An investigation of capital gain tax

Although the Iranian tax system has been trying to make some tax reformsincluding the introduction of VAT system and despite the fact that there havealready been some important tax reforms, many structural problems with theIranian taxation system still remain. In order to make structural tax reforms aimedat improving the current status of the Iranian tax system, we may apply twodifferent approaches: first, introducing new tax categories, and second, improvingthe performance of existing tax bases. The present paper is, first of all, aimed atexploring theoretical and applied issues relevant to capital gains, and then involvesitself in studying the economic impacts of this tax category followed byinvestigating other countries’ experiences in relation to CGT. The findingsobtained indelicate that in order to establish a CGT system in Iran, we are requiredto take into consideration such fundamental issues as real/unreal gains, longterm/short-term gains, adjustments made on the bases of inflation rates anddepreciation of the acquired gains, the difference between capital gains andindividuals’ ordinary incomes, and the way you may treat capital losses as opposedto capital gains. As for CGT economical impacts, the findings obtained show thatthe introduction of such a tax category may influence such economical variables asinvestment, savings, companies’ fiscal policies, the families assets combination,capital costs, the demands for assets, and the number of exchanges of assets. Theefficiency of CGT in respect of having desirable impacts on some of the abovementionedvariables is ultimately a function of different methods applied to theintroduction of this tax category.