Housing taxation in the Nordics : efficiency and equity

In many countries, owner-occupied housing enjoys a tax-favoured status relative to rental housing and many other forms of wealth. I first use simple examples to illustrate why the tax status of owner-occupied housing relates crucially to the tax treatment of the so-called imputed rent and mortgage interest expenses. I then discuss other issues related to capital income taxation as well as property taxation and housing market transaction taxes against basic principles of good taxation, referring to tax policies in the Nordic countries. I also discuss the connection between certain macroprudential policies and housing taxation.Peer reviewe

Welfare Effects of Housing Transaction Taxes : A Quantitative Analysis with an Assignment Model

We evaluate the welfare cost of housing transaction taxes with a new assignment model-based framework, where welfare effects are driven by distortions in the matching of houses and households. We calibrate the model with data from the Helsinki metropolitan region to assess the impact of a reform where an ad valorem transaction tax is replaced with a revenue-equivalent property tax. The aggregate welfare gain from this reform increases rapidly with the initial transaction tax rate, with the Laffer curve peaking at about 10%. The proportion of households that lose out from the reform is nevertheless increasing in the tax rate. We compare our model-based counterfactual aggregate welfare results with welfare calculations based on reduced-form estimates from previous policy evaluation studies; they are broadly in line, despite the latter using data from different housing markets at various levels and changes of the tax rate.Peer reviewe