Economic Effects of Taxing Different Organizational Forms under the Nordic Dual Income Tax

Tobias Lindhe (), Jan Södersten () and Ann Öberg ()

International Tax and Public Finance, 2004, vol. 11, issue 4, 469-485

Abstract: This paper analyzes the economic effects of income splitting rules for closely held corporations and sole proprietorships/partnerships under the Nordic dual income tax. Income is split by imputing a return to capital, but the methods used for this differ between the Nordic countries. With a few notable exceptions, income splitting does well in the sense that the cost of capital is approximately the same in closely and widely held corporations. The special tax rules for sole proprietorships/partnerships manage to neutralize the impact of the high labor income tax on the cost of capital.

Date: 2004
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