The Tax Treatment of Government Bonds

March 1, 1997

Preview Citation

Format: Chicago

John Norregaard. The Tax Treatment of Government Bonds, (USA: International Monetary Fund, 1997) accessed November 21, 2024

Disclaimer: 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

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.

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

Keywords: Bonds, Cost of capital, Global, Government bond, Income and capital gains taxes, Interest, Interest deductibility, Interest flow, Interest from government bonds, Interest income, Intramarginal interest differential, Investor interest, Net-of-tax interest cost, Nonresident interest, Personal income, Sovereign bonds, Tax revenue, Tax treatment, Tax-exempt bond, Withholding tax, WP

Publication Details

Pages:

25
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1997/025
Stock No:

WPIEA0251997
ISBN:

9781451844221
ISSN:

1018-5941

Notes

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

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