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Imitating Accrual Taxation On A Realization Basis

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  • Marco Sahm

Abstract

While taxation of capital gains upon accrual poses problems of liquidity and valuation, taxation upon realization evokes the so‐called lock‐in effect that possibly induces distortions of the investors' liquidation and investment decision. The tax schemes, proposed in the literature in order to remedy simultaneously the shortcomings of both taxation methods, are mostly based on the idea of imitating accrual taxation on a realization basis. The paper surveys these proposals of so‐called formulaic taxation and develops a uniform formal way of describing the suggested schemes that allows them to be easily compared and evaluated from a theoretic point of view.

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  • Marco Sahm, 2009. "Imitating Accrual Taxation On A Realization Basis," Journal of Economic Surveys, Wiley Blackwell, vol. 23(4), pages 734-761, September.
    • Handle: RePEc:bla:jecsur:v:23:y:2009:i:4:p:734-761
    DOI: 10.1111/j.1467-6419.2009.00577.x
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    References listed on IDEAS

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    1. Sahm, Marco, 2008. "Methods of Capital Gains Taxation and the Impact on Asset Prices and Welfare," National Tax Journal, National Tax Association;National Tax Journal, vol. 61(4), pages 743-768, December.
    2. William Vickrey, 1939. "Averaging of Income for Income-Tax Purposes," Journal of Political Economy, University of Chicago Press, vol. 47, pages 379-379.
    3. Auerbach, Alan J, 1991. "Retrospective Capital Gains Taxation," American Economic Review, American Economic Association, vol. 81(1), pages 167-178, March.
    4. Alworth, Julian & Arachi, Giampaolo & Hamaui, Rony, 2003. ""What's Come to Perfection Perishes*": Adjusting Capital Gains Taxation in Italy," National Tax Journal, National Tax Association;National Tax Journal, vol. 56(1), pages 197-219, March.
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    6. Julian Alworth, 1998. "Taxation and Integrated Financial Markets: The Challenges of Derivatives and Other Financial Innovations," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 5(4), pages 507-534, October.
    7. Constantinides, George M, 1983. "Capital Market Equilibrium with Personal Tax," Econometrica, Econometric Society, vol. 51(3), pages 611-636, May.
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    9. Warren, Alvin Jr, 2004. "US income taxation of new financial products," Journal of Public Economics, Elsevier, vol. 88(5), pages 899-923, April.
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    1. Giampaolo Arachi & Massimo D'Antoni, 2022. "Taxation of capital gains upon accrual: is it really more efficient than realisation?," Fiscal Studies, John Wiley & Sons, vol. 43(1), pages 39-61, March.

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