IMF Working Papers

The Tax Treatment of Government Bonds

Author/Editor:

John Norregaard

Publication Date:

March 1, 1997

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Summary:

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.

Series:

Working Paper No. 1997/025

Subject:

Bonds Capital income Financial institutions Income and capital gains taxes National accounts Personal income Sovereign bonds Taxes Withholding tax

Notes:

The paper presents the present provisions of taxation of interest from government bonds in OECD countries.