Comments on Professor Reuven S. Avi-Yonah and Amir C. Chenchinski: 'Corporate Tax Integration and the Debt/Equity Distinction: The Case for Dividend Deduction'
Deborah L. Paul
Wachtell, Lipton, Rosen & Katz
September 20, 2011
These comments challenge a recent paper by Professor Reuven S. Avi-Yonah and Mr. Amir C. Chenchinski entitled “Corporate Tax Integration and the Debt/Equity Distinction: The Case For Dividend Deduction.” In their paper, Professor Avi-Yonah and Mr. Chenchinski advance a system under which corporations would be taxed, as under current law, but corporations would also be entitled to a deduction for dividends paid to shareholders. Professor Avi-Yonah and Mr. Chenchinski identify several biases in the current system of taxing corporations and shareholders, but those biases might not be theoretically or practically problematic. Further, the design of the dividend deduction system advanced by Professor Avi-Yonah and Mr. Chenchinski would require a great deal more consideration. Within the framework that they themselves identify favoring corporate taxation on anti-deferral and regulatory grounds, the design of their system contains inconsistencies. Among other issues, Professor Avi-Yonah and Mr. Chenchinski do not suggest a workable solution for handling foreign and tax-exempt shareholders. While Professor Avi-Yonah and Mr. Chenchinski provide a helpful fresh look at one system for corporate integration, it is unclear whether there are answers to all the questions raised by their paper.
Number of Pages in PDF File: 5
Keywords: Tax Law, Corporate Tax Reform, Dividend Deduction System, CBIT, Classical Tax System, Corporate Tax Integration, Reuven Avi-Yonah
JEL Classification: K34
Date posted: December 2, 2011