Janet Yellen proposes tax on unrealized capital gains

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Several months ago, everybody was discussing a new tax that could be introduced both in the United States and worldwide. It is about the so-called single corporate tax that would make big corporations stashing their wealth in tax havens pay a fairer share of tax around the world. The essence of the tax is simple. All nations should introduce a single corporate tax rate of 15% so that corporations do not transfer their divisions to countries with low tax rates and register their separate production facilities and offices there. So far, it is difficult to say what exactly will make companies return to their homeland and pay taxes there since apart from low taxes, labor is cheaper in such countries, which gives them an advantage over the EU or the US. Anyway, in the future, companies might see no point in registering, let's say, in Malaysia or Cyprus to save on taxes. According to Treasury Secretary Yellen, more than 100 countries have already supported the initiative. Nevertheless, the new tax will not be beneficial to emerging markets.

It was reported yesterday that the US Treasury Secretary had proposed a new tax. In fact, there have been rumors about it lately. It is about a tax that would hit unrealized capital gains. Today, investors who own stocks that are growing in price do not pay taxes on them. A tax is paid only if an investor whats to sell the asset. In such a case, the difference between the purchase price and the selling price is taxed. However, many investors keep their assets for years and even decades. It also concerns cryptocurrencies. As a result, they do not pay taxes. Janet Yellen is targeting only the super-rich with this tax. Thus, the Treasury Secretary wants investors to pay a tax on the increase in the value of stock every year, even if it is not sold. So far, it remains unclear whether investors will be taxed if they have not made a profit and the value of the stock has fallen. Anyway, the administration is still working on the new tax legislation.

Notably, the US Treasury and governments of many other countries are now considering raising taxes after the coronavirus pandemic that forced them to borrow money and inject new cash into their economy. As a result, many nations have faced a budget deficit and their national debt has soared. Policymakers mainly target the rich, expecting them to cover some costs of the coronavirus pandemic. Therefore, they started to both increase taxes and introduce new ones.

The material has been provided by InstaForex Company - www.instaforex.com

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