Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/58638 
Year of Publication: 
2012
Series/Report no.: 
IZA Discussion Papers No. 6493
Publisher: 
Institute for the Study of Labor (IZA), Bonn
Abstract: 
Imputed rental income of homeowners is tax exempt in most countries, despite the long-standing arguments recommending its inclusion in the tax base, on both equity and efficiency grounds. The current fiscal crisis revived interest towards this form of taxation. The paper investigates the fiscal and distributional consequences of including homeowners' imputed rent, net of mortgage interest and maintenance costs, in taxable income as any cash income source that extends consumption opportunities. Three scenarios are analysed in six European countries: in the first imputed rent is included in the taxable income of homeowners, while at the same time existing mortgage interest tax relief schemes and taxation of cadastral incomes are abolished. In two further revenue-neutral scenarios, the additional tax revenue raised through the taxation of imputed rent is redistributed to taxpayers, either through a proportional rebate or a lump-sum tax credit. Results show how including net imputed rent in the tax base might affect inequality in each of the countries considered. Housing taxation appears to be a promising avenue for raising additional revenues, or lightening taxation of labour, with no inequality-increasing side-effects.
Subjects: 
housing taxation
imputed rent
income distribution
inequality
microsimulation
JEL: 
D31
H23
I31
I32
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size
441.06 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.