Classical Corporation Tax as a Global Means of Tax Harmonization

Seppo Kari and Jouko Ylä-Liedenpohja

No 266, Discussion Papers from VATT Institute for Economic Research

Abstract: Classical corporation tax entails double taxation of corporate income. The alternative practice of imputing corporation tax to the domestic recipients of dividends is shown, in the case of a company with international owners, to effectively 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.

Keywords: International taxation, economic integration, multinational firm, International comparisons, Kansainväliset vertailut, Taxation, Verotus, Taxation and Social Transfers, Julkisen talouden rahoitus ja tulonsiirrot, G320 - Financing Policy; Capital and Ownership Structure; financial ratios; value of firm, G350 - Payout Policy, H250 - Business Taxes and Subsidies including sales and value-added (VAT), (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (4)

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