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The Tax Treatment of Government Bonds

Author

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  • Mr. John Norregaard

Abstract

In their effort to finance fiscal deficits at a reasonable cost, governments compete with other users of financial capital. Governments, however, are in the unique position that they are the only debt suppliers that can determine the taxation of debt instruments they issue. Following an overview of the current tax treatment of government bonds in OECD countries, this paper argues that—on purely economic grounds—there are no reasons for exempting interest on government bonds. Administrative difficulties in capturing interest on many other debt instruments in the tax net may, however, provide a rationale for doing so.

Suggested Citation

  • Mr. John Norregaard, 1997. "The Tax Treatment of Government Bonds," IMF Working Papers 1997/025, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1997/025
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    Citations

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    Cited by:

    1. Wigger, Berthold U., 2009. "A note on public debt, tax-exempt bonds, and Ponzi games," Journal of Macroeconomics, Elsevier, vol. 31(3), pages 492-499, September.
    2. Thomas Luke Spreen & Ed Gerrish, 2022. "Taxes and tax‐exempt bonds: A literature review," Journal of Economic Surveys, Wiley Blackwell, vol. 36(4), pages 767-808, September.
    3. Izumi, Ryuichiro, 2020. "Financial stability with sovereign debt," Journal of Financial Stability, Elsevier, vol. 51(C).
    4. Mr. Howell H Zee, 2005. "Personal Income Tax Reform: Concepts, Issues, and Comparative Country Developments," IMF Working Papers 2005/087, International Monetary Fund.
    5. Berthold U. Wigger, 2007. "A Note on Public Debt, Tax-Exempt Bonds, and Ponzi Games," IMF Working Papers 2007/162, International Monetary Fund.

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