Implementing Corporate Tax Cuts at the Expense of Neutrality? A Legal and Optimisation Analysis of Fundamental Reform in Practice

eJournal of Tax Research (2018) vol. 16, no. 1, pp 201-235

65 Pages Posted: 16 Nov 2018

See all articles by Ann Kayis-Kumar

Ann Kayis-Kumar

UNSW Australia Business School, School of Taxation and Business Law

Date Written: October 26, 2018

Abstract

Governments and policy-makers are increasingly faced with the trade-off of protecting their tax revenue bases while maintaining their international competitiveness. This is exemplified by the international trend of jurisdictions reducing their headline corporate tax rates, which is often justified on the basis that these cuts will lead to improved efficiency and integrity outcomes. This article explores whether it is more efficient to implement corporate tax cuts or an alternative reform such as an economic rent tax which may better achieve the tax policy goals of efficiency and integrity.

In doing so, this article bridges the gap between applied legal research, economic theory and practical optimisation modelling. Specifically, this research presents a simulation analysis of the behavioural responses of a tax-minimising multinational enterprise to both existing and proposed tax regimes and compares efficiency and integrity outcomes upon implementing corporate tax cuts. This is complemented by a legal comparative analysis featuring case studies of an economic rent tax; namely, the Allowance for Corporate Equity (ACE) as introduced in Belgium and Italy. These case studies will focus on the political hurdles to implementing and sustaining these reforms, which will highlight key lessons learnt from the implementation of the ACE in practice.

Keywords: Tax neutrality, Corporate tax reform, Allowance for Corporate Equity

Suggested Citation

Kayis-Kumar, Ann, Implementing Corporate Tax Cuts at the Expense of Neutrality? A Legal and Optimisation Analysis of Fundamental Reform in Practice (October 26, 2018). eJournal of Tax Research (2018) vol. 16, no. 1, pp 201-235, Available at SSRN: https://ssrn.com/abstract=3273194

Ann Kayis-Kumar (Contact Author)

UNSW Australia Business School, School of Taxation and Business Law ( email )

Sydney, NSW 2052
Australia

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