Capital Gains Tax Research Papers (original) (raw)

Before December 1999, the capital gains of shareholders who sold their shares into Australian takeovers have been taxable irrespective of payment method. Subsequently, shareholders can elect to rollover capital gains in equity takeovers.... more

Before December 1999, the capital gains of shareholders who sold their shares into Australian takeovers have been taxable irrespective of payment method. Subsequently, shareholders can elect to rollover capital gains in equity takeovers. We examine the effect of this change on the association between target shareholder capital gains and bidder and target firm shareholder wealth. The results indicate that prior to the regulatory change, cash consideration results in higher target shareholder returns for non-taxation reasons. After the introduction of capital gains tax rollover relief, we find that target and acquiring firm shareholders earn lower returns when cash consideration is offered to shareholders with greater capital gains.

http://michael-hudson.com The recent enactment of a capital gains tax cut resulted, according to Hudson and Feder, from the absence of a true appreciation or consideration of the real beneficiaries of such a cut, probable actual effects,... more

http://michael-hudson.com
The recent enactment of a capital gains tax cut resulted, according to Hudson and Feder, from the absence of a true appreciation or consideration of the real beneficiaries of such a cut, probable actual effects, the distinction between productive and nonproductive sources of capital gains (two-thirds of capital gains accrue to real estate, which is a fixed, nonproductive asset), and

New Zealand is currently the only member country of the Organisation for Economic Cooperation and Development (OECD) without a formal, comprehensive regime in place for taxing the capital gains made by its personal and corporate... more

New Zealand is currently the only member country of the Organisation for Economic Cooperation and Development (OECD) without a formal, comprehensive regime in place for taxing the capital gains made by its personal and corporate residents. Being the outlier is insufficient justification for introducing a capital gains tax (CGT) in New Zealand, but it does raise issues — relevant to the current debate as to whether a CGT should be introduced — about how this position has arisen and whether it needs to be addressed. This article explores the trends in taxation of capital gains around the world and identifies the reasons that CGT has been — after the ubiquitous value-added taxes — the most widely introduced tax in recent decades. Most importantly, it considers the question of whether New Zealand actually needs a CGT and examines world's best practice, which might help to shape the design of such a tax in New Zealand if it is concluded that a CGT is required.

On April 25, 2021, the Washington State Legislature enacted a new state capital gains tax. Before now, Washington state has been one of the few states that does not impose a tax on either income or capital gains. Because of limitations... more

On April 25, 2021, the Washington State Legislature enacted a new state capital gains tax. Before now, Washington state has been one of the few states that does not impose a tax on either income or capital gains. Because of limitations imposed by the Washington State Constitution, the legislature has been forced to characterize the tax as an excise tax, rather than treat it as an income tax as would the federal government and every other state. Based on the statute’s structure and its presentation as an excise tax, whether intentionally or unintentionally, the legislature appears to have excluded both the trustees and beneficiaries of non-grantor trusts from being subject to the tax. This Article reviews the difference between grantor and non-grantor trusts, examines the apparent discrepancy between the two under the statute, and explores tax strategies planners and clients might consider pursuing in the wake of the new tax.

A B S T R A C T This paper analyses the impact of capital gains taxation (CGT) on dividend policy among firms that are listed at the Karachi Stock Exchange (now, Pakistan Stock Exchange or PSX). The reason for choosing the Pakistani... more

A B S T R A C T This paper analyses the impact of capital gains taxation (CGT) on dividend policy among firms that are listed at the Karachi Stock Exchange (now, Pakistan Stock Exchange or PSX). The reason for choosing the Pakistani market is the country's idiosyncratic taxation system regarding dividend and capital gains. In Pakistan, capital gains were tax-free and taxation of capital gains was levied for the first time beginning July 2010. This motivates us to study the special case of Pakistani market regarding the relationship between the imposition of capital gains taxation and the pattern of dividend payouts. For this purpose, we use both the static and dynamic panel data models (generalized methods of moments) to analyze dividend payment behavior for a sample of 284 non-financial firms listed at the PSX from the years 2006–2014. We use the dividends to total assets ratio as a dependent variable and a taxation dummy along with other control variables such as liquidity, leverage, profitability, last year's dividend and firm size, as explanatory variables. Results of the regressions show that capital gains tax has no impact on dividend payments, while profitability, leverage, and last year's dividend are the most significant determinants of dividend payments in the Pakistani market.

The present paper is a thorough study on the recent developments of excise tax in Peru. It begins by showing the most recent regulatory treatment on this tax, then focusing on the current system of it, analyzing the most relevant aspects... more

The present paper is a thorough study on the recent developments of excise tax in Peru.
It begins by showing the most recent regulatory treatment on this tax, then focusing on the current system of it, analyzing the most relevant aspects of the excise tax, aiming to be a contribution to the future improvement of this tax.

This chapter of the United Nations Handbook on Selected Issues in Protecting the Tax Base of Developing Countries considers the taxation of capital gains realized by non-residents as an important measure for protecting developing... more

This chapter of the United Nations Handbook on Selected Issues in Protecting the Tax Base of Developing Countries considers the taxation of capital gains realized by non-residents as an important measure for protecting developing countries’ tax base. Relative to the existing literature on this subject, the chapter makes five main new arguments. First, there are sound conceptual justifications for taxing non-residents’ capital gains. The prevailing assumption that only gains derived from nonresidents’ sales of immovable property (understood to include mining and mineral rights) should be taxed by the source state lacks sufficient rationale. Second, in light of the sound justifications for taxing capital gains, even Article 13 of the UN Model Tax Convention arguably imposes excessive limits on source countries’ taxing rights. Third, greater attention should be given to how non-residents’ capital gains are taxed, instead of whether they are taxed. Specifically, allowing losses to be taken into account and adopting measures that avoid the multiple taxation of the same economic gain may impart greater legitimacy to, and produce greater compliance with, the taxation of non-residents’ capital gains. Fourth, buyer withholding appears to be the most promising method both for detecting taxable sales and for enforcing the actual tax liability. By contrast, suggestions that the target company (where present) should be made secondarily liable unnecessarily erase the distinction between shareholder and corporate liabilities and are impractical given the target’s dealings with creditors. Fifth and finally, taxing non-residents’ capital gain is an important phenomenon even if it is not indispensable from a revenue perspective: it helps to maintain the fairness and integrity of the tax system, and may contribute to regulating the extensive offshore M&A markets often found for foreign direct investments into developing countries.

This is the first in a series of articles about asset rollovers, a tax relief available to businesses when one trade asset is exchanged for another. The decision to "rollover" is a decision on allocating capital - by reinvesting in the... more

This is the first in a series of articles about asset rollovers, a tax relief available to businesses when one trade asset is exchanged for another. The decision to "rollover" is a decision on allocating capital - by reinvesting in the business, the tax is deferred till the funds are eventually released on sale.

The Australian Taxation Office (ATO) considers ALL animals sold as part of a primary production business to be trading stock. However, the word ALL is not contained in s 995 of the Income Tax Assessment Act 1997 (Cth) (ITAA 1997), rather... more

The Australian Taxation Office (ATO) considers ALL animals sold as part of a primary production business to be trading stock. However, the word ALL is not contained in s 995 of the Income Tax Assessment Act 1997 (Cth) (ITAA 1997), rather the ATO view is based on its interpretation of the findings of Federal Commissioner of Taxation v Wade (Wade Case). This paper looks at the cases examined by their Honours in the Wade Case and similar cases related to the sale of livestock. It argues that findings of the Wade Case may have been misinterpreted, and that the ATO view is not as valid as is generally accepted. It argues that the revenue from sale of stud, or breeding, animals should be taxed under the capital gains tax provisions of the ITAA 1997 and not as income according to ordinary concepts.

As oppose to the expectation, financing of BoP with foreign investment exerted huge cost on India’s BoP. Dividend and capital gain are found to be the two cost of FPI on BoP, in which latter would considered as cost on BoP only if it is... more

As oppose to the expectation, financing of BoP with foreign investment exerted huge cost on India’s BoP. Dividend and capital gain are found to be the two cost of FPI on BoP, in which latter would considered as cost on BoP only if it is repatriated. FPI earns huge capital gain as compared to dividend and has significant evidence for repatriation.

Inability to observe investors' complete opportunity set has restricted prior analyses of capital gains taxes. This study overcomes these data limitations by examining involuntary capital gain real- izations arising from the 1989 RJR... more

Inability to observe investors' complete opportunity set has restricted prior analyses of capital gains taxes. This study overcomes these data limitations by examining involuntary capital gain real- izations arising from the 1989 RJR Nabisco leveraged buyout. Confidential share- holder records permit precise estimates of the shareholders' tax bases. We find a negative correlation between price and tax basis for the shares sold. The direct evidence of investor tax-rationality is con- sistent with the lock-in effect and sup- ports assertions that the lock-in effect ex- erts upward pressure on the supply curve in equity acquisitions.

Substantially increased wealth inequality across the developed world has prompted many philosophers, economists and legal theorists to support comprehensive taxes on all forms of wealth. Proposals include levying taxes on the basis of... more

Substantially increased wealth inequality across the developed world has prompted many philosophers, economists and legal theorists to support comprehensive taxes on all forms of wealth. Proposals include levying taxes on the basis of total wealth, or alternatively the change in the value of capital holdings measured from year-to-year. This contrasts with most existing policies that tax capital assets at the point they are transferred from one beneficiary to another through sale or gifts. Are these tax reforms likely to meet their aims of greater economic and political equality? We argue that these policies are likely to fail because, following neoclassical economic theory, they are based on a conception of capital as possessing given values in what amounts to a static equilibrium. This mischaracterizes the dynamic and subjective character of market economies and the contested value of real instantiations of capital goods. This makes them very difficult, often impossible, to value apart from at the point of voluntary transfer or profit realization. This means most taxes levied on a mark-to-market basis will be arbitrary and unfair. We propose alternative policies based on an income realization approach to taxation that are more likely to curb excessive wealth holdings. This includes introducing international treaties that prohibit preferential tax treatment for individual companies and specific sectors, and broadening the income tax base to include the imputed rent of personal housing wealth.

Research Associate Steven M. Fazzari and Benjamin Herzon assess the effect of a capital gains tax cut on firms' decisions to undertake new investment projects and the possible effect of such projects on economic growth and employment.... more

Research Associate Steven M. Fazzari and Benjamin Herzon assess the effect of a capital gains tax cut on firms' decisions to undertake new investment projects and the possible effect of such projects on economic growth and employment. Their analysis takes into account such factors as projects' degree of uncertainty, investors' degree of risk aversion, whether capital gains losses are deductible

It is well understood by most governments today, whatever their nominal ideology, that encouraging the private ownership of residential property is one of the most effective ways of ensuring social stability. A simple Australian example... more

It is well understood by most governments today, whatever their nominal ideology, that encouraging the private ownership of residential property is one of the most effective ways of ensuring social stability. A simple Australian example would be that after World War II, very large numbers of footloose demobilized soldiers could have been a distinct threat to the established order. It made very good political sense to direct them as soon as possible into stable employment, and into household ownership. Amongst the first acts of states which give up the lunacy of total centrally planned economic control is to move rapidly to create a residential owning middle class. As Russia formally abandoned communism in the early 1990s it did just that, allowing citizens to purchase their accommodation at very low cost. After Mao Zedong’s death in 1976, China moved in exactly the same direction, even while maintaining a facade of communist ideology. The communist state of Vietnam has acted in exactly the same way. When you have a home and a mortgage, you are probably reluctant to start a revolution, and the political elites have a significant hold on your behaviour.

Law 2578/1998 / Council Directive 90/435/EEC on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States (23 July 1990)... more

Law 2578/1998 / Council Directive 90/435/EEC on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States (23 July 1990) https://ec.europa.eu/taxation_customs/business/company-tax/parent-companies-their-subsidiaries-eu-union_en The Parent-Subsidiary Directive was introduced in the Greek legal system through the same implementation law that the Mergers Directive was also introduced. The provisions of the Parent-Subsidiary Directive lay within Arts. 8 to 11 (Chapter Β) of Law 2578/ 1998. The Directive regulates the tax treatment of associated corporate entities ί.e. parent companies and their subsidiaries within the EU. The Parent-Subsidiary Directive provides that the Member State of the subsidiary abolishes any withholding tax and that the Member State of the parent company will exempt the dividends or impute the tax already paid in the Member State where the subsίdίary has its seat. The Directive aims for the introdυction o...

This paper explores the fiscal measures adopted in the transition European countries in order to encourage the foreign direct investment. There were analysed six countries: Albania, Macedonia, Moldova, Russian Federation, Union of Serbia... more

This paper explores the fiscal measures adopted in the transition European countries in order to encourage the foreign direct investment. There were analysed six countries: Albania, Macedonia, Moldova, Russian Federation, Union of Serbia and Muntenegro, Ukraine, based on the four criteria: corporate and capital gains tax rates, withholding taxes, tax incentives, foreign tax relief and transfer pricing rules. Finally, the conclusion is that all the analysed countries offer favourable fiscal conditions for the foreign direct investment. Serbia, Muntenegro, Macedonia and Moldova have attractive fiscal regimes, showing that the authorities from these countries count on the foreign direct investment as a solution of solving the social and economic problems.

Globalization of the world economy enables companies and individuals to move across borders and seek new opportunities and business options in other countries. To do so persons may need to transfer residency or shift assets of permanent... more

Globalization of the world economy enables companies and individuals to move across borders and seek new opportunities and business options in other countries. To do so persons may need to transfer residency or shift assets of permanent establishment. The adverse side of such a migration lies in the loss of tax revenues from taxation of capital gains that occur when shifted assets are sold in new country, frequently low-tax jurisdiction. Original home country can prevent loss of tax revenues from taxation of capital gain by imposition of an exit tax. Despite rationale of exit tax its impact in globalized world might be controversial, as it represents barrier to free movement of capital and persons and freedom of establishment, which was mirrored especially in a number of controversial decisions of the CJ EU. This paper investigates presence of the exit tax in the OECD and EU Member States and focuses on the most problematic provision – timing and possibility to defer payment of exit tax until the asset is sold which can soften adverse effect of exit tax on international movement of persons. This is subject of harmonisation of anti-tax-avoidance measures in the EU however the OECD anti- avoidance package (BEPS) does not include exit tax.

Law 2578/1998 / Council Directive 90/435/EEC on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States (23 July 1990)... more

Law 2578/1998 / Council Directive 90/435/EEC on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States (23 July 1990) https://ec.europa.eu/taxation_customs/business/company-tax/parent-companies-their-subsidiaries-eu-union_en The Parent-Subsidiary Directive was introduced in the Greek legal system through the same implementation law that the Mergers Directive was also introduced. The provisions of the Parent-Subsidiary Directive lay within Arts. 8 to 11 (Chapter Β) of Law 2578/ 1998. The Directive regulates the tax treatment of associated corporate entities ί.e. parent companies and their subsidiaries within the EU. The Parent-Subsidiary Directive provides that the Member State of the subsidiary abolishes any withholding tax and that the Member State of the parent company will exempt the dividends or impute the tax already paid in the Member State where the subsίdίary has its seat. The Directive aims for the introdυction o...

Since private firms have a unique ownership structure, the method of payment decision when acquiring private firms is influenced by a different set of factors than the method of payment decision when acquiring public firms. We find that... more

Since private firms have a unique ownership structure, the method of payment decision when acquiring private firms is influenced by a different set of factors than the method of payment decision when acquiring public firms. We find that bidders are more likely to pay for private targets with stock when the capital gain tax rate is relatively high. This relationship