TY - JOUR
T1 - Replacing Corporate Income Tax with a Cash Flow Tax
AU - Garnaut, Ross
AU - Emerson, Craig
AU - Finighan, Reuben
AU - Anthony, Stephen
PY - 2020
Y1 - 2020
N2 - 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.
AB - 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.
U2 - 10.1111/1467-8462.12385
DO - 10.1111/1467-8462.12385
M3 - Article
VL - 53
SP - 463
EP - 481
JO - The Australian Economic Review
JF - The Australian Economic Review
IS - 4
ER -