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Ex-Post Equivalence under Capital Gains Taxation

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  • Francesco Menoncin

    ()
    (UNIVERSITY OF BRESCIA)

  • Paolo M. Panteghini

    ()
    (UNIVERSITY OF BRESCIA, CESIFO AND ACCOUNTAX LAB)

Abstract

In this article, we analyze a state-contingent tax on capital gains. We start by focusing on Auerbach's (1991) retrospective capital gains tax device. Although this system is equivalent to an accrual method from an ex-ante perspective, it is not on an ex-post basis. As recognized by Auerbach, this causes a fairness problem. To overcome this limitation, we follow Zhu (1992) and design a state-contingent tax rule. As will be proven, state-contingent taxation can modify the risk profile of assets and also ensure ex-post equivalence.

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File URL: http://www.accessecon.com/Pubs/EB/2012/Volume32/EB-12-V32-I2-P160.pdf
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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 32 (2012)
Issue (Month): 2 ()
Pages: 1671-1679

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Handle: RePEc:ebl:ecbull:eb-11-00725

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Keywords: capital gains; risk and taxation.;

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  1. Green, Jerry R. & Sheshinski, Eytan, 1979. "Approximating the efficiency gain of tax reforms," Journal of Public Economics, Elsevier, Elsevier, vol. 11(2), pages 179-195, March.
  2. Francesco Menoncin & Paolo Panteghini, 2009. "Retrospective Capital Gains Taxation in the Real World," CESifo Working Paper Series 2674, CESifo Group Munich.
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