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IMITATING ACCRUAL TAXATION ON A REALIZATION BASIS
Author(s) -
Sahm Marco
Publication year - 2009
Publication title -
journal of economic surveys
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.657
H-Index - 92
eISSN - 1467-6419
pISSN - 0950-0804
DOI - 10.1111/j.1467-6419.2009.00577.x
Subject(s) - accrual , realization (probability) , economics , valuation (finance) , order (exchange) , market liquidity , investment (military) , international taxation , microeconomics , macroeconomics , public economics , finance , tax reform , mathematics , statistics , earnings , politics , political science , law
While taxation of capital gains upon accrual poses problems of liquidity and valuation, taxation upon realization evokes the so‐called lock‐in effect that possibly induces distortions of the investors' liquidation and investment decision. The tax schemes, proposed in the literature in order to remedy simultaneously the shortcomings of both taxation methods, are mostly based on the idea of imitating accrual taxation on a realization basis. The paper surveys these proposals of so‐called formulaic taxation and develops a uniform formal way of describing the suggested schemes that allows them to be easily compared and evaluated from a theoretic point of view.