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Retrospective Capital Gains Taxation in a Dynamic Stochastic World

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  • Francesco Menoncin
  • Paolo M. Panteghini

Abstract

We analyze Auerbach´s (1991) proposal of a retrospective capital gains tax, which is equivalent to an accrual tax on an ex ante basis. Using a continuous-time model with stochastic interest rates and serially correlated asset returns, we prove that such an equivalence still holds. This means that in a more realistic setting the realization-based system requires no ad hoc adjustment for equivalence to hold.

Suggested Citation

  • Francesco Menoncin & Paolo M. Panteghini, 2010. "Retrospective Capital Gains Taxation in a Dynamic Stochastic World," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 66(3), pages 236-242, September.
    • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(201009)66:3_236:rcgtia_2.0.tx_2-g
    DOI: 10.1628/001522108X534835
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    References listed on IDEAS

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    1. 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.
    2. Andrew Ang & Geert Bekaert, 2007. "Stock Return Predictability: Is it There?," The Review of Financial Studies, Society for Financial Studies, vol. 20(3), pages 651-707.
    3. Auerbach, Alan J, 1991. "Retrospective Capital Gains Taxation," American Economic Review, American Economic Association, vol. 81(1), pages 167-178, March.
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    Cited by:

    1. Rainer Niemann & Mariana Sailer, 2023. "Is analytical tax research alive and kicking? Insights from 2000 until 2022," Journal of Business Economics, Springer, vol. 93(6), pages 1149-1212, August.

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    More about this item

    Keywords

    capital gains; risk; taxation;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

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