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The purpose of the article/hypothesis: The purpose of this article is to present the impact of capital gains tax on the returns of the two most popular cryptocurrencies: BITCOIN and Ethereum Classic (ETC).Methodology: In this study, the rates of return on selected cryptocurrencies were proposed as a variable that may be affected by taxes on capital gains. The article presents a new approach to the analysis of issues related to cryptocurrencies.Results of the research: The results show that for selected countries (Hungary, Italy, Poland, the USA) there is a correlation between the tax rate on capital gains and the return on ETC. In the case of BITCON, however, there is no such a relationship. Cel artykułu/hipoteza: Celem niniejszego artykułu jest przedstawienie wpływu podatku od zysków kapitałowych na zwroty dwóch najpopularniejszych kryptowalut: BITCOIN i Ethereum Classic (ETC).Metodyka: W niniejszym opracowaniu stopy zwrotu z wybranych kryptowalut zostały za-proponowane jako zmienna, na którą mogą wpływać podatki od zysków kapitałowych. Artykuł przedstawia nowe podejście do analizy zagadnień związanych z kryptowalutami.Wyniki/Rezultaty badania: Wyniki pokazują, że dla wybranych krajów (Węgry, Włochy, Polska, USA) istnieje korelacja między stawką podatku od zysków kapitałowych a zwro-tem z ETC. W przypadku BITCON-u jednak takiej relacji nie ma.

We examine the effect of staggered changes in the state-level capital gains tax on venture capital (VC)-backed start-ups and show that an increase in the tax rate of VC firms reduces the quantity and quality of patents by the start-ups. The results are consistent with a reduction in VC firms’ incentives to provide effort: increases in the capital gains tax for VC firms lead to incrementally lower innovation exchanges between start-ups in the VC firm’s portfolio. VC firms also decrease the level of investment in start-ups and the size of their portfolio as well as increase the number of start-ups that they write off.

This paper studies the impact of taxation on corporate investment, debt, equity, and dividends. There is a classical tax code in which the firm pays tax on profits and the investor pays taxes on dividends, interest, and capital gains. We find that a small increase in the dividend tax (or the capital gains tax) has no effects on consumption, production or government revenue. Instead, the firm alters the dividends and share issuance policies. A small increase in corporate profits tax (or a cut in the tax on interest) reduces consumption, increases government revenue, and for realistic tax parameters increases production. There is one approximate symmetry between the impact of corporate profits tax and interest tax, and another between dividend tax and capital gains tax.

We examine the effect of confirmed and tentative changes in long-term capital gains tax rates on direction and magnitude of tax-induced trading. Results show that investors have an asymmetric response to tax rate changes. For all tax events, investors adjust trading in losers more than in winners. Between tax events, investors respond more to a tax rate decrease than to a tax rate increase for both losing and winning stocks. Tax-induced trading activity shows that investors do not differentiate between unconfirmed and confirmed tax rate increases. Uncertainty about an impending tax rate change alters investors’ trading behavior and may affect government tax collections.

Utilizing a novel identification strategy, we uncover evidence that reducing the investment income tax rate increases acquisition activity by private equity acquirers. Applying a difference-in-difference methodology, we find that acquisitions sponsored by private equity firms nearly doubled following the investment income tax rate reductions associated with the Taxpayer Relief Act of 1997 and the Jobs and Growth Tax Relief Reconciliation Act of 2003. We attribute our findings to private equity fund structures and managing partners’ ability to capture the expected benefit of lower capital gains tax rates. These findings are robust to controlling for target shareholders’ tax incentives, as well as firm, industry, and macroeconomic factors possibly influencing acquisition activity.

We examine how capital gains taxes affect investment in private start-up (i.e., pre-IPO) firms. Using data on capital raised in individual funding rounds, we estimate the effect of the 2010 SBJA, which implemented a full exemption from federal capital gains tax on the sale of qualified shares. Because of the resulting higher expected after-tax returns, we hypothesize and find evidence consistent with this capital gains tax reduction increasing the amount of investment in start-up firms per funding round by about 12%. The effect is stronger in start-up firms that are likely to have greater administrative capacity. We estimate that about one-third of the tax benefit is captured by investors.

Taxes introduce certain complexities, requiring proper adjustments to return and risk parameters. The author offers a refined set of after-tax return and risk equations for use in practice and validates them with a stochastic future value cash flow model. The refined after-tax return and risk parameters can be used in portfolio optimization, Monte Carlo simulation, and deterministic present/future value portfolio modeling with internally consistent results. The refinements improve the discovery of the optimal after-tax portfolio and enhance long-term wealth planning in the presence of risk. TOPIC:Wealth management Key Findings • After-tax return and risk parameters are necessary for efficient asset allocation and accurate wealth planning. • Parameters must incorporate tax complexity while producing internally consistent results across portfolio optimization, Monte Carlo simulation, and deterministic modeling. • Refinements include the arithmetic-geometric return treatment with tax, a more precise incorporation of the effective annual capital gains tax rate, and risk manifesting in the price return across the distribution.

In asset return predictability, realized returns and future expected returns tend to move in opposite directions. This generates a tension between tax- and market-timing incentives. In this study, a portfolio choice problem in the presence of both return predictability and capital gains tax is examined. We characterize various features of the optimal trading strategy, and demonstrate that the optimal strategy helps mitigate the tension between market- and tax-timing. The calibrated model suggests that return predictability can significantly increase both the utility loss due to capital gains tax and the value of deferring capital gains realization. Overall, our results suggest that the nature of the asset return process can have important implications for the welfare effects of capital gains tax. This paper was accepted by Karl Diether, finance.

It is usually considered that banks with income before taxation pay corporate tax, while banks with loss before taxation do not. However, it is possible that a bank with loss before taxation incurs corporate tax expense due to the separate calculation of result before taxation in income statement and taxable income in the tax balance. This paper examines why and to which extent banks with loss before taxation have a corporate tax burden. Empirical research captured the whole banking system of Serbia in period between 2013 and 2018. In this regard, a sample of 175 observations was formed. Research results show that the inclusion of observations with loss before taxation significantly impacts the estimation of corporate tax burden of the banking sector of Serbia. In addition, capital gains tax is the most common source of corporate tax burden in observations with loss before taxation. On the other hand, the adjustment of expenses and revenue in tax balance has less impact on corporate tax burden in observations with loss before taxation.

An annual wealth tax, a mark-to-market income tax, and a retrospective capital gains tax are three approaches to capital taxation that yield roughly equivalent outcomes under certain conditions. Th...

The features of legislation concerning taxation of cryptocurrency in different countries of Europe are analyzed in this article. The author uses the anthroposociocultural approach as the basis for the study of the problem. From the point of view of anthroposociocultural approach, the necessity of proper legal regulation of taxation of cryptocurrencies has been determined to ensure the realization of the human right to taxes. The legal regulation of taxation of cryptocurrency at the European level is analyzed. The author notices that there is still no unified approach to defining what cryptocurrencies are, and how countries can develop a common policy for taxing them. This is due partly to the anonymity of users, and partly to the ambition of virtual currencies to circumvent traditional financial institutions. The author specifies what taxes can cryptocurrencies be taxed by (tax on income, capital gains tax), analyzes European approaches to solving the problem of taxation of cryptocurrencies. The author notes that Eastern Europe states have more simple and attractive tax rates. The author of the article analyzes the European judicial practice in the field of taxation of IT activities, in particular cryptocurrencies, focuses on the practice of the European Court of Justice.

Purpose Australia’s Future Tax System (2009) among its recommendations identified the need for realignment of tax revenue across the tiers of government in Australia, as well as the need to raise additional revenue from land-based taxes. In achieving these objectives, this paper aims to examine the revenues generated from land and how capital gains tax may be reconceptualised as a value capture tax resulting from the rapid urbanisation of Australia’s cities. The development of a theoretical framework realigns the emerging rationale of a value capture tax, as a means for revenue to be divested from central government in the form of capital gains, to sub-central government as a value capture tax. Design/methodology/approach A qualitative research methodology comprising grounded theory and phenomenological research is used in undertaking the review of tax revenue collection from state land tax, conveyance stamp duty, local government rating and Commonwealth capital gains tax. Grounded theory is applied for constant comparison of the data with the objectives of maximising similarities and differences in these revenues with an analytical construct as defined by Strauss and Corbin (1990, p. 61). Findings The paper finds that realigning revenue from land-based taxes against the principles of good tax design provides greater opportunity to raise additional revenue to fund public infrastructure while decentralising revenue from central government. It provides an alternate mechanism for revenue transfer from central to sub-central government while conceptually improving own source revenue from value capture taxation as a new revenue source. Research limitations/implications The limitation of this paper is the ability to quantify the potential increase that would be generated in the form of value capture revenue. It is demonstrated in the paper that capital gains tax took over 15 years for revenue generation to crystallise, a factor that would likely occur in the potential introduction of a value capture tax for funding transport infrastructure. Practical implications The pathway to introducing a value capture tax is through re-innovating capital gains tax as a value capture tax directly hypothecated to funding transport infrastructure that results in the uplift in values of the surrounding property from which revenue is raised. Originality/value This paper provides a new approach in contributing to funding the capital outlay of public infrastructure in lieu of central government consolidated revenue allocated through the Commonwealth Grants Commission. It provides a much-needed approach to decentralising revenue from the Commonwealth to sub-central government in Australia which has one of the most centralised tax systems in the OECD.

The evolution of capital gains taxation in Australia parallels that in Canada in many respects. Federal income taxes were adopted in both countries during the First World War, and in both jurisdictions the courts interpreted the term "income," the subject of taxation, using United Kingdom judicial concepts that excluded capital gains from the tax base. In the last quarter of the 20th century, both countries amended their income tax laws to capture capital gains, and in both countries concessional rates apply. Initially, the Australian capital gains tax regime had rules that paralleled those in Canada in respect of the application of capital gains tax measures to non-residents, and the list of assets that might generate a capital gains tax liability for non-residents was similar in both countries. Australia changed course just over a decade ago with a decision to limit the income tax liability of non-residents in respect of capital gains to gains on land and land-rich companies alone, albeit with an extended definition of land to capture directly related interests such as exploration and mining rights. Consequently, until this decade, reform of Australia's regime imposing capital gains tax on non-residents focused on the concept of source as a primary driver, with the categories of taxable assets being gradually reduced. However, after more than a decade of unprecedented increases in housing prices in Australia, reform has moved away from addressing source to integrity matters. In Australia, as in Canada, there has been considerable investment in property, particularly residential property, by non-residents in recent years, and the government has sought ways to enhance the enforcement and integrity of the capital gains tax rules applying to non-residents disposing of Australian real property. Since 2013, Australia has proposed three separate measures to ensure integrity within this regime: removal of a concessional rate, introduction of a withholding tax, and removal of the principal residence exemption for non-residents. This article considers the history and development of Australia's capital gains tax regime as it applies to non-residents and examines the recent shift in focus from what is captured in the capital gains source rules to integrity provisions adopted to achieve both compliance and geopolitical objectives.

The aim of this paper is to assess the profitability of strategies based on the recommendations made by brokerage houses and to identify the so-called reco-leaders from among financial institutions publishing investment advice. The authors focus on the quality of brokerage recommendations for companies listed on the Warsaw Stock Exchange. They investigate whether there has been an improvement in the quality of recommendations over recent years and whether regulations have been evolving to provide investors with a reliable source of recommendations. The analysis covers all stock recommendations for companies listed on the Warsaw Stock Exchange released between January 2006 and the end of October 2017. The equity curve presents the results of the calculations and covers both transaction costs and capital gains tax. The analysis of the recommendations shows that their overall quality is extremely low and the problem is affected further by taxation. Despite poor recommendations, the research identifies leaders amongst the recommenders. Unfortunately, the overall weak performance of the recommendations issued does not entail any changes to regulations.

This paper investigates the problem of dynamic investment and consumption in a market, where a risky asset evolves with jumps and capital gains are taxed. In addition, the investor's behavior of tax evasion is taken into account, and tax evasion is subject to penalty when it is uncovered by audits. Using dynamic programming approach, we derive an analytical solution for an investor with the CRRA utility. We find the following: (1) jumps in the risky asset do not affect the optimal tax evasion strategy; (2) jump risk lessens the optimal fraction of wealth in the risky asset; (3) tax evasion can be reduced by increasing the fine and/or the frequency of tax audits; (4) the effects of the jumps, audits and penalty on the optimal consumption are determined by the degree of risk aversion of the investor.

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. The unique setting allows us to distinguish between short-term avoidance responses and permanent responses to capital gains taxes. 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. However, the exemption cancellation slightly increased capital gains realizations of the existing traders.

After the tumult of the Whitlam government, the Fraser government (1975-1983) saw consolidation with less reform. The 1975 Asprey report remained largely unactioned, despite the fundamental problems that burdened the Australian tax system. The 1983 election of the Hawke government, however, set in train a series of economic reforms, and tax would play a big part in these. This paper tracks those developments, starting with the tax avoidance and evasion issues that plagued the era and the 1981 Campbell Committee financial system review. The main focus, though, is on the 1985 draft white paper and tax summit that delivered the first instalment of the Asprey blueprint. While the broad-based consumption tax didn’t get up, the package reformed Australia’s income tax system, with a capital gains tax, a fringe benefits tax, a foreign tax credit system and a dividend imputation system.

Numerical calculations imply that tax-loss harvesting is valuable to holders of taxable stock accounts. These calculations are based on the assumption that a capital loss on a stock portfolio can always be netted against ordinary income (up to a limit) or a capital gain on the same stock portfolio. We provide market-based evidence that a capital loss that is realized in the beginning of the year is substantially less valuable than a loss that is taken at the end of the year. A simple binomial tree model that captures the resolution of tax rate uncertainty closely mimics observed market prices. Allowing investors to postpone unused losses into the future does not alter the conclusion that realized losses are less valuable early in the year.

Few issues surrounding public wealth management in Nigeria enjoy broad geo-political agreement and support. The most vexed question is that of which level of government ought to have control over extractive resources. Behind the resource control debates is the question of the appropriate resource revenue sharing formula the country ought to adopt. Under current arrangements, states receive 13% of the revenues generated from natural resources located within their territory, leaving the federal government with control of 87% of the country’s resource wealth. Agitations by oil-producing states for state resource ownership and control have been raging for decades but have not resulted in any change in resource ownership and control. Although the federal legislature has the constitutional authority to change the current sharing formula to give states more share than they currently have, it has not yet exercised that authority. In order to ensure that extractive companies pay adequate revenue to the state, the government imposes an assortment of fiscal instruments, including: royalties, petroleum profits tax, capital gains tax and value-added tax. In order to ensure that revenues generated from the resources benefit both present and future generations, the country operates a sovereign wealth fund. The operation of this fund has been riddled in managerial controversy, even its constitutionality has boggled the minds of Nigerian legal pundits. This chapter analyses these issues, proffering views on how they may be better understood and approached.

Capital gains revenue estimates rely on a long history of research empirically estimating the tax elasticity of capital gains realizations. These elasticity estimates have varied from zero to well over 3 in absolute value depending on numerous factors, such as the time frame studied, the type of capital asset, and the estimation strategy employed. Often, the headline elasticity from a study of this nature is used to calculate the implied revenue-maximizing capital gains tax rate. Unfortunately, this last, policy-relevant step has received insufficient scrutiny. The standard approach fails to sufficiently acknowledge that the estimates of the revenue-maximizing rate are a product of the estimation procedure used and the context of the tax system from which the data were generated. Such an approach yields a single capital gains tax rate which applies to all realized gains and mechanically overstates the resulting revenue-maximizing rate.

We argue the revenue potential from increasing tax rates on capital gains may be substantially greater than previously understood. First, many prior studies focus primarily on short-run taxpayer responses, and so miss revenue from gains that are deferred when rates change. Second, the composition of capital gains has shifted in recent years, such that the share of gains that are highly elastic to the tax rate has likely declined. Third, focusing on capital gains tax collection may understate fiscal spillovers from decreasing the preferential tax treatment for capital gains. Fourth, additional base-broadening reforms, like eliminating stepped-up basis and making charitable giving a realization event, will decrease the elasticity of the tax base to rate changes. Overall, we do not think the prevailing assumption of many in the scorekeeping community—that raising rates to top ordinary income levels would raise little revenue—is warranted. A crude calculation illustrates that raising capital gains rates to ordinary income levels could raise $1 trillion more revenue over a decade than other estimates suggest. Given the magnitudes at stake, scorekeeping procedures employed in evaluating capital gains should be made more transparent and be the subject of external professional debate and review.

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. The unique setting allows us to distinguish between short-term avoidance responses and permanent responses to capital gains taxes. 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. However, the exemption cancellation slightly increased capital gains realizations of the existing traders.

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.

Welfare is traditionally understood through social security decommodifying labor markets or social investment policies. In the domain of housing, however, welfare for homeowners is largely hidden in the tax codes’ fiscal exemptions. Based on a content analysis of legislation, this paper introduces a novel yearly database of 37 countries between 1910 and 2020 to uncover the “hidden welfare state” of taxes on imputed rent, deductibility of mortgage payments, housing capital gains tax and VAT on newly built dwellings. Summary indices of homeownership attractiveness and neutrality of the tax code show that fiscal homeownership policies have been in decline until the 1980s and risen ever since. They are in place where finance is liberally and labor restrictively regulated. Contrary to the classical welfare state, they are not associated with an economic logic of industrialism or left-wing governments, but a rent-regulation alternative of Common-Law jurisdictions and smaller countries. As welfare for property owners, the logic of fiscal homeownership welfare diverges from the classical welfare for the laboring classes.

In the United States, exchange-traded funds can defer capital gains taxes of their investors by taking advantage of a legal loophole. To quantify the impact of this tax loophole on investor portfolios, we study a rank-dependent expected utility model. We develop an approximation formula for the sensitivity of the optimal investment strategy with respect to changes in the expected asset returns. By applying this approximation formula, we are able to quantitatively estimate how much investor portfolios may change depending on the investment horizon if the tax loophole is closed.

This paper uses a direct-projections approach to estimate the effect of capital gains taxation on realizations at the state level, and then develops a framework for determining revenue-maximizing rates at the federal level. We find that the elasticity of revenues with respect to the tax rate over a ten-year period is -0.5 to -0.3, indicating that capital gains tax cuts do not pay for themselves, and that a 5 percentage point rate increase would yield $18 to $30 billion in annual federal tax revenue. Our long-run estimates yield revenue-maximizing capital gains tax rates of 38 to 47 percent.

After World War II, international attention turned to economic reconstruction and the transition back to peace-time. As Australia settled into the 1950s and 1960s ‘golden years’ there wasn’t an obvious imperative to tackle basic economic reform and tax design issues. Underlying structural problems were building, though, that would ultimately call for an economic reform agenda and tax would be part of that. This paper tracks these developments, looking at some limited tax reviews along the way but the main focus will be on the 1975 Asprey review which provided a blueprint for reform of the Australian tax system. Its recommendations for a capital gains tax, a fringe benefits tax, a foreign tax credit system, dividend imputation and a value added tax would take 25 years to implement.

The central question addressed in this note is whether it is better to sell (and re-purchase) appreciated assets now and pay today's long-term capital gains tax rate, or wait to realize gains in the future and pay a likely higher capital gains tax rate. The authors argue that a framework based on maximizing expected risk-adjusted wealth should be the preferred method for answering some of the important questions arising from the interaction of taxes and investing. Investment theory holds that in a world of efficient markets, random walks and no taxes, horizon shouldn't materially affect many types of investment decisions. However, as soon as tax enters the picture, horizon in many situations becomes the single most important input an investor needs to think about. For investors with long horizons and moderate-size unrealized capital gains, it will usually make sense to defer realization even if the investor expects the tax rate to jump by 20 percentage points. Surprisingly, at intermediate time horizons, the optimal decision can be to realize some, but not all, of the unrealized gains. Investment horizon isn't the only critical input, and the interaction of all the relevant variables puts the development of a generic rule-of-thumb out of reach.

Australia is experiencing cataclysmic weather events largely due to rising atmospheric temperatures caused by greenhouse gas emissions – climate change. A consequence of droughts, floods, fires, tempests and family disasters is the sale or loss of valuable stud stock. In normal trading circumstances these animals would not be sold as trading stock. However the sale of pastoral properties can be beyond the will of the owners for a raft of reasons. Presently the receipts from the sale of ALL animals sold as part of a primary production business are considered to be income according to ordinary concepts by the Australia Taxation Office (ATO) and taxed at ordinary income tax rates. This paper considers the value of animals included in the sale of rural properties in Australia. It argues that the provisions of the Income Tax Assessment Act 1997 (ITAA 1997) are being misinterpreted by tax administrators and tax professionals. Sections 70-10, 995 ITAA 1997 provide that livestock are trading stock – a revenue item. However s 385-100 refers to breeding stock – a capital item. Many practitioners may be interpreting ss 70-10, 995 as applying to ALL livestock. Considering the sale ALL animals traded on the sale of a pastoral lease or farm as revenue denies vendors of concessions permitted under the capital gains tax provisions. This paper considers the income and capital gains tax implications on the sale of animals in conjunction with the sale of pastoral and farming properties in Australia. The distinction between classifying expenditure by an enterprise to be on items of a capital or a revenue nature has long been argued. Generally, in accounting terms, expenditure is considered to be of a capital nature if the benefit of the purchased asset is applied to more than one accounting period.

We carry out a randomized controlled trial to evaluate the effect of three different types of messages sent to taxpayers on their compliance with the rental income tax (direct effect) and the spillovers produced on payments related to the capital gains and the self-employment income taxes. One message highlights detection, another appeals to social norms, and the third type appeals to altruism. This is the first study to evaluate if these messages can produce spillovers across taxes and to perform a long-term follow-up. This is important to determine if the treatment increases tax revenues. We find that the message addressing detection produces a positive and permanent direct effect and a negative but transitory spillover on the other two taxes. Overall, it increases tax revenues by US$3.92 per dollar spent in the long run. The message appealing to social norms has no direct effect but produces a permanent negative spillover on the capital gains tax. Ignoring this spillover would have lead one to conclude that this message is innocuous when in fact produces a loss of US$ 5.20 per dollar spent in the long run. The message appealing to altruism produces a transitory negative effect and no spillovers, and has no effect on tax revenues in the long run.

Capital gains tax on securities in Taiwan was resubmitted in Mar 2012 and reimplement from Jan 2013, but this taxation suffered the huge public pressure in the society and caused the decline of stock trading volume and finally abolished on the end of 2015. This study intends to combine behavioral finance and tax neutrality principle base on Lewin field theory to investigate whether investors’ psychology, investors’ behavior and the outer environment could be interact affected by taxation in Taiwan stock market. The empirical results have shown as follows: (1) Investor psychological impact-overreaction (GJR model): The taxation announcements (bad news) would affect investors into irrational bias and due to decrease original profit for investor would amplify the negative asymmetrical volatility in return rate of stock. (2) Investor behavior impact- Lock-in effect (CLRM and DID model): in a long term, the trading volume of Hong Kong stock market has been back to normal after the extension period to dilute other interference effect. However, the stock trading volume in Taiwan still has a 19.64% decrease comparing to that in Hong Kong. Such result indicates due to the taxation substitution effects, investors would shift their investment to other low-tax or free-tax goods. (3) Environment impact-adjustment of market microstructure, due to stock trading volume is depression by 25.38% after taxation announcement and implement, individual investor structure which has higher stock demand elasticity in Taiwan have been reduced by 12.99%. The microstructure adjustment and trading ecology of stock market could be interact affected by taxation lock-in effect and overreaction effect, which is worthy of the reference of the authorities.

The US Treasury effectively ”owns” about 24% of the stocks held by high income US taxable investors. Through the capital gains tax, Uncle Sam has an effective exposure of more than $1 trillion of equities. And this huge-but-silent investor might be about to get a lot bigger if capital gains taxation is increased. But it’s not all bad news; luckily there is something you can do to lessen the blow. In this note, we’ll explain how adjusting your asset allocation to account for capital gains taxation can improve your after-tax expected welfare.

Dividends are taxed at the personal level, but injecting funds into firms does not offer the symmetric tax benefit. Hence, there is a personal tax saving incentive to retain cash in the firm. We develop a corporate finance model of liquidity management, in which the firm’s liquidity policy trades off precaution and saved personal taxes against agency and corporate tax costs. The model implies that the tax saving motive is substantial and increasing with the dividend tax rate. Consistent with the model, we show empirically that, after the 2003 dividend tax cut, affected firms reduced their cash accumulation.

We study the use of “heartbeat trades” by ETFs in explaining their superior tax efficiency. By relying on the in-kind-redemption exemption rule, authorized participants help ETFs avoid distributing realized capital gains and reduce their tax overhang. In recent years, ETFs end up with 0.92% lower tax burden per year than active mutual funds, partly due to heartbeat trades. Challenged by ETFs’ tax efficiencies, mutual funds exhibit higher flow-tax sensitivity than flow-fee sensitivity. Active mutual funds with relatively higher tax burdens had more outflows from tax-sensitive investors at the same time when ETFs with similar investment styles experienced stronger inflows. Using holdings data of institutions with high-net-worth clients, we find that investment advisors with tax-sensitive investors allocate four times more assets to ETFs than other institutions, representing an important driver behind the overall surge in ETF flows, especially after the increase of capital gains tax rate in 2013. We conclude that the migration of flows from active mutual funds to ETFs is driven primarily by tax considerations.

The main motivation behind the creation of cryptocurrencies was to devise a way to take money out of the hands of the government. It only started to do so after 2009, with the creation of Bitcoin, which purported to be an alternative to money. Cryptocurrencies today are getting closer to fulfilling the economic functions of money, but have not yet reached that point. Nonetheless, international courts have started to recognise them as, at the very least, functional equivalents to money, especially when applying anti money laundering rules to frauds committed using cryptocurrencies. On the other hand, policy-makers refuse to recognise cryptocurrencies as money, as it the case of the taxation rules of the UK which recognise them as property, subject to cumbersome Capital Gains Tax calculations and reporting obligations upon disposal. This is not the only possible approach, with other jurisdictions taking more lenient approaches. The fact that the taxation of cryptocurrencies is not a coherent issue from an international standpoint can have negative consequences, such as jurisdiction arbitrage by users, and even some cryptoassets becoming the object of hybrid mismatches agreements such as those that are part of the BEPS project of the OECD. A solution to this issue would include taking care to properly characterise all cryptoassets so that their regulation is homogeneous at an international level, and making sure the actual tax regulation they are subject to respects, or at least considers, the objectives behind their creation. The use of deeming provisions is proposed to achieve the latter end.

The Finance Bill was passed into law in January 2019 as a fiscal support measure for the 2020 budget. The Bill is supposed to effect measures that would radically revamp the Nigerian economy as well as provide a fiscal means for offsetting the deficit in the 2020 budget as presented by the H.E President Muhammadu Buhari to the Senate. The Finance Act brought several developments to the Nigerian tax regime with the amendment of the various tax legislation in Nigeria. The Act amended the Companies Income Tax Act, Personal Income Tax Act, Value Added Tax Act, Capital Gains Tax Act and the Stamp Duties Act. One of the most populous innovations brought by the Act is the increase in the Value Added Tax rate from 5% to 7.5%. The Act provides for incentives especially for SMEs and companies in real estate investment, especially for CIS. The Act is a step in the right direction towards the decentralisation of the Nigerian economy which over the years has been tied to oil. In this paper, the author seeks to explore the innovations made by the Act and their precursors. The author thus wishes to enlighten his readers on what exactly the Finance Act is all about and how they can benefit from the goodies that came with it.

Gap created by none definition of ‘educational institutions of public character’ in any of the Nigerian tax laws for the purpose of ascertaining income tax and capital gains tax has generated serious arguments and legal debates between the operators of educational institutions of a private character and the relevant tax authorities in Nigeria. Among the profits exempted from the tax payment as provided in section 23(1) (c) of the Companies Income Tax Act, 2007 (as amended) are the profits of any company engaged in educational activities of a public character in so far as such profits are not derived from a trade or business carried on by such company, and this is also contained in paragraph 13 of the third Schedule of Personal Income Tax Act, 2011 (as amended) and section 26(1) (a) of Capital Gains Tax Act, 2004 (as amended). These sections of the tax laws have been misconstrued by many operators of private schools in Nigeria to mean ‘all-inclusive’; thus, leading to low compliance in paying taxes by this circle. Consequently, it has led some persons and group of persons to demand for further insights and enlightenment on the relevant provisions of federally administered tax laws and tax administration as it concerns private schools in Nigeria. Against this backdrop, this paper attempts to deepen tax compliance culture in the privately owned educational institutions in Anambra State, Nigeria. It does this by examining certain tax concepts and laws, explaining the responsibilities of operators of private schools on tax matters and providing them with information on the requirements of the tax laws as they affect this group and for education of the public at large. This paper is organized to eradicate tax evasion, while minimizing tax avoidance and eliminate any form of multiple taxation occurring within this circle. It concludes that improvement in tax education of this stakeholder would likely optimize tax revenue collection and voluntary compliance culture. Among others, this paper recommends that FIRS should have more effective and efficient structure of taxpayers’ service department that would support in addressing the taxpayers’ grievance and regularly educate all the stakeholders in improving tax compliance culture.