OECD Tax Policy Studies

ISSN :
1990-0538 (online)
ISSN :
1990-0546 (print)
DOI :
10.1787/19900538
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This series consists of studies analyzing of the effects of tax policies that have occurred in the past or might be considered for the future. Its primary purpose is to assist policy makers in designing tax policies that are suited to their objectives.
Also available in: French
 
Fundamental Reform of Personal Income Tax

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Author(s):
OECD
Publication Date :
31 May 2006
Pages :
140
ISBN :
9789264025783 (PDF) ; 9789264025776 (print)
DOI :
10.1787/9789264025783-en

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In a drive to encourage risk-taking, entrepreneurship and competitive fiscal advantage, many OECD countries have reformed their personal income tax system fundamentally over the last two decades, generally in ways that can be characterised as rate reducing and base broadening.  This comprehensive study examines the general trends in the taxation of capital and wage income, and the most significant changes that have taken place. It looks closely at the main drivers of reform, the trade-offs between policy objectives, the guidelines, objectives and design features of tax reforms and why fundamental reform of personal income tax systems has been so high on the agenda.

The principal systems of taxes on personal capital income and wage income - comprehensive, dual and flat – are thoroughly examined and evaluated in the OECD countries that have adopted these different systems or a mix thereof.  They are each assessed in terms of the fundamental principles of sound tax policy: simplification, efficiency, equity, tax compliance and tax revenue, and their main advantages and disadvantages are discussed.  

Also available in: French

 

Executive Summary
Introduction
Chapter 1. Trends in the Taxation of Personal Income
-Personal Income Tax Revenue
-Trends in the Taxation of Labour Income
-Trends in the Taxation of Capital Income
-Trends in the Effect of Taxation on Income Distribution
Chapter 2. The Main Drivers of Personal Income Tax Reform
-Raising Revenue in an Internationally Competitive Environment
-Restoring Efficiency
-Maintaining Fairness
-Improving Compliance by Reducing Complexity
-Policy Choices Regarding Revenue Requirements, Equity-Efficiency Balance, Complexity of the Tax System, and External Pressures
Chapter 3. Personal Income Tax Design Questions
-Basic Concepts
-Tax Unit
-Rate Schedule
-Use of Tax Expenditures
-Impact of Inflation
-Effects of Personal Income Tax Reform on the Overall Tax-Benefit System
-Tax Compliance and Tax Administration
-Tax Reform Process
Chapter 4. Types of Personal Imcome Tax Systems
-Comprehensive Income Tax
-Dual Income Tax
-Semi-Dual Income Tax
-Flat Tax
-Expenditure Taxation
Chapter 5. Recent Proposals of Personal Income Tax Reform
-Flat Tax Issues in Russia, Slovak Republic, Switzerland, Poland, and Norway
-The Debate on the Dual Income Tax in Germany
-The choice of the Tax Unit: Stakes and Consequences
Chapter 6. Conclusion
-Simplification
-Efficiency
-Equity
-Tax Compliance
-Raising Revenue
-Fundamental Personal Income Tax Reform: The Road Ahead
References