Behavioral Explanation of Tax Asymmetries

Martin Fochmann () and Martin Jacob ()
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Martin Fochmann: Faculty of Economics and Management, Otto-von-Guericke University Magdeburg
Martin Jacob: WHU - Otto Beisheim School of Management

No 110021, FEMM Working Papers from Otto-von-Guericke University Magdeburg, Faculty of Economics and Management

Abstract: This note develops a behavioral explanation for the existence of an asymmetric tax treatment of gains and losses when investors are loss averse. We find that loss offset rules should be more restrictive for investors which are (1) more risk averse in case of gains, (2) less risk seeking in case of losses, or (3) more loss averse. Our findings have important policy implications. Tax authorities often implement identical loss offset rules for different investor clienteles. However, there should be specific loss offset rules for investors who differ in risk attitude as well as in loss aversion.

Keywords: Asymmetric Taxation; Loss Offset Rules; Loss Aversion; Behavioral Economics (search for similar items in EconPapers)
Pages: 18 pages
Date: 2011-10
New Economics Papers: this item is included in nep-pbe, nep-pub and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:mag:wpaper:110021

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