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Taxation of Household Savings

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This report provides a detailed review of the taxation of household savings in 40 OECD and partner countries. It examines the different approaches that countries take to taxing household savings, and calculates marginal effective tax rates on a wide range of savings vehicles (including bank accounts, bonds, shares, private pensions and housing) to assess the impact of these approaches on savings behaviour. It examines asset holdings across income and wealth distributions to help assess the distributional impact of savings taxation, and discusses recent changes in the exchange of information for tax purposes between tax administrations. It also draws out a range of implications from this analysis for savings tax policy as part of an inclusive growth tax agenda.

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Marginal effective tax rates on household savings

This chapter presents estimates of marginal effective tax rates (METRs) across a range of savings vehicles for 40 OECD and key partner countries to assess the effect of tax systems on the incentives individuals face to save in different forms. The results highlight significant variation in METRs across savings vehicles, with tax systems creating significant incentives to alter portfolio allocation away from that which would be optimal in the absence of taxation. Private pension funds tend to be the most tax-favoured, with owner-occupied residential property also significantly tax-favoured. In contrast to owner-occupied residential property, rental property is often subject to relatively high METRs due to the application of progressive marginal personal income tax rates, capital gains taxes and significant property taxes. Bank accounts and corporate bonds also tend to be relatively heavily taxed in many countries.

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