European Business Schools Librarian's Group

HEC Research Papers Series,
HEC Paris

No 721: The Taxation of Trades in assets

Alessandro CITANNA, Heracles M. POLEMARCHAKIS and M. TIRELLI
Additional contact information
Heracles M. POLEMARCHAKIS: Brown University, Providence
M. TIRELLI: Université Catholique de Louvain

Abstract: When the asset market is incomplete, there typically exist taxes on trades in assets and a redistribution of revenue in the asset market that are Pareto improving.

The policy is anonymous, it economizes on complexity, and it results in ex post Pareto optimal allocations, it is publicly announced before markets open, thus fully and correctly anticipated by traders, it does not require that financial markets be shut down, and it does not modify the asset market structure. As such, it improves over previously proposed constrained interventions.

Keywords: taxes; incomplete asset market; equilibrium; pareto; improvement

JEL-codes: D52; D60; H20

19 pages, December 1, 2000

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