<abstract xmlns="http://www.w3.org/1999/xhtml"><p>In personal income taxation, Finland had used the dualistic income tax model, known as the Nordic model, since 1993. The basic idea is that taxation of earned income is progressive, whereas taxation of capital income is proportional. Here, the model is reviewed from different perspectives: What kind of tax policy background does it have and how is the distinction between types of income argued for on theoretical grounds? How has the borderline of earned and capital income been drawn in tax legislation, and how is it drawn in the court cases, in particular in those related to tax avoidance? The dualistic model has often been criticized using equity arguments, but there are still strong arguments for the model. In any case, the model has not always worked too well in practice. The distinction has required special tax legislation as well as given rise to many court cases.</p></abstract>

In personal income taxation, Finland had used the dualistic income tax model, known as the Nordic model, since 1993. The basic idea is that taxation of earned income is progressive, whereas taxation of capital income is proportional. Here, the model is reviewed from different perspectives: What kind of tax policy background does it have and how is the distinction between types of income argued for on theoretical grounds? How has the borderline of earned and capital income been drawn in tax legislation, and how is it drawn in the court cases, in particular in those related to tax avoidance? The dualistic model has often been criticized using equity arguments, but there are still strong arguments for the model. In any case, the model has not always worked too well in practice. The distinction has required special tax legislation as well as given rise to many court cases.

The Nordic model: 25 years of drawing the line between earned and capital income in Finland

Nordic Tax Journal

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

In personal income taxation, Finland had used the dualistic income tax model, known as the Nordic model, since 1993. The basic idea is that taxation of earned...

The Nordic model: 25 years of drawing the line between earned and capital income in Finland

Article Category: Article

Publié en ligne: 31 mai 2018

Pages: 64 - 80

Reçu: 18 déc. 2017

Accepté: 27 févr. 2018

DOI: https://doi.org/10.1515/ntaxj-2018-0003

Mots clés
Nordic model, dualistic income tax, differentiated tax system, earned income, capital income, tax avoidance

© 2018 R. Knuutinen, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

The Nordic model: 25 years of drawing the line between earned and capital income in Finland

Article Category: Article

Publié en ligne: 31 mai 2018

Pages: 64 - 80

Reçu: 18 déc. 2017

Accepté: 27 févr. 2018

DOI: https://doi.org/10.1515/ntaxj-2018-0003

Mots clésNordic model, dualistic income tax, differentiated tax system, earned income, capital income, tax avoidance

© 2018 R. Knuutinen, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Mots clés
Nordic model, dualistic income tax, differentiated tax system, earned income, capital income, tax avoidance