Fundamental Reform of Personal Income Tax: Oecd Tax Policy Studies

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. 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 Includes Bibliographical References (p.138-140). This report analyses the trends in the taxation of personal income in OECD countries. It discusses the drivers for tax reform and the trade-offs that inevitably will be encountered. The report also presents the features that have to be considered when designing and reforming a personal income tax system. This analysis then leads to a discussion of the main types of personal income tax systems: the comprehensive income tax, the dual income tax and the flat income tax. These alternative tax systems are evaluated in light of the principles of sound tax policy and the objectives that policy makers try to achieve. Finally, some recent tax reform proposals and results of recent tax reform experiences in OECD countries are discussed 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. At the same time, governments are aware that they must maintain taxpayer's faith in the integrity of their tax systems to fund public spending. Fairness and simplicity have become the byword of reformers, but the double challenge has meant that no clear consensus has emerged on an ideal personal income tax. Although there are large differences in tax policies between OECD countries, almost all the re