Kingdom of the Netherlands: Netherlands: Selected Issues-The Labor Income Tax Credit in an International Perspective
IMF Staff Country Reports, July 6, 2001
Source details
- Canonical URL
- Kingdom of the Netherlands: Netherlands: Selected Issues-The Labor Income Tax Credit in an International Perspective
Other formats
Bibliographic details
- Published: July 6, 2001
- Series: IMF Staff Country Reports
Main findings
- Compared with its U.S. and U.K. counterparts, the Labor Tax Credit (LTC) is likely to have more limited effects on incentives for primary-earners to enter the labor force, because of the smaller size of the credit.
- Any significant increase in the LTC to strengthen its effect on the still large poverty trap in the Netherlands is likely to be extremely expensive.
- Given the easy availability of part-time employment and the high marginal tax rates, the reduction in hours worked could be substantial in the Netherlands.
Policy implications and considerations
- Expanding the LTC materially to improve work-entry incentives for primary-earners would require substantial fiscal resources.
- The interaction of the LTC with prevalent part-time employment patterns and high marginal tax rates could lead to unintended reductions in hours worked, implying careful design is needed to avoid work disincentives.
- Addressing the "still large poverty trap" may require alternatives or complements to sizable LTC increases, given cost constraints.
Subjects and keywords
- Subject: Credit, Labor, Marginal effective tax rate, Money, National accounts, Personal income, Tax allowances, Tax policy, Taxes
- Keywords: CR, Credit, earner, EITC, EITC offset, full-time equivalent, income, income earner, ISCR, labor income, Marginal effective tax rate, per-capita income, Personal income, Tax allowances, tax rate
Source: https://www.imf.org/en/publications/cr/issues/2016/12/30/kingdom-of-the-netherlands-netherlands-selected-issues-the-labor-income-tax-credit-in-an-15197