Presentation by: David Bradbury (OECD, Head, Tax Policy and Statistics Division) OECD Conference on wealth inequalities: Measurement and policies Paris, 26 April 2018.

1. Wealth inequalities:
measurement and policies
David Bradbury
Head, Tax Policy and Statistics Division
OECD’s Centre for Tax Policy and Administration
OECD Boulogne Auditorium, 26 April 2018
The role of tax policy: Opportunities and challenges

2. Tax design for inclusive economic growth
2
OECD Taxation Paper
Tax Design for Inclusive Economic Growth
Bert Brys, Sarah Perret, Alastair Thomas &
Pierce O’Reilly
Paper No.26
OECD Taxation Working Paper series
http://www.oecd-ilibrary.org/taxation/

3. How tax policy affects inequality
• Most redistribution occurs through transfers, but education and health spending
can reduce wealth inequality by increasing opportunities for all
Tax revenues finance expenditure which may reduce inequality
• PIT progressivity, property taxes and capital taxes are key tools to narrow the
distribution of income and wealth inequalities directly
Taxes can reduce disposable income and wealth inequality
• Inheritances taxes, capital gains taxes, and wealth transfers taxes can affect wealth
transfers and thus income and wealth mobility
Taxes can reduce inequalities in inherited wealth
• Intra-personal as opposed to inter-personal redistribution, e.g. SSCs to finance
future benefits
The tax system can redistribute wealth across the lifecycle
3

4. Tax-by-tax
assessment
Systems
approach
Tax policy
principles
for
inclusive
growth
Towards a systems approach
4

5. Recent OECD work on capital taxation
The Role and
Design of Net
Wealth Taxes
Taxation of
Household
Savings
1 2
OECD Tax Policy Studies
5

6. Key findings
6
Net Wealth
Taxes (NWTs)
have been in
decline across
OECD countries
NWTs can raise
revenue and
reduce
inequality, but
typically are a
‘second-best’
policy tool
Need to consider
the overall
approach to the
taxation of
capital
Taxes on capital
are important
for inclusive
growth
We tax different
types of savings
differently &
this generally
favours the
wealthy
In some cases,
different tax
treatment helps
achieve
important policy
objectives
Improved tax
policy design can
support inclusive
growth

7. TAXATION OF HOUSEHOLD
SAVINGS
7

8. • Examines how countries tax savings, covering
a wide range of asset types in 40 countries
• Calculates marginal effective tax rates (METRs)
across asset types
– Calculate the net present value (NPV) of taxes as
a percentage of the NPV of gross returns
– over an asset holding period
– accounting for:
• multiple taxes
• deductions and variations in tax bases
• inflation
• Assesses the distribution of asset holdings
• Examines the implications of AEOI for savings
tax policy
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Overview of the report

9. 9
METRs vary widely across asset types
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
Bank Deposits Shares: taxed
as dividends
Shares: taxed
as capital gains
Private Pensions:
deductible contributions
Residential property: equity
financed; owner-occupied
Residential property:equity
financed; rented
Low income (67%AW) Medium income (100%AW) High income (500%AW)
Averages across 40 countries, 2016
Marginal effective tax rates by asset type
Source: authors calculations

10. 10
0%
20%
40%
60%
80%
100%
1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th
Percentageoffinancialassets Income decile
Other financial assets Mutual funds & managed accounts
Bonds and shares Voluntary pensions
Bank deposits
0%
20%
40%
60%
80%
100%
1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th
Percentageofrealassets
Income decile
Main residence Other residence Other real assets
Averages across 18 European countries, 2012-2015 data*
Real assets Financial assets
Source: authors calculations based on the 2016 Household Finance and Consumption Survey *Spain data for 2010-12
Asset-holding mixes vary with income
Breakdown of households’ asset-holdings across income deciles

11. Opportunities
for countries to
increase
neutrality
Opportunities
for some
countries to
increase
progressivity
Case to maintain
concessionary
treatment of
retirement
savings
Opportunities to
improve tax
design,
particularly
regarding private
pensions and
residential
property
Policy implications
11
FOUR MAIN THEMES

12. THE ROLE AND DESIGN OF
NET WEALTH TAXES IN THE
OECD
12

13. • Examines the current and historical
use of net wealth taxes in the
OECD
• Assesses the case for and against
net wealth taxes
• Considers practical net wealth tax
design issues
13
Overview of the report

14. 14
The declining use of net wealth taxes
Number of OECD countries levying individual net wealth taxes over time
Source: OECD Net Wealth Tax Questionnaire
12
3

15. Characteristics of a net wealth tax
With net wealth of EUR 10 million and a 4% return:
30% capital income tax = 1.2% wealth tax
Similarity with a tax
on personal capital
income
Taxation irrespective
of actual returns
A wealth tax is equivalent to taxing a fixed return on
assets
So the effective tax burden  with returns
Taxation on an
accrual basis
Taxation of self-made
and inherited wealth
If asset values are regularly updated, a net wealth tax is
equivalent to taxation on accruals
A net wealth tax is imposed on all net wealth,
regardless of its source
Net wealth tax = Recurrent tax on individual net wealth stocks
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16. • Increases progressivity/
reduces inequality
• Leads to very high METRs if
imposed on top of personal
capital income taxes
• Possibly more productive use
of assets (if NWT replaces
capital income taxes)
• Penalises the holders of low-
return assets
• Liquidity issues
• No lock-in effects
• Valuation and compliance
issues
• Reduces wealth inequality
• No distinction between
inherited and self-made
wealth
The case for and against net wealth taxes
Similarity with a tax
on personal capital
income
Taxation irrespective
of actual returns
Taxation on an
accrual basis
Taxation of self-made
and inherited wealth
+ –
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17. The effect of wealth taxes on ETRs
METRs on different assets with and without net wealth taxes
Source: Data from OECD Taxation of Household Savings
17
-100%
-50%
0%
50%
100%
150%
200%
Bank deposits Corporate
bonds: issued
at par
Shares: 50%
distribution
Private
pensions:
deductible
contributions
Residential
property: debt;
owner-
occupied
Switzerland
-100%
-50%
0%
50%
100%
150%
200%
Bank deposits Corporate
bonds: issued
at par
Shares: 50%
distribution
Private
pensions:
deductible
contributions
Residential
property: debt;
owner-
occupied
Norway
-100%
-50%
0%
50%
100%
150%
200%
Bank deposits Corporate
bonds: issued
at par
Shares: 50%
distribution
Private
pensions:
deductible
contributions
Residential
property: debt;
owner-
occupied
Spain
-100%
-50%
0%
50%
100%
150%
200%
Bank deposits Corporate
bonds: issued
at par
Shares: 50%
distribution
Private
pensions:
deductible
contributions
Residential
property: debt;
owner-
occupied
France
METRs without net wealth tax METRs with net wealth tax

18. 18
Main conclusions
Strong case for addressing wealth inequality through the tax
system, but this does not necessarily require a NWT
Weaker a case for a NWT on top of broad-based capital income
taxes and well-designed inheritance and gift taxes
Where the taxation of capital income is low or where inheritance
taxes are not levied, there is a stronger case for a NWT
Need to focus on design, including by keeping rates low and bases
broad, and accounting for taxpayers’ liquidity constraints

19. TRANSPARENCY AND THE
TAXATION OF CAPITAL
INCOME
19

20. 20
Global Forum and transparency
Global Forum on Transparency and Exchange of Information
for Tax Purposes
• April 2009: G20 announces “the era of bank secrecy is over” and the Global
Forum was restructured - now consists of 150 members
• Exchange of Information on Request (EOIR). By 2016, over 250 peer reviews
conducted and 116 jurisdictions rated
• In 2014, Global Forum endorsed the Common Reporting Standard (CRS), allowing
the Automatic Exchange of Information (AEOI)
• 101 countries have committed to make first exchanges by 2017/18 and
estimated that close to 2 000 bilateral exchange relationships for AEOI
to be activated this year with exchanges to begin next September

21. The EOIR relationships
amongst OECD and G20
countries in 2009
The network of EOIR agreements
2009
Data are
Preliminary and
subject to revision 21

22. The EOIR relationships
amongst OECD and G20
countries in 2017
All OECD and G20 countries now
exchange information on request
with each other. The network of
EOIR agreements has been
completed.
Much of the expansion of the EOIR
network has come through countries
signing the Multilateral Convention
on Mutual Administrative Assistance
in Tax Matters (MAC) – 110
countries have signed.
The network of EOIR agreements
2017
22

23. The EOIR relationships
between OECD/G20 countries
and offshore financial centres*
in 2009
The network of EOIR agreements
2009
*IMF (2000) definition of Offshore Financial
Centre used 23

24. The EOIR relationships
between OECD/G20 countries
and offshore financial centres*
in 2017
In 2009 the network between
OECD/G20 countries and OFCs was not
very well developed, but it has
expanded substantially. However, there
are still some offshore jurisdictions that
do not exchange information according
to the latest data.
The network of EOIR agreements
2017
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*IMF (2000) definition of Offshore Financial
Centre used

25. 25
Transparency & inclusive fiscal reform
Exchange of Information on Request
• Some academic research (e.g. Johannesen and Zucman, 2014) has suggested that
when countries sign EOIR agreements, offshore holdings may shift to non-signatory
countries – based on 2011 data.
• This highlights the importance of the completion of the network of EOIR
agreements, for continued multilateral action on EOI and for continued work on
beneficial ownership.
Automatic Exchange of Information
• More than 500 000 taxpayers have disclosed offshore assets over the past 8
years, and close to 85 billion euros in additional tax revenue has been identified
as a result of voluntary compliance mechanisms and offshore investigations.*
*OECD (2017), OECD Secretary-General report to G20 Leaders, Hamburg, Germany, July 2017

26. Contact details
David Bradbury
Head of the Tax Policy and Statistics Division
Centre for Tax Policy and Administration
2, rue André Pascal - 75775 Paris Cedex 16
Tel: +33 1 45 24 15 97 – Fax: +33 1 44 30 63 51
David.Bradbury@oecd.org || www.oecd.org/tax
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