Methods of Mitigating Double Taxation

Tobias Lindhe
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Tobias Lindhe: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden

No 2002:8, Working Paper Series from Uppsala University, Department of Economics

Abstract: This paper presents a comprehensive overview of existing methods of mitigating double taxation of corporate income within a standard cost of capital model. Two of the most well-known and most utilized methods, the imputation and the split rate systems, do not mitigate double taxation in corporations where the marginal investment is financed with retained earnings. However, all methods are effective when the marginal investment is financed with new share issues. The corporate tax rate, fiscal allowances, allocation to periodization funds and allocation to tax equalization reserves (or allowance for corporate equity) are effective instruments, independent of the sources of financing. The paper also discusses why so many different methods have been employed in mitigating double taxation.

Keywords: Corporate Taxation; Double Taxation; Cost of Capital (search for similar items in EconPapers)
JEL-codes: G32 H25 H32 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2002-05-02
New Economics Papers: this item is included in nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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