The efficiency loss of capital income taxation under imperfect loss offset provisions

Arbeitspapier

The importance of capital loss offset provisions in a world of risk is well documented in the tax literature. However, the potential deadweight losses owing to imperfect offset has not been fully explored. This paper develops a framework whereby that investigation can be carried out and utilizes numerical simulations to investigate the size of potential losses. Results show that when the government and private sector are equally efficient in handling market risk, welfare losses owing to the absence of offset provisions could be substantial. Under plausible assumptions about attitudes towards risk and time preference, and with a capital income tax rate of forty percent, over sixty cents per dollar of tax revenue raised would be dissipated. In contrast, full loss offset would reduce that loss to approximately fourteen cents.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 2203

Classification and Topics

• Classification: Wirtschaft ; Public Economics: General ; Taxation and Subsidies: Efficiency; Optimal Taxation ; Taxation and Subsidies: Incidence
• Subject: capital income taxation ; uncertainty ; deadweight loss ; loss offset provisions ; Kapitalertragsteuer ; Entscheidung bei Unsicherheit ; Wohlfahrtseffekt ; Steuerbegünstigung ; Steuertheorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Ahsan, Syed M. ; Tsigaris, Panagiotis
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2008

Further information

• Handle: http://hdl.handle.net/10419/26248
• Last update: 10.03.2025, 11:42 AM CET