Taxing the public is the easiest method to generate funds for government in order to cover its operational and development expenditures. Now due to increase in expenses, government try to bring various innovative means in order to put more taxes on the public and on business. Nowadays a new idea has been flourishing that government, apart from already getting property related taxes; may also imposed the tax on unrealized capital gains.
The concept of realized and unrealized cleared as realized capital gain is that which an owner of the property has earned preferably at the time of selling the property. Hence the owner will have to pay tax at a certain or described percentage on the capital gain he has earned. This property is mostly the fixed property which can be said as long term asset or illiquid asset.
However, as compared to realized capital gain, the unrealized capital gain is that gain which could be taken by the owner whenever he sells it. This means the market value of the property has been assigned and his gain has been calculated till now. But the issue remains that this gain has not been taken by the owner yet he have to pay tax on this gain.
The above mentioned logic states that owner of the property have to pay tax from his own pocket without getting any money in return. How can a person pay tax on the service or price he has not received yet? In addition to this, there are other issues that are arising with these phenomena.
- If a property is owned by a family, then whether they have to sell a small portion of that land or property in order to pay the tax. From which source they would be generating the funds.
- What would be the case with the new business ventures like start-up that have small portion of investment to invest in the project and to pay their salary and other expense? Whether they need to sell some share or portion of their start-up to another investor than what point will remain for opening up the business and taking the risk and pain of hardships.
- What if the tax is levied on richest man on the planet like Amazon’s Jeff Bezos or Microsoft’s Bill Gates, as they would be paying billions in term of unrealized capital gain tax and after some time, their name from richest men would be gone?
Such proposal should be critically reviewed before incorporating into the economy. Nevertheless, the governments should release that gradual increase in taxes does not affect the common man. If they are eager to fill the government treasury with the bucks, they need to start their own ventures to generate billions along with helping out the economy as well as the reduction in employment. Thus wise planning and decisions are required by the professionals working with the government in order to maintain a balance with public ease and government spending.