The IMF Country Reports Series covers economic and financial developments and trends in member countries. Each report, prepared by a staff team after discussions with officials of the country, is published at the option of the member.
This paper aims to contribute to the discussion by sketching ways in which the taxation equity-efficiency frontier could be shifted outward in the Netherlands. In a nutshell, we argue that significant efficiency gains could be achieved by shifting the tax burden away from labor, and toward consumption and capital-especially housing. The detrimental impact of the tax-benefit system on labor supply-in particular by mothers-and the insufficient and distortionary use of the value-added tax (VAT) as a revenue-collection mechanism is also highlighted in the paper. This paper also reviews the main features of the Dutch tax system and sketches the contours of a hypothetical tax reform.