In 1994, following widespread reforms to the taxation of capital income and wealth in member countries, the OECD released a landmark report on Taxation and Household Savings. A range of recent developments make a re-examination of the topic timely. In particular, income and wealth inequality has increased in many countries. This has been brought into particular focus as a result of the 2008 global financial and economic crisis, leading to strong calls for greater taxation of capital income and wealth in many countries. Furthermore, ground-breaking changes are being made in the international tax environment to prevent capital income and wealth being hidden offshore. Meanwhile, concern about low levels of retirement savings persist, particularly in light of continued population ageing.

This report provides a detailed review of the taxation of household savings in 40 OECD and key partner countries in light of these and other developments. It examines the different approaches that countries take to taxing savings and calculates marginal effective tax rates to quantify the incentives created by these approaches; examines the distribution of asset holdings in a range of OECD countries; examines the recent changes in the international tax environment; and discusses the implications of the analysis for savings tax policy.

While countries do not necessarily need to tax savings more, the analysis shows that there is significant scope to improve the way countries tax savings to foster inclusive growth. Most significantly, there are opportunities for countries to increase neutrality in taxation across assets and thereby improve both the efficiency and fairness of their tax systems. At the same time, there remains a case for preferential tax treatment of private pensions in order to encourage retirement savings. There are also opportunities for improvement in tax design regarding private pensions and in a number of other areas such as residential property.

This report provides policymakers with the empirical evidence and the practical policy recommendations needed to ensure a more coherent and effective approach to the taxation of household savings.