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A Superior Hybrid Cash-Flow Taxon Corporations

  • Howell H. Zee
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    This paper proposes a new hybrid cash-flow tax on corporations that, on one hand, taxes only excess corporate profits as they accrue, and, on the other hand, treats real and financial transactions neutrally. It is, therefore, a superior tax compared to the cash-flow tax on real transactions that seems to have gained common acceptance. The hybrid tax is a modified version of the cash-flow tax on real and financial transactions combined. The modification involves replacing expensing of fixed assets with normal depreciation allowances, but the undepreciated value of fixed assets is carried forward with interest at the opportunity cost of equity capital.

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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=19146
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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/117.

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    Length: 25
    Date of creation: 01 May 2006
    Date of revision:
    Handle: RePEc:imf:imfwpa:06/117
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    1. David F. Bradford, 2003. "Addressing the Transfer-Pricing Problem in an Origin-Basis X Tax," NBER Working Papers 9843, National Bureau of Economic Research, Inc.
    2. David F. Bradford, 1998. "Transition to and Tax-Rate Flexibility in a Cash-Flow-Type Tax," NBER Chapters, in: Tax Policy and the Economy, Volume 12, pages 151-172 National Bureau of Economic Research, Inc.
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