Contents

• Main Authors: Thornton Matheson, Pall Kollbeins, International Monetary, Fund Wp, Prepared Thornton Matheson
• Other Authors: The Pennsylvania State University CiteSeerX Archives
• Format: Text
• Language: English
• Published: 2012
• Subjects: II. Capital-Based vs. Labor-Based Allocation Methods.; Iceland
• Online Access: http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.248.4924; http://www.imf.org/external/pubs/ft/wp/2012/wp12263.pdf

This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. In contrast to most Scandinavian countries, Iceland allocates the income of closely held businesses (CHBs) between capital and labor based on administratively set minimum wages rather than an imputed return to book assets. This paper contrasts the relative tax burdens of the current minimum wage system with asset-based allocation methods, and finds that switching to an asset-based method could increase tax revenues from CHBs in a generally progressive manner. Predictably, the shift would also raise the tax burden of skilled labor-intensive industries more than it would that of capital-intensive industries.