A utility-based explanation of tax asymmetries

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The item A utility-based explanation of tax asymmetries represents a specific, individual, material embodiment of a distinct intellectual or artistic creation found in International Bureau of Fiscal Documentation.
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Summary: This article develops a utility-based explanation for the existence of an asymmetric tax treatment of gains and losses when investors are loss averse. The authors 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. Their findings have important policy implications. Tax authorities often implement identical loss offset rules for different investor clienteles. However, when designing loss offset rules, tax authorities should take into account differences in risk attitude and loss aversion across different groups of investors

Work

Summary: This article develops a utility-based explanation for the existence of an asymmetric tax treatment of gains and losses when investors are loss averse. The authors 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. Their findings have important policy implications. Tax authorities often implement identical loss offset rules for different investor clienteles. However, when designing loss offset rules, tax authorities should take into account differences in risk attitude and loss aversion across different groups of investors