Should Canada's Rate Capital Gains Taxation Be Reduced?

Walter Erwin Diewert () and D.A. Lawrence

UBC Departmental Archives from UBC Department of Economics

Abstract: The paper lays out a simple model of business income taxation that includes the taxation of asset capital gains. The concepts of tax distorted and undistorted user costs of capital are also defined. The tax distorted user cost differs from its undistorted counterpart by two distortion terms. The first distortion term is associated with the fact that the imputed interest cost of equity capital cannot be deducted from taxable income and the second distortion term is associated with the present 75% inclusion rate for capital gains. Rather than further reducing the inclusion rate, the paper argues for a more fundamental tax reform that would reduce both distortion terms to zero. A technical appendix relates the size of the distortion terms and the efficiency costs to the economy of the tax distortions.

Keywords: TAX; REFORM (search for similar items in EconPapers)
JEL-codes: D24 D58 D61 D91 E62 H25 M41 (search for similar items in EconPapers)
Date: 1999

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:ubc:bricol:99-19

Access Statistics for this paper

More papers in UBC Departmental Archives from UBC Department of Economics
Series data maintained by Maureen Chin ().