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Taxation of Household Capital in EU Member States Impact on Economic Efficiency, Revenue and Redistribution

Savina Princen, Athena Kalyva, Alexander Leodolter, Cécile Denis, Adriana Reut, Andreas Thiemann () and Viginta Ivaškaitė-Tamošiūnė

No 130, European Economy - Discussion Papers from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission

Abstract: Taxation of capital, including the taxation of capital income and stocks, could play an important role in increasing revenue efficiency and making the tax system fairer. Recent international tax developments on automatic exchange of information and administrative co-operation have increased the capacity of Member States to raise taxes from mobile tax bases such as capital income. This paper first analyses the tax treatment of household capital income. It presents the theoretical features of the optimal taxation of capital income and describes the tax treatment of income from different capital assets in EU Member States. The paper then focusses on the taxation of owner-occupied housing and measures the impact of specific tax features on the cost of home ownership by using an indicator-based analysis. Then, it analyses specific issues in capital gains taxation and their macroeconomic effects. Finally, the paper explores the possibilities of increasing revenue efficiency through wealth transfer taxes, i.e. inheritance and gift taxes. It provides an up-to-date review of the theoretical arguments and the practical implementation of such taxes in EU Member States and tries to shed light on the reasons why these taxes contribute only little to raising revenues.

JEL-codes: D1 D2 D3 E6 H2 H21 J08 J2 (search for similar items in EconPapers)
Pages: 94 pages
Date: 2020-08
New Economics Papers: this item is included in nep-acc, nep-eec, nep-mac, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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