An example of "ripple effect". https://www.bloomberg.com/news/arti...s-has-handed-huge-profits-to-distressed-funds As for Grimstad, a quiet town where painted wooden houses line a horseshoe-shaped harbor, Aas’s tax payments will be sorely missed. He alone contributed 145 million kroner in taxes from 2014 to 2016, according to the municipality. The town has probably ‘lost’ a significant tax payer for 2018, Tone Marie Nybo Solheim, the city’s top administrative official, said by email. “Potential big losses might produce large tax losses carried forward, which will reduce taxable income for years to come,” she said. I hope that municipal has saved some of that tax money for this rainy day.
I doubt Aas trader will have future taxable income since he is bankrupt today. I don't think bankrupts are permitted to trade.
The quoted text is about the municipal having to pay 28% of the trader's personal losses, a debt the community probably need to contest or split up over many years, but is part of the symmetrical taxation laws. Articles mention Aas betting using own money and taking the brunt of the losses, so limited protection. Though it's incredible what financial ashes some people can rise up from.
Thanks for the clarification. Symmetrical taxation is new to me. I thought tax carry-forwards are deferred taxes which can only be utilised when there is future profits.
https://www.statsbudsjettet.no/Upload/Statsbudsjett_2015/dokumenter/pdf/chapter2_tax2015_eng.pdf The income tax for individuals is calculated on two different bases. Firstly, a flat rate tax of 27 pct. is paid on «ordinary income» less the person- al allowance and certain special allowances. Ordi- nary income comprises all taxable income (wages including taxable benefits in kind, pen- sions, net income from self-employment, taxable income from shares and other capital incomes), less the basic allowance, deductible losses and expenses such as debt interest, etc., parental al- lowance and other allowances. Levying a flat tax rate on a net tax base ensures that all deductions are of equal tax value and makes the taxation of capital symmetric, i.e. income (gains) and expens- es (losses) are taxed at the same rate. This applies quite generally to all kinds of investments, and ensures a fair base to taxation. There are ways to defer and linearize taxation using special accounts and owning companies as well. For municipals, prudent risk management will be to invest and save any larger tax income.
In a recession when many companies announce losses or go bankrupt, the Norway government is in for a huge reverse tax bill.
For persons yes. For insolvent companies? Out of my field, but I suspect not or there are ways around it. The state is pro-persons, so make sense. For banks and institutions there may be exemptions, though the last financial disaster of 2008 may have depleted most saving graces.
In common parlance, it's called an oxymoron. In scientific academia, it's called a disproof. In economics, it's called an undisputed fact. To those whose trade is risk, it's called an opportunity. Well, the problem is this was (as described by experts on this) one isolated incident. But, keep in mind that "one isolated incident" is an entirely accurate description of the "first occurrence of a systemic failure". The problem as I see it is that a single trader was able to hang liabilities on clearing members to the tune of about 40% of his assets prior to the trade. Imagine if this had been a big trading desk, not a personal account. It's possible to see how a clearing member or two going down on defaults could take down even very stable brokers. This is a pretty scary situation because the panic that would ensue on a large-scale default like that would be accompanied by a crippling blow to liquidity as confidence in the backstop to the counter party is undermined. So, as a trader, you know SIPC likely is going to be paying pennies on the dollar if this unravels, but you don't know if your counter party (and all layers between) will make good on their side of the trade. To an extent, the American market (and western markets generally) works on the idea that moving parts can be kept moving by adding more moving parts. And because the new moving parts added have not failed yet (in their short 10-ish year history), they are presumed to be working well. But as anyone who's ever looked at a system can tell you, more moving parts is more parts to fail, in more ways. Which circles me back to a point I made on another thread about this. Unprecedented is not the same as impossible. Though economic theory treats it that way.