A Superior Hybrid Cash-Flow Taxon Corporations
IMF Working Papers, May 1, 2006
Source details
- Canonical URL
- A Superior Hybrid Cash-Flow Taxon Corporations
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Bibliographic details
- Authors: Howell H Zee
- Published: May 1, 2006
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451863772.001
Summary and central proposal
- Proposes a new hybrid cash-flow tax on corporations that:
- "taxes only excess corporate profits as they accrue"
- "treats real and financial transactions neutrally"
- Characterized as "a superior tax compared to the cash-flow tax on real transactions" that has gained common acceptance.
- Described as a modified version of the cash-flow tax on real and financial transactions combined.
Design features of the hybrid tax
- Modification to standard cash-flow tax treatment:
- Replaces expensing of fixed assets with normal depreciation allowances.
- The undepreciated value of fixed assets is carried forward with interest at the opportunity cost of equity capital.
- Emphasis on neutrality between real and financial transactions.
Claimed advantages and outcomes
- Targets only excess corporate profits as they accrue (implying non-excess returns are not taxed under this design).
- Achieves neutrality across transaction types, providing a rationale for superiority over cash-flow taxes limited to real transactions.
Subject areas and keywords covered
- Subject headings:
- Anti-money laundering and combating the financing of terrorism (AML/CFT)
- Corporate income tax
- Crime
- Currencies
- Depreciation
- Money
- National accounts
- Tax allowances
- Taxes
- Keywords include: Anti-money laundering and combating the financing of terrorism (AML/CFT), cash flow, cash inflow, cash-flow tax, Corporate income tax, Currencies, Depreciation, equity capital, modified S-CFT, proceeds, Tax allowances, tax burden, tax calculation, tax deferral, tax depreciation, tax implication, tax liability, tax payment, tax reform, WP