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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/30660
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| Title: | | Retrospective capital gains taxation in the real world  |
| Authors: | | Menoncin, Francesco Panteghini, Paolo M. |
| Issue Date: | | 2009 |
| Series/Report no.: | | CESifo working paper 2674 |
| Abstract: | | In this article, we analyze Auerbach's (1991) proposal of a retrospective capital gains tax, which is equivalent to an accrual tax on an ex-ante basis. Using a continuous-time model with stochastic interest rates, we prove that equivalence holds even if the risk-free asset return is correlated with other risky assets' returns. However, equivalence fails to hold on an ex-post basis. In other words, if an investor faces a huge gain (loss), the effective tax rate under this system is less (higher) than that what would be due under an accrual tax system. This leads to a fairness problem. For this reason, we also find the conditions that ensure equivalence on an ex-post basis. As will be shown, however, ex-post equivalence can be achieved only if a huge amount of information is available, making its implementation a hard task. |
| Subjects: | | capital gains risk taxation |
| JEL: | | H25 H32 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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