Taxes on holding gains Final recommendations

1
Taxes on holding gainsFinal recommendations

• OECD
• F. Lequiller

2
Taxes on holding gains

• Contradiction in the SNA
• Taxes on holding gains are deducted from the SNA
  measure of income
• But...holding gains are not included in the SNA
  measure of income
• The tax is deducted while the tax base is not
  included !
• This contradiction misled some users, in
  particular in the second part of the 90s

3
Taxes on holding gains

• The OECD prepared a discussion paper and a
  questionnaire (March 2003)
• Twenty five countries reponded to the
  questionnaire
• On this basis the OECD made a recommendation
• This recommendation is submitted to this meeting
  for comment
• Taking account of comments, we will forward it to
  the ISWGNA

4
Only one solution

• Two solutions were theoretically possible to
  resolve the contradiction
• (1) re-classify holding gains and losses as
  income this solution was discarded as too
  ambitious
• (2) re-classify taxes on holding gains as capital
  taxes only this solution was proposed in the
  questionnaire

5
Pros and Cons

• Re-classifying taxes on holding gains as capital
  would resolve the contradiction
• It is consistent with the view of most households
• However, it is not consistent with the view of
  the government
• The main problem is that it is difficult to
  disembody the tax on holding gains from the
  global income tax

6
Results of the consultation

• Question 1 as a principle, would you support the
  change of taxes on holding gains as a capital
  tax?
• Result Experts were split thirteen supported
  the change in principle while fifteen did not
  support the change

7
Results of the consultation

• Question 2 in practice, can you separate taxes
  on holding gains from the income tax?
• A large majority (18) responded that they would
  not be in a position to separate these taxes from
  the tax on income

8
OECD proposals

• In the view of the OECD, considering the results
  of the questionnaire, it would be premature to
  propose a change now.
• Half of the experts disagree on the principle
• Two third disagree on the practicality
• The OECD proposes therefore that the SNA does not
  change regarding the classification of this tax
• However, where this is possible, countries should
  compile and transmit data on taxes on holding
  gains in order for economists to be able to add
  this to income to neutralise totally the impact
  of holding gains from income

9
Final recommendation

• The SNA should not be changed regarding the
  classification of taxes on holding gains which
  should remain part of D51, current taxes on
  income.
• However, the SNA should recognise the breakdown
  of D51 between taxes on income from production
  and taxes on holding gains as a necessary
  information for users

10
Final recommendation (continued)

• The new SNA should discuss and present
  alternative measures of household income,
  excluding taxes on holding gains.
• The SNA/ESA questionnaire (Table 9) will include
  special sub-categories in which countries for
  which this is possible would report taxes on
  holding gains received from households (and,
  separately, corporations).

11
Taxes on holding gains

• The meeting of OECD experts on national accounts
  is requested to comment on this recommendation
• Taking acount of comments, the recommendation
  will be forwarded to the ISWGNA