Does Germany collect revenue from taxing the normal return to capital?

Becker J, Fuest C

Abstract
A widespread objection to the introduction of consumption tax systems claims that this would lead to high tax revenue losses. This paper investigates the revenue effects of a consumption tax reform in Germany. Our results suggest that the revenue losses would be surprisingly low. We find a maximum revenue loss of 1.6 per cent of annual GDP. In some years, we even find tax revenue gains. This implies that the current tax system collects little revenue from taxing the normal return to capital. Based on these results, we calculate a macroeconomic measure of the effective tax rate on capital income.


Publication type
Research article (journal)

Peer reviewed
Yes

Publication status
Published

Year
2005

Journal
Fiscal Studies

Volume
26

Issue
4

Start page
491

End page
511

Language
English

ISSN
0143-5671