Until 1981 Danish equity securities were taxed at a capital gains rate of 50% for securities held for over two years, and at a speculative gains rate of 75% for securities held for under two years. This led to market segmentation caused by

Question

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The high capital gains and speculative gains tax rates on Danish equity securities created market segmentation as investors were incentivized to hold securities for shorter time periods to avoid the higher tax rates. This tax policy created distortions in the market and reduced overall efficiency.

Until 1981 Danish Equity Securities Were Taxed at a Capital