Measuring effective taxation of housing
Building the foundations for policy reform
This paper measures the effective taxation of housing investments in 40 OECD member
and partner countries. The paper derives both Marginal Effective Tax Rates (METRs)
and Average Effective Tax Rates (AETRs), which incorporate the stream of income and
taxes over the life of the housing investment. The methodology is applied to owner-occupied
and rented residential property for investments that are financed with debt or equity.
The paper finds that the level and components of housing taxation depend greatly on
the investment scenario. Effective tax rates vary substantially depending on the holding
period, rate of return, tenure (owner-occupied or rented), financing scenario, and
the inflation rate. Effective tax rates do not vary much with the taxpayer’s income
and wealth or with the rate of return. The paper finds there is scope to reduce the
tax differential between different investment scenarios and strengthen progressivity
and horizontal equity.
Published on January 12, 2022
In series:OECD Taxation Working Papersview more titles