Sensible Capital Gains Taxation

A capital gain is income derived from the sale of an investment. A capital investment can be stocks, a home, a farm even a work of art. Capital Gain is the difference between the money received from selling the asset and the price paid for it.

"Capital gains" tax is really a misnomer. It would be more appropriate to call it the "capital formation" tax. It is a tax penalty imposed on productivity, investment, and capital accumulation. Since the tax is paid only when an asset is sold, taxpayers can legally avoid payment by holding on to their assets - a phenomenon known as the "lock-in effect".

There is one other large inequity of the capital gains tax. It represents a form of double taxation on capital formation. This is how economists Victor Canto and Harvey Hirschorn explain the situation:

A government can choose to tax either the value of an asset or its yield, but it should not tax both. Capital gains are literally the appreciation in the value of an existing asset. Any appreciation reflects merely an increase in the after-tax rate of return on the asset. The taxes implicit in the asset's after-tax earnings are already fully reflected in the asset's price or change in price. Any additional tax is strictly double taxation.

The Direct Tax Code. introduced by the Government will replace India’s antiquated Income Tax Act of 1961.The draft is likely to become law only in 2011 and is currently open to public scrutiny and comment. It hopes to create a modern progressive regime of taxation in India. However the proposed treatment of Capital Gains is very regressive.

Swaminathan S Anklesaria Aiyar has written an excellent article about Taxation of Capital Gains in the Economic Times. Read more here

Why Text Messages Are Limited To 160 Characters

Did you ever wonder why text messages(SMS) are limited to 160 characters? No?

SMS messages simply fill the remaining bytes in the packets that GSM phones use to coordinate with the network. After the coordination protocol and some SMS headers are counted, there are 140 bytes remaining in the packet. With some simple packing techniques, those 140 bytes can be used to encode 160 7-bit characters, and THIS is why SMS messages are limited to 160 characters.

Interesting, isn't it? Read more here

Financial Crisis? No, Capitalism As Usual

The August 5 edition of the Economic Times had an excellent article by Swaminathan S Anklesaria Aiyar titled "Financial Crisis? No, Capitalism As Usual"

In this article he makes the case that proclaiming the death of capitalism is premature and booms and busts are integral to Capitalism's 'Creative Destruction' process.

Read more here