1. To ensure that there is equity in taxation, capital gains need to be taxed as persons earning capital gains will be favored if they are not taxed as compared to those earning wages, salaries and profits as their normal income.
2. Capital gains tend to occur during periods of rising prices and not during periods of falling prices, hence a tax on such gains will not only earn revenue to the government but may be helpful in curbing inflationary pressure and achieving economic stability.
3. Exclusion of capital gains from the scope of taxation may create a scope for tax avoidance, as the earning from companies may be ploughed back into business and later distributed as capital gains.
4. The increase in the pressure of population and income are said to be responsible for the rise in the values of houses, land and all other kinds of properties without any effort, and investment on the part of the owner and therefore if taxed, it will not adversely affect the initiative and incentive to invest on such properties.
5. Capital gains by their nature are fluctuating in character and hence, if they are taxed, the tax payers would not mind to pay the tax if they really benefited by such gains, in addition, such gains are unexpected, and therefore a tax on those gains will not increase the burden of taxation on the tax payers.
Wilfykil answered the question on February 15, 2019 at 05:29
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