Financing Decisions, Legal Status of the Firm, and Business Taxation (Unternehmensfinanzierung, Unternehmensrechtsform Und Besteuerung)

Arqus Quantitative Tax Research Discussion Paper No. 15

24 Pages Posted: 25 Nov 2006

See all articles by Ralf Maiterth

Ralf Maiterth

Leibniz Universität Hannover - Economics and Business Administration Area

Caren Sureth-Sloane

Paderborn University; Vienna University of Economics and Business; TRR 266 Accounting for Transparency

Date Written: January 2006

Abstract

Under a progressive capital income tax neutral taxation concerning the legal status of the firm and financing decisions is not feasible. In this case we ensure neutrality only if the corporate tax is completely integrated into the personal income tax. Otherwise, financing and legal status neutrality of taxation requires a proportional tax on capital income. Furthermore, taking account of international taxation it is necessary to implement identical tax systems in every country to keep tax neutrality. Facing international tax competition of sovereign countries this is not likely to be realized. Although it is often stated that the German tax system discriminates specific legal forms we find the average tax burden to be mainly independent of the legal status. In contrast, taxation approximately keeps financial neutrality for partnerships but may distort financing decisions severely in corporations.

Note: Downloadable document is in German.

Keywords: tax neutrality, legal status of the firm, financing decisions, cost of capital, capital import neutrality, capital export neutrality, synthetic income tax, shareholder tax

JEL Classification: H25, G32

Suggested Citation

Maiterth, Ralf and Sureth-Sloane, Caren, Financing Decisions, Legal Status of the Firm, and Business Taxation (Unternehmensfinanzierung, Unternehmensrechtsform Und Besteuerung) (January 2006). Arqus Quantitative Tax Research Discussion Paper No. 15, Available at SSRN: https://ssrn.com/abstract=905817 or http://dx.doi.org/10.2139/ssrn.905817

Ralf Maiterth (Contact Author)

Leibniz Universität Hannover - Economics and Business Administration Area ( email )

Koenigsworther Platz 1
30167 Hannover
Germany

Caren Sureth-Sloane

Paderborn University ( email )

Warburger Str. 100
Paderborn, 33098
Germany

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

TRR 266 Accounting for Transparency ( email )

Warburger Straße 100
Paderborn, 33098
Germany

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