Allocating Business Income between Capital and Labor under a Dual Income Tax: The Case of Iceland

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 sys...

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Main Authors: Ms. Thornton Matheson, Mr. Pall Kollbeins
Format: Report
Language:unknown
Subjects:
Iceland
Online Access:http://www.imf.org/external/pubs/cat/longres.aspx?sk=40078
id ftrepec:oai:RePEc:imf:imfwpa:2012/263
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spelling ftrepec:oai:RePEc:imf:imfwpa:2012/263 2024-04-14T08:13:32+00:00 Allocating Business Income between Capital and Labor under a Dual Income Tax: The Case of Iceland Ms. Thornton Matheson Mr. Pall Kollbeins http://www.imf.org/external/pubs/cat/longres.aspx?sk=40078 unknown http://www.imf.org/external/pubs/cat/longres.aspx?sk=40078 preprint ftrepec 2024-03-19T10:41:19Z 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. WP;wage;minimum wage;CHB owner; Dual income tax; small business taxation; wage income; capital income; CHB income; business owner; Income; Capital income; Personal income tax; Minimum wages Report Iceland RePEc (Research Papers in Economics)
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collection RePEc (Research Papers in Economics)
op_collection_id ftrepec
language unknown
description 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. WP;wage;minimum wage;CHB owner; Dual income tax; small business taxation; wage income; capital income; CHB income; business owner; Income; Capital income; Personal income tax; Minimum wages
format Report
author Ms. Thornton Matheson
Mr. Pall Kollbeins
spellingShingle Ms. Thornton Matheson
Mr. Pall Kollbeins
Allocating Business Income between Capital and Labor under a Dual Income Tax: The Case of Iceland
author_facet Ms. Thornton Matheson
Mr. Pall Kollbeins
author_sort Ms. Thornton Matheson
title Allocating Business Income between Capital and Labor under a Dual Income Tax: The Case of Iceland
title_short Allocating Business Income between Capital and Labor under a Dual Income Tax: The Case of Iceland
title_full Allocating Business Income between Capital and Labor under a Dual Income Tax: The Case of Iceland
title_fullStr Allocating Business Income between Capital and Labor under a Dual Income Tax: The Case of Iceland
title_full_unstemmed Allocating Business Income between Capital and Labor under a Dual Income Tax: The Case of Iceland
title_sort allocating business income between capital and labor under a dual income tax: the case of iceland
url http://www.imf.org/external/pubs/cat/longres.aspx?sk=40078
genre Iceland
genre_facet Iceland
op_relation http://www.imf.org/external/pubs/cat/longres.aspx?sk=40078
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