Abstract
We find that the transitory tax effect is larger andmore statistically significant than the permanent tax effect when we distinguish between these two effects in the empirical specification. Our results are consistent with the estimates fromprevious studies on the tax effects on capital gains realization, and suggest that taxpayers aremore responsive to transitory tax changes than to permanent tax changes. Taxpayers are more responsive to transitory tax changes because transitory tax changes create opportunities for tax arbitrage by means of time shifting. Therefore, policy evaluations based on conventional estimateswithout distinguishing between the permanent effect and the transitory effect may be misleading. Nevertheless, we may need further analyses to clarify whether or not our results are applicable to all land trading, since this study is based only on self-used residential land.