Classical Corporation Tax as a Global Means of Tax Harmonization

Seppo Kari and Jouko Ylä-Liedenpoha

No 665, CESifo Working Paper Series from CESifo

Abstract: Classical corporation tax entails double taxation of corporate income. The alternative practice to impute corporation tax to the domestic recipients of dividends is shown, in the case of a company with international owners, effectively to convert the imputation system back to a classical corporation tax. It also requires complex rules for exempting flow-through dividends from equalization tax to avoid the cumulation of corporation tax internationally. In contrast, classical corporation tax maintains its simplicity and can be designed so as to be neutral in respect of the financing and dividend decisions of multinationals, by adopting double taxation of interest income. Broad tax bases, flat-rate taxes on personal income from capital, and low statutory tax rates are advocated as general policy.

Date: 2002
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Working Paper: Classical Corporation Tax as a Global Means of Tax Harmonization (2002)
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