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A comment on the viability of the allowance for corporate equity

  • John Isaac
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    This article, acknowledging the potentially important general attractions of the allowance for corporate equity (ACE), looks at some of its more specific implications. On corporate taxes, the article looks at questions about the implied revenue-neutral rate of corporation tax (and redistribution of the tax burden); the effects on cash flow of both government and companies; and what would become a crucially important charge on capital gains. On income tax, the article comments on the implications for self-employed earnings (and also,potentially, employees); for investment income and the logically accompanying EXPEP (extended personal equity plan); and therefore for inheritance tax. For international investment, the article notes that unless and until other countries adopt an ACE as the basis for harmonisation, the interaction of the ACE and existing taxes would not always be helpful for outward investment; and on some inward investment, if the most optimistic assumptions are not borne out, the effects could be rather bleak.

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    File URL: http://www.ifs.org.uk/fs/articles/fsisaac.pdf
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    Article provided by Institute for Fiscal Studies in its journal Fiscal Studies.

    Volume (Year): 18 (1997)
    Issue (Month): 3 (August)
    Pages: 303-318

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    Handle: RePEc:ifs:fistud:v:18:y:1997:i:3:p:303-318
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    1. Michael Devereux & Harold Freeman, 1991. "A general neutral profits tax," Fiscal Studies, Institute for Fiscal Studies, vol. 12(3), pages 1-15, August.
    2. Sijbren Cnossen, 1996. "Company Taxes in the European Union: Criteria and Options for Reform," Fiscal Studies, Institute for Fiscal Studies, vol. 17(4), pages 67-97, November.
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