Fiscal and trade distorting effects of capital gains tax on land sales - empirical evidence from agricultural land market in Finland
Capital gains taxes are likely to distort the market and resource allocations through so called “lock-in” effect, meaning discouraging trade transactions that trigger the tax payments. When it comes to agricultural land, the lock-in effect implies that the land ownership and active farming deviate from each other and, as a result, land tenancy increases. Increasing land tenancy and land tenure insecurity incur a significant social cost, because they deplete productivity of land by discouraging and delaying irreversible land improvements that would be necessary for maintaining land productivity. This study estimates the fiscal effects of reduction in capital gains taxes imposed on land sales and provides grounds for optimizing the tax scheme. The results suggest that certain temporary tax waiver programs could maintain the current tax revenues with less trade distorting effects on the land market. By simulating the land trade quantities conditional on alternative tax rates, the study gives information on how much a particular tax waiver program would trigger land sales. The results signal that tax waiver programs could shift the current structural development pattern of gradually increasing tenancy and land tenure insecurity to a pattern, in which the share of land ownership would be increased.
(This abstract was borrowed from another version of this item.)
|Date of creation:||May 2009|
|Date of revision:|
|Contact details of provider:|| Postal: Latokartanonkaari 9, 00790 Helsinki|
Phone: +358-20-772 004
Fax: +358-20-772 0403
Web page: http://www.mtt.fi/english
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Pavel Ciaian & Johan Swinnen, 2005.
"Land Market Imperfections and Agricultural Policy Impacts in the New EU Member States: A Partial Equilibrium Analysis,"
LICOS Discussion Papers
15805, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
- Pavel Ciaian & Johan F.M. Swinnen, 2006. "Land Market Imperfections and Agricultural Policy Impacts in the New EU Member States: A Partial Equilibrium Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(4), pages 799-815.
- Huisman, K.J.M. & Kort, P.M. & Pawlina, G. & Thijssen, J.J.J., 2004.
"Strategic investment under uncertainty : Merging real options with game theory,"
Other publications TiSEM
57b69510-cf54-479e-938e-d, Tilburg University, School of Economics and Management.
- Huisman, K.J.M. & Kort, P.M. & Pawlina, G. & Thijssen, J.J.J., 2003. "Strategic Investment Under Uncertainty : Merging Real Options with Game Theory," Discussion Paper 2003-6, Tilburg University, Center for Economic Research.
- Ky–sti Pietola & Minna V”re & Alfons Oude Lansink, 2003. "Timing and type of exit from farming: farmers' early retirement programmes in Finland," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 30(1), pages 99-116, March.
- Daunfeldt, Sven-Olov & Praski-Ståhlgren, Ulrika & Rudholm, Niklas, 2007. "Do High Taxes Lock-in Capital Gains? Evidence from a Flat Rate Tax System," HUI Working Papers 6, HUI Research.
- Meredith J. Soule & Abebayehu Tegene & Keith D. Wiebe, 2000. "Land Tenure and the Adoption of Conservation Practices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(4), pages 993-1005.
- Kline, Jeffrey D. & Alig, Ralph J. & Johnson, Rebecca L., 2000. "Forest owner incentives to protect riparian habitat," Ecological Economics, Elsevier, vol. 33(1), pages 29-43, April.
When requesting a correction, please mention this item's handle: RePEc:ags:mttfdp:50040. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)
If references are entirely missing, you can add them using this form.