no harmonization of methods for taxing capital income. Approaches to taxing capital gains vary greatly, and distortions arise from the treatment of various sources of capital income. In 1993, when the EU began efforts to integrate capital markets, member countries proposed various ways to harmonize capital income taxes, including a proposal to introduce a withholding tax on interest income of residents of member states, with a minimum rate of 15 percent (revised to 10 percent). Under this scheme all interest on bank deposits and government and private bonds would be taxed and there might also be a final withholding tax on residents interest income. But the proposal was not accepted and the EU Commission decided to maintain the status quo, not to pressure member countries to harmonize company taxes. But Hungary could look for models in the Nordic countries (especially Norway and Sweden), Austria, and Finland, which have undertaken far-reaching reforms of capital income taxation. In most EU countries capital gains are either not (directly) taxed or are not taxed systematically. In Finland and Norway identical tax rates are applied to all types of capital income, including capital gains. The centerpiece of the"Scandinavian model"is a dual income tax, combining a progressive tax on personal income with a flat-rate tax on all types of capital income. The"Scandinavian model"contrasts sharply with the"comprehensive income taxation"model, under which a single (progressive) tax schedule is applied to income from all sources. In Austria the treatment of different types of capital income is relatively uniform but the composite tax burden on capital income resembles the highest personal income tax rate rather than a reduced rate. Austria's rate of tax evasion was high, but a 10 percent withholdingtax applied to all interest-bearing assets has reduced discrimination against honest taxpayers.
|Date of creation:||31 Mar 1998|
|Contact details of provider:|| Postal: 1818 H Street, N.W., Washington, DC 20433|
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
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.:
- Schmidt-Hebbel, Klaus & Serven, Luis & Solimano, Andres, 1994. "Saving, investment, and growth in developing countries : an overview," Policy Research Working Paper Series 1382, The World Bank.
- Roger H. Gordon & Joel Slemrod, 1988. "Do We Collect Any Revenue from Taxing Capital Income?," NBER Chapters, in: Tax Policy and the Economy: Volume 2, pages 89-130 National Bureau of Economic Research, Inc.
- Sorensen, Peter Birch, 1995. "Changing Views of the Corporate Income Tax," National Tax Journal, National Tax Association, vol. 48(2), pages 279-294, June.
- John R King & Vito Tanzi, 1995. "The Taxation of Financial Assets; A Survey of Issues and Country Experiences," IMF Working Papers 95/46, .
- Sorensen, Peter Birch, 1995. "Changing Views of the Corporate Income Tax," National Tax Journal, National Tax Association, vol. 48(2), pages 279-94, June.
- Jeffrey Sachs & Andrew M. Warner, 1996. "Achieving Rapid Growth in the Transition Economies of Central Europe," CASE Network Studies and Analyses 0073, CASE-Center for Social and Economic Research.
- Burgess, Robin & Stern, Nicholas, 1993. "Taxation and Development," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 762-830, June.
- 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;International Institute of Public Finance, vol. 1(1), pages 57-79, February.
- Holzmann, Robert, 1992. "Tax Reform in Countries in Transition: Central Policy Issues," Public Finance = Finances publiques, , vol. 47(Supplemen), pages 233-255.
- Genser, Bernd, 1995. "Austria's steps towards a dual income tax," Discussion Papers, Series II 288, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
- Genser, Bernd & John, Christoph, 1992.
"Reform of the GDR Tax System: A Blueprint for East European Economies?,"
Public Finance = Finances publiques,
, vol. 47(Supplemen), pages 335-348.
- Genser, Bernd & John, Christoph, 1991. "Reform of the GDR tax system: A blueprint for east European economies?," Discussion Papers, Series II 157, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
- Peter Birch Soerensen, "undated". "Changing Views of the Corporate Income Tax," EPRU Working Paper Series 95-05, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
- Joseph E. Stiglitz, 1991. "Government, Financial Markets, and Economic Development," NBER Working Papers 3669, National Bureau of Economic Research, Inc.
- Mintz, Jack M. & Tsiopoulos, Thomas, 1994. "The effectiveness of corporate tax incentives for foreign investment in the presence of tax crediting," Journal of Public Economics, Elsevier, vol. 55(2), pages 233-255, October.
- Gordon, Roger & Kalambokidis, Laura & Slemrod, Joel, 2004. "Do we now collect any revenue from taxing capital income?," Journal of Public Economics, Elsevier, vol. 88(5), pages 981-1009, April.
- Roger H. Gordon & Laura Kalambokidis & Joel Slemrod, 2003. "Do We Now Collect Any Revenue From Taxing Capital Income?," NBER Working Papers 9477, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:1903. 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: (Roula I. Yazigi)
If references are entirely missing, you can add them using this form.