Taxing owner-occupied housing: comparing the Netherlands to other European Union countries

van der Hoek, M. Peter and Radloff, Sarah. E. (2007): Taxing owner-occupied housing: comparing the Netherlands to other European Union countries. Published in: Public Finance and Management , Vol. 7, No. 4 (2007): pp. 393-421.

Abstract

This paper compares owner-occupied housing tax regimes in the Netherlands and the other countries in the EU-15. The Nether-lands appears to stand apart in two respects. First, in Luxembourg and the Netherlands owner-occupiers have to include an imputed rental income in their taxable income. Second, in the Netherlands, the tax-deductibility of mortgage interest payments is almost unre-stricted. The tax regime of owner-occupied homes increasingly erodes the personal income tax base in the Netherlands, so that higher tax rates are needed to collect a given amount of revenue. However, elimination or reduction of the mortgage interest deduction can only be realized gradually. Due to a lack of data both within the various tax regimes and across time periods, a comprehensive multivariate time-series comparison among the various tax regimes in the EU-15 is not pos-sible. Thus, the statistical analysis is limited to bivariate compari-sons.

• Item Type: MPRA Paper
• Language: English
• Keywords: owner-occupied housing, mortgage interest deduction, imputed rental income
• Subjects: H - Public Economics > H2 - Taxation, Subsidies, and Revenue

References

Börsch-Supan, A. and A. Eymann (2000) Household Portfolios in Germany, Institut für Volkswirtschaftsle-hre und Statistik, Paper No. 603-01, University of Mannheim, Mannheim.

Catte, P., N. Girouard, R. Price and C. André (2004) Housing Market, Wealth and the Business Cycle, OECD Economics Department, Working Paper No. 394, OECD, Paris.

Central Bureau of Statistics (CBS) (1982) Statistisch Zakboek 1982, Staatsuitgeverij, The Hague.

Central Bureau of Statistics (CBS) (2005) Statistisch Jaarboek 2005, CBS, Voorburg/Heerlen.

European Commission (2005) “Public Finances in EMU – 2005”, European Economy, No. 3, http://europa.eu.int/comm/economy_finance/publications/european_economy/2005/ee305en.pdf.

Gervais, M. (2002) “Housing taxation and capital ac-cumulation”, Journal of Monetary Economics, Vol. 49, No. 7 (October), pp. 1461-1489.

Hendershott, P.H., G. Pryce and M. White (2003) “Household Leverage and the Deductibility of Home Mortgage Interest: Evidence from U.K. House Purchas-ers”, Journal of Housing Research, Vol. 14, No. 1, pp. 49-82.

International Bureau of Fiscal Documentation (IBFD) (2005) Supplementary Service to European Taxation, IBFD, Amsterdam.

International Monetary Fund (IMF) (2006) Kingdom of the Netherlands-Netherlands: Selected Issues, IMF Country Report No. 06/284, IMF, Washington, DC.

Meen, G. (2002) “The Time-Series Behavior of House Prices: A Transatlantic Divide?”, Journal of Housing Economics, Vol. 11, No. 1 (March), pp. 1-23.

Ministry of VROM 2004 Betaalbaarheid van het wo-nen, Ministry of VROM, The Hague.

Neuteboom, P. (2004) “A comparative analysis of the net cost of a mortgage for homeowners in Europe”, Journal of Housing and the Built Environment, Vol. 19, No. 2, pp. 169-186.

Organisation for Economic Co-operation and Develop-ment (OECD) (2004) OECD Economic Surveys 2004 – Netherlands, OECD, Paris. Parliamentary Papers (2000) Mensen, wensen, wonen, Session-year 2000-2001, 27,559, No. 2, Sdu Uitgevers, The Hague.

Parliamentary Papers (2004a) Nota over de toestand van ’s Rijks Financiën, Session-year 2004-2005. 29,800, No. 3, Sdu Uitgevers, The Hague.

Parliamentary Papers (2004b) Vaststelling van de be-grotingsstaten van het Ministerie van Volkshuisvesting, Ruimtelijke Ordening en Milieubeheer (XI) voor het jaar 2005, Session-year 2004-2005, 29,800 XI, No. 11, Sdu Uitgevers, The Hague.

Poterba, James M. (1984) “Tax Subsidies to Owner-Occupied Housing: An Asset-Market Approach,” The Quarterly Journal of Economics, Vol. 99, No. 4 (No-vember), pp. 729-752.

Poterba, James M. (1991) “House Price Dynamics: The Role of Tax Policy and Demography”, Brookings Pa-pers on Economic Activity, No. 2, pp. 143-183.

U.S. House of Representatives (2005) Glossary of Terms in the Federal Budget Process, http://www.house.gov/rules/glossary_fbp.htm.

van den Noord, P. (2003) Tax Incentives and House Price Volatility in the Euro Area: Theory and Evidence, Economics Department, Working Paper No. 356, OECD, Paris.

VROM-raad (2004) Op eigen kracht: eigen woningbezit in Nederland, Advice No. 44, The Hague.