The tax system and the financial crisis

This paper investigates the effects of the tax system on the economic factors that triggered the financial crisis. We examine three cases in which the tax regime interacted with these factors, reinforcing them. First, we focus on the taxation of residential building: while the importance of capital gains taxes is disputed, the deductibility of mortgage interest may have contributed to the financial crisis by creating some of the raw materials for the securitization industry. Second, a narrow perspective on the tax treatment, together with specific provisions, may have fostered performance-based remuneration of managers, resulting in overemphasis of short-term profitability and incentive to excessive risk-taking. Third, the securitization process, which played a key role in the outbreak of the financial crisis, was accompanied by opportunities for tax arbitrage and reduction of the overall tax wedge paid by investors, through offset of incomes that are ordinarily taxed at different rates; a de facto exemption of CDS premiums received by non-residents supplemented the tax arbitrage.taxation, financial crisis, housing market, stock options, securitization, credit default swaps

Financement de l'investissement et neutralité fiscale: La déduction pour capital à risque en perspective = Investment financing and tax neutrality: The deduction for risk capital in perspective

Le but de cet article est de mettre la réforme belge en perspective, dans le contexte plus large de la neutralité de l’impôt à l’égard des modes de financement des entreprises. Une première section présente le problème et l’éventail des solutions théoriques qui peuvent être apportées. La seconde section présente l’expérience belge et la troisième section, l’expérience italienne. Nous concluons sur les enjeux pour la Belgique.The debt-equity bias is present in many tax systems since a significant number of decades: while interest is tax deductible, the return on equity is subject to tax at the corporate level and may be taxed again at the personal level. The recent financial and economic crisis has clearly made the point the excessive leverage may be damaging, so there is a renewed interest in the consequence of the debt-Equity bias. This article sets out the main solutions for the debt-equity bias that have been suggested in the economic literature. We nest present the Belgian and Italian reforms: both counties have introduced an Allowance for Corporate Equity (ACE) but the design of the allowance is very different. We describe the two reforms and some elements of assessment, and next conclude on the what we could learn from that comparison for the future of the ACE in Belgiu

The tax system and the financial crisis

This paper investigates the effects of the tax system on the economic factors that triggered the financial crisis. We examine three cases in which the tax regime interacted with these factors, reinforcing them. First, we focus on the taxation of residential building: while the importance of capital gains taxes is disputed, the deductibility of mortgage interest may have contributed to the financial crisis by creating some of the raw materials for the securitization industry. Second, a narrow perspective on the tax treatment, together with specific provisions, may have fostered performance-based remuneration of managers, resulting in overemphasis of short-term profitability and incentive to excessive risk-taking. Third, the securitization process, which played a key role in the outbreak of the financial crisis, was accompanied by opportunities for tax arbitrage and reduction of the overall tax wedge paid by investors, through offset of incomes that are ordinarily taxed at different rates; a de facto exemption of CDS premiums received by non-residents supplemented the tax arbitrage

The tax system and the financial crisis

This paper investigates the effects of the tax system on the economic factors that triggered the financial crisis. We examine three cases in which the tax regime interacted with these factors, reinforcing them. First, we focus on the taxation of residential building: while the importance of capital gains taxes is disputed, the deductibility of mortgage interest may have contributed to the financial crisis by creating some of the raw materials for the securitization industry. Second, a narrow perspective on the tax treatment, together with specific provisions, may have fostered performance-based remuneration of managers, resulting in overemphasis of short-term profitability and incentive to excessive risk-taking. Third, the securitization process, which played a key role in the outbreak of the financial crisis, was accompanied by opportunities for tax arbitrage and reduction of the overall tax wedge paid by investors, through offset of incomes that are ordinarily taxed at different rates; a de facto exemption of CDS premiums received by non-residents supplemented the tax arbitrage.taxation, financial crisis, incentives, housing, bonuses

Le spese fiscali collegate all'Irpef

Discussione delle spese fiscali associate all'Irpef

Capitolo 4 - Federalismo fiscale e IRAP

Il Quaderno del CNEL “Riformare l’ordinamento fiscale italiano per garantire equità nel prelievo, solidarietà nella società civile, contrasto delle diseguaglianze e sviluppo economico sostenibile” è il frutto del lungo lavoro di ascolto, confronto e analisi emerso dalla Commissione di studio per l’esame delle tematiche connesse alla riforma fiscale anche al fine della redazione di iniziative legislative ai sensi dell’art. 99, comma 3, della Costituzione istituita presso il CNEL e presieduta dal prof. Franco Gallo. In particolare, insieme al dott. Vieri Ceriani e al gruppo di lavoro si è proceduto alla redazione del Capitolo 4 - Federalismo fiscale e IRA

Taxation and the financial crisis

The financial crisis has opened up a global debate on the taxation of the financial sector. A number of international policy initiatives, most notably by the G20, have called for major changes in the tax treatment of financial institutions and transactions as well as individuals working in the financial sector. This book examines how tax policies contributed to the financial crisis and whether taxation can play a role in the reform efforts under way to establish a sounder and safer financial system. The book looks at the pros and cons of various tax initiatives, including limiting the tax advantages to debt financing, special taxes on the financial sector and financial transactions taxes.Copyright 2012 Oxford University Press. Chapter 3 & 5 copyright 2012 European Union. Chapter 9 copyright 2009 Bank for International Settlements. This publication is available as an open access version through OUP, as part of the OAPEN-UK project. Re-use of this article is permitted in accordance with the Terms and Conditions set out at http://creativecommons.org/licenses/by-nc-nd/3.0