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Business and Economics > Corporate Taxation

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Cover IMF Working Papers
Macroeconomic Effects of Dividend Taxation with Investment Credit Limits
Matteo Ghilardi
and
Roy Zilberman
We analyze the effects of dividend taxation in a general equilibrium business cycle model with an occasionally-binding investment credit limit. Permanent dividend tax reforms distort capital investment decisions in the binding long-run equilibrium, but are neutral otherwise. Temporary unexpected tax cuts stimulate shortterm real activity in the credit-constrained economy, yet produce contractionary macroeconomic outcomes in the slack regime. The occasionally-binding constraint reconciles the `traditional' and `new' views of dividend taxation, and highlights the importance of measuring the firm's initial borrowing position before enacting tax reforms. Finally, permanently lower dividend taxes dampen financial business cycles, and help to explain macroeconomic asymmetries.
Keywords:
Dividend Taxation; Occasionally-Binding Borrowing Constraints; Investment; Business Cycles.; borrowing position; tax relief; dividend distribution; dividend tax rate; dividend tax adjustment; tax environment; benchmark system; dividend tax shock; dividend tax cut; tax adjustment; dividend tax system; Dividend tax; Credit; Corporate income tax; Collateral; Stocks
Cover IMF Working Papers
The Incidence and Efficiency Costs of Corporate Taxation When Corporate and Noncorporate Firms Produce the Same Goods
International Monetary Fund
One difficulty confronting Harberger’s celebrated model of the corporate income tax is how to treat the noncorporate production in primarily corporate sectors and corporate production in primarily noncorporate sectors. This paper presents a two-good model with corporate and noncorporate production of both goods. The incidence of the corporate tax in our Mutual Production Model (MPM) can differ markedly from that in the Harberger Model. The difference between the two models in deadweight loss is also striking, with losses in the MPM over ten times as large as in the Harberger Model.
Keywords:
WP; tax burden; tax rate; income tax; substitution elasticity; Noncorporate firm; capital share; incidence formula; Corporate income tax; Macroprudential policy instruments; Self-employment; Demand elasticity; Tax incidence