In August 1976 the then Federal Treasurer foreshadowed the incorporation in the Income Tax Assessment Act, 1936 of a severely modified form of the Mathews Committee's (1975) recommendations on trading stock. This paper documents the existence of substantial “tax-free” capital gains to those invested in the equity of affected companies, in particular retailer-merchants, at the time of this announcement. The observed price response was immediate and consistent with subsequent realizations of the “trading stock valuation adjustment” – both of which would be expected if capital markets are efficient.
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2.
Gibson, R.W. and E. Ong, 1978, “Trading Stock Valuation Adjustment – Just Another Tax Deduction?”, The Chartered Accountant in Australia, 49(5), 20–23.
3.
Mandelker, G., 1974, “Risk and Return: The Case of Merging Firms”, Journal of Financial Economics, 1, 303–35.
4.
Mathews, R., 1980, “The Mathews Report on Business Taxation: Reply”, The Economic Record, 56, September, 261–69.
5.
Report of the Committee of Inquiry into Inflation and Taxation, 1975, (Australian Government Publishing Service, Canberra).
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Swan, P. L., 1976, “The Mathews Report on Inflation and Company Taxation”, Paper presented to the 47th A.N.Z.A.A.S. Congress, 10–14 May, Hobart.
7.
Swan, P. L., 1978, “The Mathews Report on Business Taxation”, The Economic Record, 54, April, 1–16.
8.
Swan, P. L., 1980, “The Mathews Report on Business Taxation: Rejoinder”, The Economic Record, 56, September, 270–77.
9.
Whittred, G. P., 1980, “The Timeliness of the Australian Annual Report”, Journal of Accounting Research, 18(2), 623–28.
