Dividends and capital gains are generally subject to lower effective tax rates than wage income at a personal level, according to a working paper from the Organisation for Economic Co-operation and Development (OECD) published on Monday 28 August.
The OECD has presented a novel analysis that compares the tax treatment of labour and capital income in OECD countries in a consistent way, using stylised effective tax rates.
In many countries, capital income is also favoured from a tax point of view, even when the taxes paid by companies and individuals are taken into account. This gap between the taxation of earned income and that of capital income tends to be smaller if only personal income tax is considered. However, it increases with income levels and varies from country to country.
The study highlights the fact that tax treatment of income from labour and capital can affect the efficiency and equity of tax systems.
The European Commission’s annual report on taxation, published in July, also concluded that the fact that Member States’ taxes are mainly levied on labour could undermine the progressive tax system (see EUROPE 13219/16).
Read the study: https://aeur.eu/f/8d4 (Original version in French by Anne Damiani)