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

In: Tax Policy and the Economy, Volume 19

  • Randall Morck

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. Future tax reforms in the United States should mind the original intent of Congress and the President regarding intercorporate dividend taxation. Foreign governments may find the American experience of value should they desire to eliminate their business groups.

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This chapter was published in:
  • James M. Poterba, 2005. "Tax Policy and the Economy, Volume 19," NBER Books, National Bureau of Economic Research, Inc, number pote05-1, March.
  • This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 0167.
    Handle: RePEc:nbr:nberch:0167
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