How to Eliminate Pyramidal Business Groups - the Double Taxation of Inter-Corporate Dividends and Other Incisive Uses of Tax Policy

45 Pages Posted: 19 Dec 2004 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

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Date Written: December 2004

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 as part of a package of tax and other policies aimed at eliminating United States pyramidal business groups. These structures remain the predominant form of corporate organization outside the United States. The first Roosevelt administration associated them with corporate governance problems, corporate tax avoidance, market power, and an objectionable concentration of economic power. Future tax reforms in the United States should mind the original intent of Congress and the President regarding intercorporate dividend taxation. Foreign governments may find the American experience of value should they desire to eliminate their business groups.

Suggested Citation

Morck, Randall K., How to Eliminate Pyramidal Business Groups - the Double Taxation of Inter-Corporate Dividends and Other Incisive Uses of Tax Policy (December 2004). NBER Working Paper No. w10944. Available at SSRN: https://ssrn.com/abstract=629586

Randall K. Morck (Contact Author)

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

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