The reality of a cash flow based corporate tax system

Zsuzsanna Galántainé Máté

Public Finance Quarterly, 2010, vol. 55, issue 3, 697-714

Abstract: Capital income, cash flow, or a mixture of the two may serve as the corporate tax base. In the case of companies, fundamentally, corporate income serves as the tax base; however, in recent years, there has been a growing interest in cash flowbased taxation both in the research of taxation theory and in practice. The present study outlines the advantages and disadvantages of a possible cash flow tax (CFT) in comparison with those of the traditional corporate income tax (CIT), attempting to find out whether a cash flow-type tax may become a realistic alternative to the currently used corporate income tax, and whether the traditional due date based income tax may be replaced by a cash flow-based consumption tax? The main aspects of the analysis are: the neutrality and efficiency of the cash flow tax, the complexity of the tax, and its performance costs. Also, we wish to find out how a CFT would affect tax revenues (provided that tax rates remained unchanged), and whether it can be applied in a global environment (regarding international transactions)?

Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:pfq:journl:v:55:y:2010:i:3:p:697-714

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