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A Superior Hybrid Cash-Flow Taxon Corporations
Author:
Mr. Howell H Zee
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Series:
IMF Working Papers
Volume/Issue:
Volume 2006: Issue 117
Language:
English
Publication Date:
01 May 2006
DOI:
https://doi.org/10.5089/9781451863772.001
ISBN:
9781451863772
ISSN:
1018-5941
Pages:
25
Keywords:
WP; cash flow; tax burden; proceeds; Corporate income tax; cash-flow tax; tax reform; modified S-CFT; cash inflow; tax liability; tax calculation; tax depreciation; tax implication; equity capital; tax payment; tax deferral; Currencies; Tax allowances; Anti-money laundering and combating the financing of terrorism (AML/CFT); Depreciation
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper proposes a new hybrid cash-flow tax on corporations that, on one hand, taxes only excess corporate profits as they accrue, and, on the other hand, treats real and financial transactions neutrally. It is, therefore, a superior tax compared to the cash-flow tax on real transactions that seems to have gained common acceptance. The hybrid tax is a modified version of the cash-flow tax on real and financial transactions combined. The modification involves replacing expensing of fixed assets with normal depreciation allowances, but the undepreciated value of fixed assets is carried forward with interest at the opportunity cost of equity capital.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund