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- Title
Taxation, Political Risk and Portfolio Selection.
- Authors
Ekern, Steinar
- Abstract
This paper concentrates on cases where at the time of selecting a portfolio an investor has incomplete knowledge of the tax rates which will be effective in the future. This may be the situation in a parliamentary election year if rival parties are in favour of corporation income taxation and consumption taxation, respectively. In some countries uncertainty about tax rates may be a more permanent feature; for example, at all times there may be a non-zero probability of complete confiscation of investment profits. Under such circumstances the tax rate can appear as a random variable from an investor's point of view. In this way uncertainty about after-tax income can reflect uncertainty as to the tax rates which eventually will become effective--political risk--as well as uncertainty as to before-tax returns--commercial risk.
- Subjects
INVESTMENTS; INVESTORS; TAX rates; CORPORATE taxes; CONSUMPTION tax; POLITICAL risk (Foreign investments)
- Publication
Economica, 1971, Vol 38, Issue 152, p421
- ISSN
0013-0427
- Publication type
Article
- DOI
10.2307/2551882