Why Some Double Taxation Might Make Sense: The Special Case of Inter-Corporate Dividends

47 Pages Posted: 27 Apr 2003 Last revised: 30 Jan 2013

See all articles by Randall Morck

Randall Morck

University of Alberta - Department of Finance and Statistical Analysis; National Bureau of Economic Research (NBER); European Corporate Governence Institute; Asian Bureau of Finance and Economic Research

Date Written: April 2003

Abstract

Arguments for eliminating the double taxation of dividends apply only to dividends paid by corporations to individuals. The double (and multiple) taxation of dividends paid by one firm to another intercorporate dividends - was explicitly included in the 1930s to eliminate pyramidal corporate groups. These structures exist elsewhere, and are associated with corporate governance problems, corporate tax avoidance, and a greater concentration of economic power than is currently possible in the United States. Current US tax reform proposals do not distinguish dividends paid to individuals from intercorporate dividends and, by eliminating double taxation on both sorts of dividends, may allow pyramidal groups in the US again for the first time since the 1930s.

Suggested Citation

Morck, Randall K., Why Some Double Taxation Might Make Sense: The Special Case of Inter-Corporate Dividends (April 2003). NBER Working Paper No. w9651. Available at SSRN: https://ssrn.com/abstract=398554

Randall K. Morck (Contact Author)

University of Alberta - Department of Finance and Statistical Analysis ( email )

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National Bureau of Economic Research (NBER)

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Asian Bureau of Finance and Economic Research ( email )

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