OECD Calls for More Tax on Wealthy

May 2, 2014 International Tax Cooperation

Taxation on wealthyPARIS – The OECD is calling for changes to be made to the taxation of wealthy individuals to help reduce income inequality.

On April 30th the Organization for Economic Cooperation and Development issued the results of their latest research, showing that income inequality has grown over the last three decades, and outlining potential regulatory changes which could help address the problem.

According to the OECD, since the 1980s the wealthiest 1 percent of individuals in the USA enjoyed 47 percent of all income growth in the country, while the top 1 percent accounted for 37 percent of all wage increases.

The OECD conceded that the increases in incomes were not as sever in countries with higher levels of income equality, but still noted that even in Scandinavia, the top 1 percent experienced up to 8 percent of all income growth.

The significant difference in income growth is not only a historical event, as in 2010 the top 1 percent of earners saw their incomes rise by 4 percent in one year, while the real incomes of the bottom 90 percent stagnated.

The difference in the growth of wages was attributed to the preferential tax treatment enjoyed by high-income earners, specifically decreases in top marginal tax rates and decrease in taxes on dividend incomes.

In response to the growing inequality, the OECD called abolishing tax deductions enjoyed primarily by wealthy individuals, shifting tax burdens to immovable assets, harmonizing taxation of labor and capital, and cracking down on so-called “treaty shopping”.

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