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Why Some Double Taxation Might Make Sense: The Special Case of Inter-corporate Dividends

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  • Randall Morck

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 to eliminate pyramidal corporate groups. These structures exist elsewhere, and are associated with corporate governance problems, corporate tax avoidance, and a greater concentration of economic power than is currently possible in the United States. Current US tax reform proposals do not distinguish dividends paid to individuals from intercorporate dividends and, by eliminating double taxation on both sorts of dividends, may allow pyramidal groups in the US again for the first time since the 1930s.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9651.

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Date of creation: Apr 2003
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Handle: RePEc:nbr:nberwo:9651

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Cited by:
  1. Mihir A. Desai & William M. Gentry, 2004. "The Character and Determinants of Corporate Capital Gains," NBER Chapters, in: Tax Policy and the Economy, Volume 18, pages 1-36 National Bureau of Economic Research, Inc.
  2. Heitor Almeida & Daniel Wolfenzon, 2005. "A Theory of Pyramidal Ownership and Family Business Groups," NBER Working Papers 11368, National Bureau of Economic Research, Inc.
  3. Mihir A. Desai & Alexander Dyck & Luigi Zingales, 2004. "Theft and Taxes," NBER Working Papers 10978, National Bureau of Economic Research, Inc.
  4. Bhavish Jugurnath & Mark Stewart & Robert Brooks, 2008. "Dividend taxation and corporate investment: a comparative study between the classical system and imputation system of dividend taxation in the United States and Australia," Review of Quantitative Finance and Accounting, Springer, vol. 31(2), pages 209-224, August.
  5. Peter Hogfeldt, 2004. "The History and Politics of Corporate Ownership in Sweden," NBER Working Papers 10641, National Bureau of Economic Research, Inc.
  6. Dino Falaschetti & Michael Orlando, 2003. "Cutting the Dividends Tax…and Corporate Governance Too?," Finance 0311008, EconWPA.
  7. Morck, Randall & Yeung, Bernard, 2004. "Special issues relating to corporate governance and family control," Policy Research Working Paper Series 3406, The World Bank.

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