Land Tax Changes and Full Capitalisation

Anne Kristine Høj, Mads Rahbek Jørgensen and Poul Schou

Fiscal Studies, 2018, vol. 39, issue 2, 365-380

Abstract: We use a unique data set to examine the extent to which changes in the Danish land tax are capitalised into house prices. The Danish local government reform in 2007, which caused tax increases in some municipalities and tax decreases in others, provides plenty of exogenous variation, thus eliminating endogeneity problems. The results imply full capitalisation of the present value of future taxes under reasonable assumptions about discount rates. Consequently, the paper gives an empirical confirmation of two striking consequences of a land tax. First, it does not distort economic decisions because it does not distort the user cost of land. Second, the full incidence of a permanent land tax change lies on the owner at the time of the (announcement of the) tax change; future owners, even though they officially pay the recurrent taxes, are not affected as they are fully compensated via a corresponding change in the acquisition price of the asset.

Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://doi.org/10.1111/1475-5890.12163

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:fistud:v:39:y:2018:i:2:p:365-380

Access Statistics for this article

More articles in Fiscal Studies from John Wiley & Sons
Bibliographic data for series maintained by Wiley Content Delivery ().