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Reforming Business Taxation: Lessons from Italy?

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  • Massimo Bordignon

    ()

  • Silvia Giannini

    ()

  • Paolo Panteghini

    ()

Abstract

We carefully review the recent Italian reform of business taxation, compare it with other international experiences and theoretical proposals, and calculate its effects on the cost of capital and on the effective average corporate tax rate. We argue that the Italian reform is an original attempt to find a compromise between two conflicting aims, both of which are unavoidable in an open economy: the first is to reduce the average rate of taxation on profits, and the second is to reduce the financial and real distortions produced by corporate taxation. In assessing the initial evidence in the Italian case, we argue that too much weight has been given to the latter objective, and that further reductions in average taxation on profits may be needed. Copyright Kluwer Academic Publishers 2001

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Bibliographic Info

Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 8 (2001)
Issue (Month): 2 (March)
Pages: 191-210

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Handle: RePEc:kap:itaxpf:v:8:y:2001:i:2:p:191-210

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Web page: http://www.springerlink.com/link.asp?id=102915

Related research

Keywords: cost of capital; dual income system;

References

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  1. Bonds, Stephen R. & Devereux, Michael P., 1995. "On the design of a neutral business tax under uncertainty," Journal of Public Economics, Elsevier, vol. 58(1), pages 57-71, September.
  2. Raghuram G. Rajan & Luigi Zingales, 1994. "What Do We Know About Capital Structure? Some Evidence from International Data," NBER Working Papers 4875, National Bureau of Economic Research, Inc.
  3. Robin Boadway & Neil Bruce, 1988. "Problems with Integrating Corporate and Personal Income Taxes in an Open Economy," Working Papers 735, Queen's University, Department of Economics.
  4. Michael Devereux & Harold Freeman, 1991. "A general neutral profits tax," Fiscal Studies, Institute for Fiscal Studies, vol. 12(3), pages 1-15, August.
  5. Devereux, Michael P. & Griffith, Rachel, 1998. "Taxes and the location of production: evidence from a panel of US multinationals," Journal of Public Economics, Elsevier, vol. 68(3), pages 335-367, June.
  6. Massimo Bordignon & Alberto Zanardi, 1997. "Tax Evasion in Italy," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 56(3-4), pages 169-210, December.
  7. Kanniainen, Vesa & Sodersten, Jan, 1995. "The importance of reporting conventions for the theory of corporate taxation," Journal of Public Economics, Elsevier, vol. 57(3), pages 417-430, July.
  8. Paolo M. Panteghini, 2001. "Dual income taxation : the choice of the imputed rate of return," Finnish Economic Papers, Finnish Economic Association, vol. 14(1), pages 5-13, Spring.
  9. Michael Devereux & Rachel Griffith, 1998. "The taxation of discrete investment choices," IFS Working Papers W98/16, Institute for Fiscal Studies.
  10. Mikael Apel & Jan Södersten, 1999. "Personal Taxation and Investment Incentives in a Small Open Economy," International Tax and Public Finance, Springer, vol. 6(1), pages 79-88, February.
  11. Desai, Mihir A. & Hines Jr., James R., 1999. ""Basket cases": Tax incentives and international joint venture participation by American multinational firms," Journal of Public Economics, Elsevier, vol. 71(3), pages 379-402, March.
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