Classical Corporation Tax as a Global Means of Tax Harmonization

26 Pages Posted: 28 Feb 2002

See all articles by Seppo Juhani Kari

Seppo Juhani Kari

Government of the Republic of Finland - VATT Institute for Economic Research

Jouko Ylä-Liedenpohja

Tampere University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Date Written: February 2002

Abstract

Classical corporation tax entails double taxation of corporate income. The alternative practice to impute corporation tax to the domestic recipients of dividends is shown, in the case of a company with international owners, effectively to convert the imputation system back to a classical corporation tax. It also requires complex rules for exempting flow-through dividends from equalization tax to avoid the cumulation of corporation tax internationally. In contrast, classical corporation tax maintains its simplicity and can be designed so as to be neutral in respect of the financing and dividend decisions of multinationals, by adopting double taxation of interest income. Broad tax bases, flat-rate taxes on personal income from capital, and low statutory tax rates are advocated as general policy.

JEL Classification: H25, G32, G35

Suggested Citation

Kari, Seppo Juhani and Ylä-Liedenpohja, Jouko, Classical Corporation Tax as a Global Means of Tax Harmonization (February 2002). CESifo Working Paper Series No. 665; EFA 2002 Berlin Meetings Presented Paper. Available at SSRN: https://ssrn.com/abstract=301501

Seppo Juhani Kari

Government of the Republic of Finland - VATT Institute for Economic Research ( email )

Arkadiankatu 7
P.O Box 1279
Helsinki, FIN-00531
Finland

Jouko Ylä-Liedenpohja (Contact Author)

Tampere University - Department of Economics ( email )

P.O. Box 607
Tampere, FIN-33101
Finland

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

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