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The Corporate Income Tax: international trends and options for fundamental reform

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  • Michael P. Devereux
  • Peter Birch Sørensen

Abstract

This paper discusses the future of the corporate income tax in an integrating world economy. The first part of the paper reviews some important trends in corporate taxation across the OECD area. The second part discusses the role of the corporation tax, laying out guidelines for corporate tax reform and considering some alternatives to existing corporate income taxes. In discussing options for fundamental reform, two sets of concerns are addressed. The first represents the traditional aims of a tax on corporate income. Essentially the traditional aim has been to design a tax system which raises revenue as efficiently as possible - that is, which minimises distortions to the location and scale of investment, to the sources and uses of finance, and to the choice of legal form. These distortions have been the subject of study for many years, and many proposals for reform have been made. One of the most popular and enduring ideas has been to tax only economic rent: in a traditional framework such a tax would not be expected to have any effect on investment or financing decisions.There is also a second set of concerns. Part of this concern has also been the subject of study for many years - the relationship between the personal and corporate sectors, and in particular, the possibility of tax avoidance by shifting income between the two sectors.

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Bibliographic Info

Paper provided by Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission in its series European Economy - Economic Papers with number 264.

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Length: 62 pages
Date of creation: Dec 2006
Date of revision:
Handle: RePEc:euf:ecopap:0264

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Keywords: world economy; corporate income tax; corporation tax; corporate tax reform; alternatives; distortions; economic rent; tax avoidance; Devereux; Birch Sørensen;

References

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Citations

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Cited by:
  1. Tuomas Kosonen, 2007. "The Increased Revenue from Finnish Corporate Income Tax in the 1990s," Discussion Papers 421, Government Institute for Economic Research Finland (VATT).
  2. Michael P Devereux, 2008. "Taxation of Outbound Direct Investment: Economic Principles and Tax Policy Considerations," Working Papers 0824, Oxford University Centre for Business Taxation.
  3. Ganghof, Steffen & Genschel, Philipp, 2007. "Taxation and Democracy in the EU," MPIfG Discussion Paper 07/2, Max Planck Institute for the Study of Societies.
  4. Margit Schratzenstaller, 2007. "Unternehmensbesteuerung in der Europäischen Union: aktuelle Entwicklungen und Implikationen für die deutsche Steuerpolitik," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 76(2), pages 21-38.
  5. Alan J. Auerbach & Michael P. Devereux & Helen Simpson, 2008. "Taxing Corporate Income," NBER Working Papers 14494, National Bureau of Economic Research, Inc.
  6. Marcel Gérard & Christian Valenduc, 2007. "La politique fiscale sous contraintes," Reflets et perspectives de la vie économique, De Boeck Université, vol. 0(1), pages 173-192.
  7. Ossip Hühnerbein & Tobias Seidel, 2010. "Intra-regional Tax Competition and Economic Geography," The World Economy, Wiley Blackwell, vol. 33(8), pages 1042-1051, 08.
  8. Siemers, Lars-H. R. & Zöller, Daniel, 2011. "Change-over within little scope: On the decision neutrality of recent tax reform proposals," MPRA Paper 27943, University Library of Munich, Germany.

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