IDEAS home Printed from https://ideas.repec.org/a/oup/oxford/v12y1996i2p109-17.html
   My bibliography  Save this article

Tax Reform to Promote Investment

Author

Listed:
  • Bond, Stephen R
  • Devereux, Michael P
  • Gammie, Malcolm J

Abstract

In this paper we explain why the current UK corporation tax discourages investment, consider how large this effect is likely to be, and discuss how this tax bias against corporate investment can best be eliminated. The present corporation tax does not raise the cost of capital for all types of investment, but does raise it for investment financed by retained profits. We propose a new corporate to allowance for investment financed by equity (the Allowance for Corporate Equity). This approach not only eliminates the discouragement to investment, hut also reduces or eliminates most other distortions to company behavior that result from the current corporation tax. The new allowance can be partly financed by eliminating the present tax advantages of dividend income for tax-exempt investors, and this may have an additional benefit for investment by removing one source of pressure for high dividend pay-out ratios in the UK. Copyright 1996 by Oxford University Press.

Suggested Citation

  • Bond, Stephen R & Devereux, Michael P & Gammie, Malcolm J, 1996. "Tax Reform to Promote Investment," Oxford Review of Economic Policy, Oxford University Press, vol. 12(2), pages 109-117, Summer.
  • Handle: RePEc:oup:oxford:v:12:y:1996:i:2:p:109-17
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. George R. Zodrow, 2007. "Should Capital Income be Subject to Consumption-Based Taxation?," Working Papers 0715, Oxford University Centre for Business Taxation.
    2. Ahmed, S., 2004. "Modelling corporate tax liabilities using company accounts: a new framework," Cambridge Working Papers in Economics 0412, Faculty of Economics, University of Cambridge.
    3. Spengel, Christoph & Li, Wei & Zinn, Benedikt & Finke, Katharina, 2011. "The Computation and Comparison of the Effective Tax Burden in Four Asian Countries," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 52(1), pages 13-39, June.
    4. Jacobs, Otto H. & Spengel, Christoph, 1999. "The effective average tax burden in the European Union and the USA: a computer-based calculation and comparison with the model of the European tax analyzer," ZEW Discussion Papers 99-54, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    5. Gordon, Roger & Kalambokidis, Laura & Slemrod, Joel, 2004. "Do we now collect any revenue from taxing capital income?," Journal of Public Economics, Elsevier, vol. 88(5), pages 981-1009, April.
    6. Ernst Fehr & Wolfgang Wiegard, 2001. "The Incidence of an Extended Ace Corporation Tax," CESifo Working Paper Series 484, CESifo Group Munich.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:oxford:v:12:y:1996:i:2:p:109-17. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press) or (Christopher F. Baum). General contact details of provider: https://academic.oup.com/oxrep .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.