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.
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Paper provided by Government Institute for Economic Research Finland (VATT) in its series Discussion Papers with number
266.
Length: Date of creation: 19 Feb 2002 Date of revision: Handle: RePEc:fer:dpaper:266
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Find related papers by JEL classification: G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
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