International Tax Reform By Means of Corporate Integration

67 Pages Posted: 23 Apr 2016 Last revised: 15 Feb 2017

Bret Wells

University of Houston Law Center

Date Written: April 18, 2016


This Article focuses on a single organizing question, namely how should a dividend paid deduction regime be designed so that it achieves acceptable international tax outcomes. By focusing on the international tax implications attendant with a dividend paid deduction regime, the author is not attempting to minimize the broader benefits of achieving shareholder-corporate integration. The dividend paid deduction proposal, as to distributed earnings, would equate the tax treatment of debt and equity, and in so doing it would reduce distortions that current law creates with respect to debt and equity in the corporate context. Furthermore, recent economic works suggest that the incidence of the corporate income tax burden is partially shifted to labor and away from shareholders whereas a properly designed integration proposal puts the incidence of business taxation squarely on shareholders. Furthermore, shareholder-corporate integration for C corporations harmonizes the divergent tax treatment that currently exists between C corporations and pass-through entities. Thus, a corporate integration proposal provides a broad spectrum of potential benefits, and so not surprisingly significant scholarship has been dedicated towards how to best achieve shareholder-corporate integration. But, in today’s era, the overwhelming tax policy problem that must be solved rests on finding a solution to the systemic international tax challenges that face the country, and so that is where this Article will focus. In Part I, the Article sets forth three major systemic international tax policy challenges that plague the extant U.S. international tax regime. In Part II, this Article evaluates the dividend paid deduction proposal in light of these systemic policy challenges and then provides analysis for how a properly designed dividend paid deduction regime can solve each of the international tax challenges set forth in Part I. Finally, in Part III, this paper draws tentative conclusions about the way forward.

Keywords: international tax tax reform, base erosion and profit shifting, BEPS, earning stripping, corporate integration, dividend paid deduction

Suggested Citation

Wells, Bret, International Tax Reform By Means of Corporate Integration (April 18, 2016). Forthcoming, Florida Tax Review (Fall 2016); U of Houston Law Center No. 2016-A-6. Available at SSRN:

Bret Wells (Contact Author)

University of Houston Law Center ( email )

4604 Calhoun Road
Houston, TX 77204-6060
United States

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