Replacing Corporate Income Tax with a Cash Flow Tax
Date
2020
Authors
Garnaut, Ross
Emerson, Craig
Finighan, Reuben
Anthony, Stephen
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Publisher
Blackwell Publishing Ltd
Abstract
We design a parsimonious cash flow tax for Australia and estimate revenue effects. It allows immediate deduction of all capital expenditures, denies deductions of interest payments, and compensates negative cash flows at the same rate and time as it taxes positive cash flows. It allows taxpayer timing choice on implementation over 10 years. It has incentive effects comparable to lowering the corporate income tax rate to zero. It removes distortions that artificially favour debt over equity, short- over long-term investments, rents over competitive returns, large, established over small and new businesses, and conventional over innovative investments. It closes international tax evasion loopholes. Its spur to investment and timing of revenue impacts favours implementation in recession.
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Source
The Australian Economic Review
Type
Journal article
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Access Statement
License Rights
Restricted until
2099-12-31