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Issues In The Design Of Taxes On Corporate Profit

  • Devereux, Michael P.

This paper considers the proposals of the Mirrlees Review to introduce an allowance for corporate equity (ACE) in the corporation tax system. It assesses how an ACE would affect various dimensions of corporate decision making. Broadly, the ACE would introduce neutrality in decisions as to the scale of investment and the source of finance. But it would leave distortions in choices regarding many mutually exclusive discrete choices, such as location and profit shifting. The paper presents some evidence on the likely impact of introducing an ACE, which depends on how the government makes up for foregone corporation tax revenue. It also considers briefly more radical options such as a destination-based corporate tax.

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Article provided by National Tax Association in its journal National Tax Journal.

Volume (Year): 65 (2012)
Issue (Month): 3 (September)
Pages: 709-30

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Handle: RePEc:ntj:journl:v:65:y:2012:i:3:p:709-30
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  1. Robin Boadway & Neil Bruce, 1982. "A General Proposition on the Design of a Neutral Business Tax," Working Papers 461, Queen's University, Department of Economics.
  2. Devereux, Michael P & Griffith, Rachel, 2003. "Evaluating Tax Policy for Location Decisions," International Tax and Public Finance, Springer, vol. 10(2), pages 107-26, March.
  3. Leon Bettendorf & Albert van der Horst, 2006. "Documentation of CORTAX," CPB Memorandum 161, CPB Netherlands Bureau for Economic Policy Analysis.
  4. Ruud A. de Mooij & Sjef Ederveen, 2008. "Corporate tax elasticities: a reader's guide to empirical findings," Oxford Review of Economic Policy, Oxford University Press, vol. 24(4), pages 680-697, winter.
  5. Michael P. Devereux & Simon Loretz, 2012. "How Would EU Corporate Tax Reform Affect US Investment in Europe?," NBER Chapters, in: Tax Policy and the Economy, Volume 26, pages 59-91 National Bureau of Economic Research, Inc.
  6. Bonds, Stephen R. & Devereux, Michael P., 1995. "On the design of a neutral business tax under uncertainty," Journal of Public Economics, Elsevier, vol. 58(1), pages 57-71, September.
  7. (IFS), Institute for Fiscal Studies & Mirrlees, James (ed.), 2011. "Tax By Design: The Mirrlees Review," OUP Catalogue, Oxford University Press, number 9780199553747, March.
  8. Doina Maria Radulescu & Michael Stimmelmayr, 2007. "ACE versus CBIT: Which is Better for Investment and Welfare?," CESifo Economic Studies, CESifo, vol. 53(2), pages 294-328, June.
  9. Alexander Klemm, 2007. "Allowances for Corporate Equity in Practice," CESifo Economic Studies, CESifo, vol. 53(2), pages 229-262, June.
  10. Lars P. Feld & Jost H. Heckemeyer, 2011. "Fdi And Taxation: A Meta‐Study," Journal of Economic Surveys, Wiley Blackwell, vol. 25(2), pages 233-272, 04.
  11. Lars P. Feld & Jost Henrich Heckemeyer & Michael Overesch, 2011. "Capital Structure Choice and Company Taxation: A Meta-Study," CESifo Working Paper Series 3400, CESifo Group Munich.
  12. Shackelford, Douglas A. & Shaviro, Daniel N. & Slemrod, Joel, 2010. "Taxation And The Financial Sector," National Tax Journal, National Tax Association, vol. 63(4), pages 781-806, December.
  13. Michael P. Devereux & Rachel Griffith & Alexander Klemm, 2002. "Corporate income tax reforms and international tax competition," Economic Policy, CEPR;CES;MSH, vol. 17(35), pages 449-495, October.
  14. Desai, Mihir A. & Hines, James R. Jr., 2003. "Evaluating International Tax Reform," National Tax Journal, National Tax Association, vol. 56(3), pages 487-502, September.
  15. Alan Auerbach & Michael P Devereux & Helen Simpson, 2007. "Taxing corporate income," Working Papers 0705, Oxford University Centre for Business Taxation.
  16. Ruud de Mooij & M.P. Devereux, 2009. "An applied analysis of ACE and CBIT reform in the EU," CPB Discussion Paper 128, CPB Netherlands Bureau for Economic Policy Analysis.
  17. Christian Keuschnigg & Martin Dietz, 2007. "A growth oriented dual income tax," International Tax and Public Finance, Springer, vol. 14(2), pages 191-221, April.
  18. Michael Keen & John King, 2002. "The Croatian profit tax: an ACE in practice," Fiscal Studies, Institute for Fiscal Studies, vol. 23(3), pages 401-418, September.
  19. Johannes Becker & Clemens Fuest, 2007. "Taxing Foreign Profits with International Mergers and Acquisitions," Working Papers 0719, Oxford University Centre for Business Taxation.
  20. Marko Köthenbürger & Michael Stimmelmayr, 2009. "Corporate Taxation and Corporate Governance," CESifo Working Paper Series 2881, CESifo Group Munich.
  21. Bond, Stephen Roy & Devereux, Michael P., 2002. "Cash Flow Taxes in an Open Economy," CEPR Discussion Papers 3401, C.E.P.R. Discussion Papers.
  22. Simon Loretz, 2008. "Corporate taxation in the OECD in a wider context," Working Papers 0821, Oxford University Centre for Business Taxation.
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