A study on the essence and taxing method of capital gains – comparing with the taxation on capital gains in the Income tax act of Japan
Date Issued
2011
Date
2011
Author(s)
Cheng, Ting-Yu
Abstract
The definition of capital gains is varying by scholars. However, although the wordings are different, capital gains should be unusual, arise from capital assets and mean the increase of value. Taxing to capital gains were controversial in past days among some countries and areas, but it has been deemed appropriate to tax commonly and really taxed in the taxation system of most countries in order to make equality in taxation.
In our country, we also have tax on capital gains without exception. In Income Tax Act of Taiwan, in addition to Profit-Seeking Enterprise Income Tax in Taiwan, for individuals, Income from property transactions is truly the typical sort of capital gains. Besides, we still own one specific kind of tax named Land Value Increment Tax which is taxed when the value of land being transferred has changed, but this kind of tax is independent from Income Tax Act. Due to the independence of Land Value Increment Tax from Income tax, add, income taxes on security exchanges are exempt by the existing Income Tax Act, the research of the superordinate concept ”capital gain” is usually neglect in our country. Furthermore, researches on it are conducted from economical or statistical view often times.
Nonetheless, Land Value Increment Tax is always be advocated to tax which with other types of income, and also there are still scholars that emphasize that the taxation on income from security exchange should be restored. Therefore, the research on the essence and taxing method of capital gains becomes an essential assignment to take those policies into effect.
This thesis starts from the discussion about the essence of capital gains, and will introduce and analyze issues that concern the background theories of it and the principle of realization. By means of these analyses, it is hoped to establish the basic framework or structure of capital gains. Moreover, the comparison between Taiwanese and Japanese law will help to find out some possible problems under the current taxation system in Taiwan, and it is also desired to discover some keys to resolve the problem by the reading of existing tax laws, especially provisions relating to income from the transfer of one''s property and some judicial precedents of Japan.
It is easy that problem occurs in case of objects transferred with no compensation. According to the principle of realization, the taxing on income is probably to be postponed eternally. To solve this problem, Income Tax Act of Japan use the method of “minashijouto” (to be deemed as transferred) that in the case of transactions without compensation, the owner of the object transferred is to be taxed in order to wind up the increase of value during his or her possession when this object is conveyed to another person. Although this rule has been amended now and the rule is generally applied instead that the cost used when the object was acquired by the transferor is to be inherited by the transferee without taxing to the transferor. In fact the most important thing is whether the nation surely handles the increase of value and really taxes it.
In the case of transaction without compensation, Land Value Increment Tax would be taxed to one side of this dealing, but in the case that the dealing object not to be land, we do not tax the increase of value to any one side of the transaction. Add, when the transferee delivers this object to another person, the fair value of last transaction (transaction without compensation) will be took as the cost of the object in calculating the taxing burden of him or her, so that the nation, in fact, can be seen as to abandon its right of taxation. Because the gift tax and estate tax are deemed as supplemental taxes instead of a replacement of income tax, this ruling method of taxation in our country is significantly unreasonable and need to be modified.
Subjects
capital gain
theory of net increase of property
principle of realization
income from property transactions
land value increment tax
SDGs
Type
thesis
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