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How to Eliminate Pyramidal Business Groups: The Double Taxation of Inter-corporate Dividends and other Incisive Uses of Tax Policy

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  • Morck, Randall

Abstract

Arguments for eliminating the double taxation of dividends apply only to dividends paid by corporations to individuals. The double (and multiple) taxation of dividends paid by one firm to another - intercorporate dividends - was explicitly included in the 1930s as part of a package of tax and other policies aimed at eliminating United States pyramidal business groups. These structures remain the predominant form of corporate organization outside the United States. The first Roosevelt administration associated them with corporate governance problems, corporate tax avoidance, market power, and an objectionable concentration of economic power; and undertook a sustained program that rapidly broke up large American pyramidal groups.

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Bibliographic Info

Paper provided by Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University in its series CEI Working Paper Series with number 2005-15.

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Length: 43 p.
Date of creation: Mar 2006
Date of revision:
Handle: RePEc:hit:hitcei:2005-15

Note: First Draft: March 21st 2001; This Draft, October 25th 2004
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Citations

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Cited by:
  1. Randall Morck & Lloyd Steier, 2005. "The Global History of Corporate Governance: An Introduction," NBER Chapters, in: A History of Corporate Governance around the World: Family Business Groups to Professional Managers, pages 1-64 National Bureau of Economic Research, Inc.
  2. Sharon Belenzon & Tomer Berkovitz, 2007. "Innovation in business groups," LSE Research Online Documents on Economics 19661, London School of Economics and Political Science, LSE Library.
  3. Randall Morck & Bernard Yeung, 2009. "Never Waste a Good Crisis: An Historical Perspective on Comparative Corporate Governance," Annual Review of Financial Economics, Annual Reviews, vol. 1(1), pages 145-179, November.
  4. Emiliano Carlo, 2014. "Pyramids and the separation between direction and control of non-financial Italian family companies," Journal of Management and Governance, Springer, vol. 18(3), pages 835-872, August.
  5. Dahlquist, Magnus & Robertsson, Göran & Rydqvist, Kristian, 2007. "Direct Evidence of Dividend Tax Clienteles," SIFR Research Report Series 51, Institute for Financial Research.
  6. Rydqvist, Kristian & Spizman, Joshua & Strebulaev, Ilya, 2014. "Government policy and ownership of equity securities," Journal of Financial Economics, Elsevier, vol. 111(1), pages 70-85.
  7. Marianna Belloc & Ugo Pagano, 2009. "Politics-Business Interaction Paths," CESifo Working Paper Series 2883, CESifo Group Munich.
  8. Mihir A. Desai & Dhammika Dharmapala, 2005. "Corporate Tax Avoidance and Firm Value," NBER Working Papers 11241, National Bureau of Economic Research, Inc.
  9. Federica Pazzaglia, 2010. "Are Alternative Organizational Forms the Solution to Limit Excessive Managerial Discretion?," Journal of Business Ethics, Springer, vol. 93(4), pages 623-639, June.
  10. Tan, Danchi & Meyer, Klaus E., 2010. "Business groups' outward FDI: A managerial resources perspective," Journal of International Management, Elsevier, vol. 16(2), pages 154-164, June.
  11. Huseynov, Fariz & Klamm, Bonnie K., 2012. "Tax avoidance, tax management and corporate social responsibility," Journal of Corporate Finance, Elsevier, vol. 18(4), pages 804-827.
  12. Bena, Jan & Ortiz-Molina, Hernán, 2013. "Pyramidal ownership and the creation of new firms," Journal of Financial Economics, Elsevier, vol. 108(3), pages 798-821.
  13. Randall Morck & Bernard Yeung, 2005. "Dividend Taxation and Corporate Governance," Journal of Economic Perspectives, American Economic Association, vol. 19(3), pages 163-180, Summer.
  14. Mike Peng & Yi Jiang, 2006. "Family Ownership And Control In Large Firms: The Good, The Bad, The Irrelevant – And Why," William Davidson Institute Working Papers Series wp840, William Davidson Institute at the University of Michigan.
  15. Mihir A. Desai & Dhammika Dharmapala & Winnie Fung, 2005. "Taxation and the Evolution of Aggregate Corporate Ownership Concentration," NBER Working Papers 11469, National Bureau of Economic Research, Inc.
  16. Bunkanwanicha, Pramuan & Gupta, Jyoti & Wiwattanakantang, Yupana, 2006. "Pyramiding of Family-owned Banks in Emerging Markets," CEI Working Paper Series 2006-4, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
  17. Lloyd Steier, 2009. "Familial capitalism in global institutional contexts: Implications for corporate governance and entrepreneurship in East Asia," Asia Pacific Journal of Management, Springer, vol. 26(3), pages 513-535, September.

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