Taxing unrealised gains could support financial stability – study
BoE paper finds conventional capital gains tax cuts historically increased asset price volatility
Capital gains taxation could serve as an effective tool to curb excessive asset price volatility if used in the form of a small levy on unrealised gains, a new study from the Bank of England has found.
In the staff working paper, published on August 21, author Pau Belda notes that a longstanding question in public finance is whether capital gains tax accentuates asset price fluctuations, thereby promoting economic instability.
To address this question, Belda developed a framework to analyse the
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