Capital Gains Tax Research Articles

Further Thoughts on the Capital Gains Tax

The paper illustrates why Canada’s Budget 2024 tax rules do not treat the earners of capital gains uniformly or fairly, because of inflation. The effective tax rates on real capital gains vary substantially among taxpayers depending upon the holding period and the rate of return. Furthermore, capital gain taxes may even create real losses. Uniform inclusion rates applied to nominal capital gains poorly measure real capital gains and typically result in considerable underassessment or overassessment of actual capital gains income (i.e., improvement in purchasing power). An appropriate measure of capital gains should use a cost base adjusted for inflation.

The Effect of Capital Gains Taxes on Business Creation and Employment: The Case of Opportunity Zones

The Tax Cuts and Jobs Act of 2017 established a new program called Opportunity Zones (OZs) that reduces or eliminates capital gains taxes on investment in a limited number of low-income Census tracts. We provide a model illustrating how a change in capital taxation affects employment in existing and new establishments. We then use establishment-level data to show that, in its first two years, the OZ designation increased employment growth relative to comparable tracts by between 3.0 and 4.5 percentage points in metropolitan areas. The job growth occurred in multiple industries and persisted into 2021 rather than quickly disappearing. However, most of the jobs created by the program were likely taken by residents who live outside of the designated tracts, consistent with only 5% of U.S. residents working in the same Census tract as the one in which they live. This paper was accepted by Tomasz Piskorski, finance. Funding: The authors are grateful for the financial support of an award from UW-Madison’s Fall Research Competition. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2022.03223 .

Non-Oil Revenue and the Impact on the Economic Development of Nigeria

Nigeria as one of the major oil-producing countries in the world has been diversifying into more non-oil revenue while more attention is paid to tax revenue as it has the potential of taking the country to the Promised Land. As a result, the study sought to examine Non-Oil Revenue and its impact on the Economic Development of Nigeria, leveraging on tax revenue for the period 1994–2023. The objectives of the study examined the effect of corporate income tax, capital gain tax, value-added tax, customs and excise duties on economic growth. Tertiary Education Tax, Stamp duty, and Other Levies were used as controlled variables. Data were sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin and Federal Inland Revenue (FIRS) Statistical Reports. ARDL Regression Analysis was applied to test the hypotheses. The findings revealed that the coefficients of variation for the lag values showed that the RGDP was positively impacted by TDT and CED, while negatively impacted by CIT, CGT, VAT, and SD. The ARDL model's R2 and Adjusted R2 statistics together explained almost 69% of the variation in RGDP, according to the adjusted R2 of 0.518719. This implies that a significant portion of volatility is still unaccounted for despite the model's poor predictive power. The study concluded that the aggregate tax revenue does not show the hope of taking the country to the promised land, as only two (CED and TDT) showed a positive relationship with the economic growth of the country. Thus, it recommended that the Nigerian government need to pay more attention to tax income since it can promote the necessary growth in the nation.

Estimation of tax incidence in Beijing housing market

ABSTRACT Capital gains tax (CGT) in China charges 20% of the profit from home resale, exempted only if the seller owns only one home and the seller has owned it for more than five years. This work estimates how CGT is shared between seller and buyer. By calculating the price differential between similar CGT-accrued housing units and CGT-exempt housing units and estimating CGT accrued, we find that approximately 50% of CGT is in fact transferred to the buyer. It should be noted that 50% is a lower bound of actual buyer incidence due to data limitations. Appreciating, liquid, quality housing units are associated with higher tax incidence for buyers. To address non-hedonic motives to sell, it is also shown that the price differential between CGT- accrued and CGT-exempt housing units is not a result of demand for liquidity or out of market conditions. This work suggests that regulators should be prudent in utilizing such tax as tools to deter speculation in the housing market.

Permanent and Transitory Responses to Capital Gains Taxes: Evidence from a Lifetime Exemption in Canada

Abstract Using panel data on a 20% random sample of Canadian taxpayers, we study behavioral responses to the cancellation of a lifetime capital gains exemption that resulted in increased capital gains taxation for some individuals. We show that the exemption did not change the number of taxpayers reporting positive capital gains, and thus unlikely resulted in increased participation in capital markets. Furthermore, our results suggest that the cancellation increased the long-run capital gains realizations of tax filers with more unused exemption room but had a small, statistically insignificant impact on the capital gains realizations of those with little unused exemption room.

Block Chain Technology, Cryptocurrency and Revenue Generation: A Systematic Review

The huge debt profile of Nigerian government dictates the need to look for alternative means of financing. This paper explored how the Nigerian government can increase its revenue through block chain technology and crypto currency. The study adopted a qualitative research approach by reviewing related literatures. The study concluded that even though crypto currency was not recognized as legal tender in Nigeria, the government can take advantage of the emerging and growing market of crypto currency by taxing it, this study recognized the fact that Nigeria government just enacted an act imposing 10% capital gain tax on digital assets including crypto currency, the government can still do better. It therefore recommended that Nigeria government should adopt the USA model of taxing crypto currency whereby not only capital gain tax would be charged, but also income tax and value added tax; thereby increasing the total revenue generated from this avenue.

Identifying Factors Influencing the Effective Implementation of Capital Gains Tax

Identifying Factors Influencing the Effective Implementation of Capital Gains Tax

E-Tax Compliance in Nigeria: Implications for Company Income Tax and Petroleum Profit tax

This work examines the effect of e-tax compliance in Nigeria: Implication on Company Income Tax and Petroleum Profit Tax. As Nigeria's economy continues to evolve in the digital age, the taxation landscape has seen significant changes with the advent of e-tax compliance. This work therefore aims to explore the implications of e-tax compliance on two key revenue streams for the Nigerian government: Company Income Tax (CIT) and Petroleum Profit Tax (PPT). The study reveals that the amount of capital gain tax revenue before (before the arrival of e-taxation) and after (after the advent of e-taxation) shows a positive, negligible difference and that the Petroleum Profit Tax also has a positive negligible difference between pre- (before the advent of e-taxation) and post- (after the advent of e-taxation). The study concluded that the transition to electronic tax compliance in Nigeria has been driven by the need for efficiency, transparency, and improved revenue collection. It has not only streamlined the tax assessment and payment process but has also increased the government's ability to monitor and collect taxes from this lucrative industry. Federal Inland Revenue Services should develop measures to ensure that defaulters are brought to book and dealt with in accordance with the laws, in addition to establishing a collaborative pattern between the government, Federal Inland Revenue Services, and Nigerian taxpayers to enable them to observe any difficulty felt by the taxpayers or the shortcomings besetting the effectiveness of the system.

The Ethical Case against the Capital Gains Tax, Explained Simply

The Ethical Case against the Capital Gains Tax, Explained Simply

Putting the "Finance" into "Public Finance": A Theory of Capital Gains Taxation

Putting the "Finance" into "Public Finance": A Theory of Capital Gains Taxation

How Managerial Capital Gains Taxes Increase Deception: Evidence from Stock Price Crash Risk

How Managerial Capital Gains Taxes Increase Deception: Evidence from Stock Price Crash Risk

Does UK Capital Gains Tax Achieve Its Policy Objectives?

Does UK Capital Gains Tax Achieve Its Policy Objectives?

The Effects of Changes in Tick Size and Tax Rates on the Tax-Timing Option and the Market Response to Stock Distributions

This study examines how changes in tick size and the differential between short-term and long-term capital gain tax rates affect the market response to the announcement of stock distributions. Prior research finds that a stock distribution increases the volatility of the stock, which in turn increases the value of the stock’s tax-timing option. We show that the minimum tick size established by the exchange where the stock is traded affects a stock’s volatility and, therefore, the value of the tax-timing option and the market response to the stock distribution. We document a stronger relation between the market response and changes in volatility among large distributions than among small distributions. We also find a positive relation between the market response and the tax rate differential, although it is only significant for small distributions. Finally, we show that the relationship between the market response and changes in both volatility and tax rate differential is primarily driven by tax-sensitive institutional investors in the distributing firm.

A Comparative Analysis of the Treatment of Inflation in South African Capital Gains Tax and the Accrual Systems

Inflation is often defined as a continuous and considerable rise in prices in general. Recently it has become a focal point due to globally elevated levels of inflation. Considering its treatment in the South African legal system, this article unpacks the contrary approaches of the Matrimonial Property Act 88 of 1984 (MPA) and the Income Tax Act 58 of 1962 (ITA) regarding inflation. These two Acts are considered as they provide different approaches to inflation, therefore different outcomes. While the MPA makes provision for inflation in determining the growth of each of the estates of spouses married out of community with the accrual system, the ITA does not recognise inflation insofar as it relates to capital gains tax. Comparing the approaches of the MPA and the ITA reveals disparities in the law and justifies the investigation conducted in this article. Accordingly, this article compares the effect of inflation and capital gains tax and why inflation is not considered when determining the base cost of an asset for capital gains tax purposes. To explain the inconsistency between the MPA and the ITA, this article firstly unpacks the characteristics of the South African matrimonial property regime insofar as it relates to inflation. Thereafter, the article characterises the South African application of the capital gains tax and articulates the shortcomings of existing capital gains tax provisions and the resulting challenges in the application of both Acts. In comparing the ways in which the MPA and the ITA deal with inflation, a clear distinction becomes evident. This article finds that, while the initial inclusion rate for capital gains tax inflation is largely accommodated, subsequent increases in the inclusion rate have erased this provision. Given these findings, this article suggests that the current South African capital gains tax regime's inclusion rate be further investigated to determine whether a wider set of exclusions could be developed to better accommodate inflation.

Assessment of the trends of urban land lease price from spatio-temporal perspective in Ethiopia: evidence from Bahir Dar City

Land price maps help the government and stakeholders to recognize fluctuations in land values in the economy. This paper aims to examine the trends of land lease prices from spatio-temporal perspectives for development. The study employed a mixed research approach. The result indicated that the lease price of residential land has been increasing rapidly in the past decade. Inefficiency in the land administration system, high speculation, and low provision of land for auction are the main drivers for the increment. The researchers thus suggest that the government rethink the tenure system, impose the maximum number and size of land parcels, and introduce the capital gain tax.

Tax Compliance (Active Tax Payers) and Non-Oil Tax Revenue in Nigeria: Exposition of Fiscal Exchange Theory and Expectation Proposition

The paper investigated the tax compliance (active tax payers) and non oil revenue in Nigeria in relation to fiscal exchange theory and expectation proposition. The study adopted ex post facto research design; secondary data for nineteen years (2003 - 2022) were collected from various issues of the Federal Inland Revenue Services (FIRS) statistical bulletin and annual reports. Tax compliances as regressand variable was measured with number of actual annual total non oil tax revenue in Nigeria and Tax compliances among active tax payers of company income tax (CIT), Petroleum profit tax (PPT), Capital gain tax (CGT), Value Added Tax (VAT) and Personal Income Tax (PIT) as regressors. The data was analyzed using multiple regression analysis to establish the relationship between the dependent and independent variables. The findings revealed that tax compliance have significant effect on boosting tax revenue generation and that tax default can cause significant variation in government revenue. The variable in the model is significant at the 5% critical level and the regression coefficient reveals that 72.8% of the total variation in revenue is accounted for by tax compliance with other variables in the stochastic term accounting for the remaining 27.2%. Specifically, Tax Compliance (Active Tax Payers) is significantly and positively related to Active Tax Payers on Value Added Tax (ATVAT) (1.827925 ), Active Tax Payers on Company Income Tax (ATCIT) (2.84599) and Active Tax Payers on Petroleum Profit Tax (ATPPT) (2.286043 ), while Tax Compliance (Active Tax Payers) is negatively and insignificantly correlated with Active Tax Payers on Personal Income Tax (ATPIT)( -0.236908 ) Active Tax Payers on Capital Gain Tax (ATCGT)( - 0.236908 ) . It is recommended that Federal Inland Revenue Service should open more offices across the federation to increase the ease of paying taxes, set performance targets for managers of tax offices and sanction for non-performance.

An Appraisal of Legal and Institutional Framework Regulating Tax Collection in Nigeria

This research focused on exploring the regulatory framework governing tax collection in Nigeria, with a specific emphasis on the legal and institutional aspects. The analysis involved examining the relevant provisions of the Constitution of the Federal Republic of Nigeria 1999 (as amended) related to taxes and associated matters. Key statutes that regulate taxes and taxation were also scrutinized, including the Federal Inland Revenue Service (Establishment) Act, the Personal Income Tax Act, the Companies Income Tax Act, the Capital Gains Tax Act, the Value Added Tax Act, the Stamp Duties Act, and the Taxes and Levies (approved List) Act. Furthermore, the study investigated the governmental agencies responsible for tax collection and administration, such as the Federal Inland Revenue Service (FIRS), the Joint Tax Board (JTB), the Federal Board Inland Revenue (FBIR), States Board of Internal Revenue (SBIR), Local Government Revenue Committees, and Joint State Revenue Committees. The research paper was concluded by providing a summary of the findings.

Policy Forum: Inflation Indexation and Capital Gains Tax Reform

Using data from the Toronto Stock Exchange Composite Index from 1971 to 2020, this article examines the differences between the real increases in purchasing power resulting from capital gains and assessed taxable capital gains, assuming inclusion rates of 50 percent and 75 percent, on assets with holding periods of 5, 10, and 20 years. The analysis shows that partial inclusion of nominal gains poorly approximates real (constant-dollar) capital gains income and typically results in considerable overassessment or underassessment of such income and tax. Hence, it is argued that capital gains should be indexed for inflation in order that individual investments, individual stockholders (and capital asset holders generally), and all taxpayers are treated fairly by the tax system. Also, indexation seems a realistic alternative.

양도소득세 예정신고와 확정신고에 관한 소고

In some cases, each individual tax law has a separate provision for ‘Final Return’ and ‘Preliminary Return’, and one of the representative tax items is Capital Gains Tax under the Income Tax Act.
 Opinions on the finalizing effect of the Preliminary Return on Capital Gains Tax are largely divided into Final Conclusive Theory and Provisional Conclusive Theory, and this discussion has been ongoing for a long time. Final Conclusive Theory is the opinion that tax liability for Capital Gains Tax is determined by Preliminary Return on Capital Gains Tax, and Provisional Conclusive Theory is the opinion that tax liability for Capital Gains Tax is determined with deferring the tax settlement procedure through Final Return on Capital Gains Tax by Preliminary Return on Capital Gains Tax.
 In reference to the Supreme Court's series of rulings on the validity of the Preliminary Return on Capital Gains Tax, it seems to adopt Provisional Conclusive Theory on finalizing effect of the Preliminary Return. In addition, the Target Judgement(the Judgement Numbered 2017Du73297 Sentenced on December 31, 2021 by the Supreme Court) seems to have confirmed the Supreme Court's legal principles regarding the validity of the Preliminary Return on Capital Gains Tax once again.
 According to the Target Judgement, it is judged that Preliminary Return on Capital Gains Tax and Tax office’s disposition of increase and correction based on Preliminary Return on Capital Gains Tax are absorbed and extinguished by Final Return. In this point of view, above all, this may cause a problem that taxpayers abuse the Final Return System. However, it is difficult to say that the conclusion of the Target Judgment is wrong under the current tax law, as it seems that the taxpayer cannot be prohibited from filing Final Return which revises the details of the Preliminary Return on Capital Gains Tax.
 In addition, under the current tax law related with the validity of the Preliminary Return of Capital Gains Tax, there seem to be various issues about Limitation Period for Imposition, Limitation Period for Imposition of National Taxes, Tax office’s disposition of increase and correction, and other provisions of the Framework Act on National Taxes etc. Therefore, through legislative supplementation which is premised on active discussions on the relevant tax laws related to the validity of the Preliminary Return on Capital Gains Tax, it is necessary to improve the systematic consistency of related tax law regulations and harmonize in some degree with the Supreme Court legal principles which seem to take an attitude of Provisional Conclusive Theory about the finalizing effect of the Preliminary Return on Capital Gains Tax.
 In other words, through the legislative supplementation as above, it is expected that problems which may arise due to the interpretation of the validity of the Preliminary Return on Capital Gains Tax can be minimized, legal stability can be improved, and equity among taxpayers can be enhanced at the same time.

A Monte Carlo Simulation of the Tax Burdens and Impacts Associated With Common Intergenerational Family Farm Transfer Strategies

This paper utilizes a Monte Carlo approach to simulate intergenerational farm property transfers within the context of four common succession strategies across a series of ordinary income and capital gain tax rates. Ordinary income/expenses accompany these intergenerational transfers in the form of interest income and the potential for depreciation recapture and capital gain income for all sales between the parties where transaction prices exceed basis and financing is utilized. Finally, post-transfer depreciation charges for the successor may accompany the usage of the family farm assets exchanged. The findings highlight the fact that transfers through estates represent the best pure tax outcomes (lowest aggregate tax burden), while sales transactions involve the highest tax burden. The conclusion is that it would be prudent and well-advised for everyone contemplating or engaging in intergenerational family farm transfers to ensure that tax considerations represent a focus for evaluating, determining, and selecting the best timing and course of action.