The distortive effects of the capital gains tax regime
Source: The Tax Specialist Journal Article
Published Date: 1 Aug 2016
Although at the cost of simplicity, the design of the capital gains tax (CGT) regime is aimed at enhancing the ideals of horizontal and vertical equity, economic efficiency and fiscal adequacy. However, with the introduction of the CGT general discount (CGT discount) in 1999, satisfaction with such tax policy criteria has proven particularly difficult, if not impossible. The broad availability of the CGT discount together with the distortive effects of a realisation based tax incidence have led to personal capital gains being taxed on a highly concessional basis.
This article discusses the rationale for the introduction of a CGT system and considers how the CGT discount has created significant additional distortion and complexity within the tax system thereby undermining the equity foundations on which the CGT regime was built. The article considers how this distortion may be reduced with the author concluding that, while a CGT regime plays a vital role in enhancing fiscal adequacy, the CGT discount represents one of the most generous, costly and complex preferences of all.
Sorry, this is subscriber only content.
To gain access to this material and much more - Subscribe Now.
(Note: Members can access Taxation in Australia journal articles without a Tax Knowledge Exchange subscription - please log in to access).
Already a Subscriber? Login now
Already a Subscriber? Login now
Details
- Published By: Frederick Mahar
- Published On:1 Aug 2016
The material is copyright. Apart any fair dealing for the purpose of private study, research criticism or review, as permitted under the copyright Act, no part may be reproduced by any process without written permission from The Tax Institute.
Unless expressly stated, opinions are not that of The Tax Institute, which accepts no responsibility for the accuracy of any of the information contained within it.
The Tax Institute
(ABN 45 008 392 372 (PRV14016))
("TTI")
The Tax Institute is a Recognised Tax Agent Association (RTAA) under the Tax Agent Services Regulations 2009.
Copyright Statement
All materials provided on this site are protected by copyright and are owned by or licensed to TTI.
Except as expressly permitted by TTI or the copyright owner, any person or company who uses this site must not use, reproduce, redistribute, retransmit, publish or otherwise transfer, or commercially exploit, the materials or any information, software or other content, in whole or in part, which is available through this site.
Tags
Share this page