Publication: Personal Income Tax Piggybacking
Date
2023-03-17
ISSN
Published
2023-03-17
Author(s)
Abstract
Personal income tax (PIT)
piggybacking is a local surcharge levied by Subnational
government (SNGs) on top of the taxable personal income or
on the personal income tax liability already being levied by
the central government. In contrast to tax sharing
arrangements, piggybacking provides more SNG autonomy since
the SNG is granted the power to set and levy the
piggybacking rate, typically within certain bounds
established by the central government, thereby strengthening
the accountability between SNGs and their residents.
Different versions of PIT piggybacking have been implemented
largely in high-income countries, including Denmark, Norway,
US, Canada, Spain, and Portugal. Croatia, a middle-income
country, has adopted a PIT piggybacking system. While PIT
piggybacking is an important source of SNG revenue in these
countries, if Indonesia were to adopt a PIT piggyback, it
would be one of the first few major middle-income countries
to do so.
Citation
“Chattha, Muhammad Khudadad; Blum, Jürgen René; Kelly, Roy. 2023. Personal Income Tax Piggybacking. Equitable Growth, Finance & Institutions Notes. © World Bank, Washington, DC. http://openknowledge.worldbank.org/entities/publication/d158867c-314e-47ec-b684-548e3086c8a6 License: CC BY-NC 3.0 IGO.”