Improving Cash Flow Corporate Taxation (CFCT) and the Z-Tax (ZT) Approach

24 Pages Posted: 20 Jun 2019

See all articles by David Ingles

David Ingles

Australian National University (ANU) - Crawford School of Public Policy - Tax and Transfer Policy Institute

Date Written: June 13, 2019

Abstract

This paper proposes a method to improve the cash flow corporate tax and in particular to make it better applicable to financial corporations. This takes the S-CFCT – which is a tax on net flows to shareholders - proposed by the 1978 Meade Committee a step further and allows us to tax ‘pure profits’ on debt as well as equity. The other adjustment is to avoid negative tax receipts when cash flows are net inward and replace these with a rebate, which is adjusted upwards over time. The rebate offsets tax when it falls due. This also provides a mechanism to deal with corporations which accumulate cash and don’t distribute, which is a serious issue for the S-CFCT. I call this the corporate Z-tax as it mimics the mechanism provided under the personal Z-tax (as described in Working Paper 6/2019).

Keywords: Z-tax, corporation tax, cash-flow corporation tax (CFCT), capital income taxation, tax reform, economic rent, allowance for corporate equity (ACE), allowance for corporate capital (ACC)

Suggested Citation

Ingles, David, Improving Cash Flow Corporate Taxation (CFCT) and the Z-Tax (ZT) Approach (June 13, 2019). Tax and Transfer Policy Institute - Working paper 7/2019. Available at SSRN: https://ssrn.com/abstract=3403389 or http://dx.doi.org/10.2139/ssrn.3403389

David Ingles (Contact Author)

Australian National University (ANU) - Crawford School of Public Policy - Tax and Transfer Policy Institute ( email )

ANU College of Asia and the Pacific
J.G. Crawford Building, #132, Lennox Crossing
Canberra, Australian Capital Territory 0200
Australia

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