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Corporate Income Tax Reform: The Neglected Issue of Tax Income

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  • Ablett, John

    (University of Western Sydney)

  • Hart, Neil

    (University of Western Sydney)

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    Abstract

    The 'double taxation' of corporate income is often used as an argument in support of the integration of company and shareholder taxes, as occurred with the introduction of tax imputation in 1987 in Australia. These arguments are based, often implicity, on the premise that the economic incidence of company taxes falls on shareholders receiving dividend income. However, a review of the available theoretical and empirical literature fails to provide an unambiguous answer to the corporate income tax incidence question. Empirical results presented in this paper suggest the existence of significant forward shifting of the tax in to consumers though higher prices in the case of Australian manufacturing corporations. A more informed discussion of tax reform must therefore consider more carefully the implications arising from the likely existence of significant forward shifting if the corporate income tax.

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    Bibliographic Info

    Article provided by Queensland University of Technology (QUT), School of Economics and Finance in its journal Economic Analysis and Policy (EAP).

    Volume (Year): 35 (2005)
    Issue (Month): 1-2 (March/September)
    Pages: 45-60

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    Handle: RePEc:eap:articl:v:35:y:2005:i:1-2:p:45-60

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    Related research

    Keywords: Incidence; Tax Incidence; Tax; Taxation; Taxes;

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    References

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    1. Alan J. Auerbach, 2005. "Who Bears the Corporate Tax? A review of What We Know," NBER Working Papers 11686, National Bureau of Economic Research, Inc.
    2. Gravelle, Jane G & Kotlikoff, Laurence J, 1989. "The Incidence and Efficiency Costs of Corporate Taxation When Corporate and Noncorporate Firms Produce the Same Good," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(4), pages 749-80, August.
    3. Sorensen, Peter Birch, 1995. "Changing Views of the Corporate Income Tax," National Tax Journal, National Tax Association, vol. 48(2), pages 279-94, June.
    4. McLure, Charles Jr., 1975. "General equilibrium incidence analysis : The Harberger model after ten years," Journal of Public Economics, Elsevier, vol. 4(2), pages 125-161, February.
    5. Gilbert E. Metcalf, 2006. "Tax Incidence," Discussion Papers Series, Department of Economics, Tufts University, Department of Economics, Tufts University 0607, Department of Economics, Tufts University.
    6. Bhatia, Kul B., 1988. "Tax incidence in a hierarchical model," Journal of Public Economics, Elsevier, vol. 37(2), pages 221-242, November.
    7. Parai, Amar K, 1988. "The Incidence of Corporate Income Tax under Variable Returns to Scale," Public Finance = Finances publiques, , , vol. 43(3), pages 414-24.
    8. Beath, John A, 1979. "Target Profits, Cost Expectations and the Incidence of the Corporate Income Tax," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 46(3), pages 513-25, July.
    9. Shoven, John B & Whalley, John, 1984. "Applied General-Equilibrium Models of Taxation and International Trade: An Introduction and Survey," Journal of Economic Literature, American Economic Association, vol. 22(3), pages 1007-51, September.
    10. Arnold C. Harberger, 1962. "The Incidence of the Corporation Income Tax," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 70, pages 215.
    11. Piggott, John & Whalley, John, 1987. "Interpreting Net Fiscal Incidence Calculations," The Review of Economics and Statistics, MIT Press, vol. 69(4), pages 685-94, November.
    12. Kevin Daly & Neil Hart, 1994. "Mark-up Pricing and the Forward Shifting of the Corporate Income Tax," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 27(3), pages 45-54.
    13. Gravelle, Jane G., 1995. "The Corporate Income Tax: Economic Issues and Policy Options," National Tax Journal, National Tax Association, vol. 48(2), pages 267-77, June.
    14. Shoven, John B & Whalley, John, 1973. "General Equilibrium with Taxes: A Computational Procedure and an Existence Proof," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 40(4), pages 475-89, October.
    15. Miyagiwa, Kaz, 1988. "Corporate income tax incidence in the presence of sector-specific unemployment," Journal of Public Economics, Elsevier, vol. 37(1), pages 103-112, October.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Being Uninvited to Lefty, Righty and Libertarian Dinner Parties: Corporate Income Tax Edition
      by wintercow20 in The Unbroken Window on 2013-12-19 04:31:01

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