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A Superior Hybrid Cash-Flow Taxon Corporations

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  • Mr. Howell H Zee

Abstract

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.

Suggested Citation

  • Mr. Howell H Zee, 2006. "A Superior Hybrid Cash-Flow Taxon Corporations," IMF Working Papers 2006/117, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2006/117
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    References listed on IDEAS

    as
    1. David F. Bradford, 1998. "Transition to and Tax-Rate Flexibility in a Cash-Flow-Type Tax," NBER Chapters, in: Tax Policy and the Economy, Volume 12, pages 151-172, National Bureau of Economic Research, Inc.
    2. Bradford, David F, 2003. "Addressing the Transfer-Pricing Problem in an Origin-Basis X Tax," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 10(5), pages 591-610, September.
    3. Laurence S. Seidman, 1997. "A Progressive Consumption Tax," Challenge, Taylor & Francis Journals, vol. 40(6), pages 63-84, November.
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