Editing Cross ownership (section)

==Cross ownership of stock==
Countries noted to have high levels of cross ownership include:
* [[Japan]]<ref name=":0">{{Cite book |last=Mikuni |first=Akio |url=https://www.worldcat.org/oclc/53482709 |title=Japan's policy trap : dollars, deflation, and the crisis of Japanese finance |date=2002 |publisher=Brookings Institution Press |others=R. Taggart Murphy |isbn=0-8157-9876-8 |location=Washington, D.C. |oclc=53482709}}</ref>
* [[Germany]]{{Citation needed|date=August 2022}}

Examples of the positives of cross ownership:
* Closely ties each business to the economic destiny of its business partners
* Promotes a slow rate of economic change

Cross ownership of shares is criticized for:
* Stagnating the economy
* Wasting capital that could be used to improve productivity
* Expanding economic downturns by preventing reallocation of capital
* Lessening control of shareholders over corporate leadership.<ref name=":0" />

A major factor in perpetuating cross-ownership of shares is a high [[capital gains tax]] rate. Companies have less incentive to sell cross-owned shares when taxes are high, as the tax liability reduces the net proceeds from the sale.

For example, a company owns $1000 of stock in another company that was originally purchased for $200. If the capital gains tax rate is 25% (as in Germany), the $800 profit ($1000 - $200) would result in a tax liability of $200 ($800 × 0.25). After paying the tax, the company would retain a net gain of $600 ($800 profit - $200 tax). However, the immediate tax expense may discourage the company from selling, as holding the stock defers the tax liability and preserves the full value of the assets on paper.

Long term cross ownership of shares combined with a high capital tax rate greatly increases periods of asset deflation both in time and in severity.{{Citation needed|date=August 2022}}