Re-examining the Integration of Corporate and Individual Income Taxes in the Light of International Trends
Date Issued
2008
Date
2008
Author(s)
Kao, Wang-Yu
Abstract
In order to slove the problem of economic double taxation on dividends, imputation and split-rate systems have been introduced to Taiwan since 1998. The imputation system in Taiwan relieves economic double taxation on dividends by means of giving imputation credits at the shareholders’ level while the split-rate system imposes additional 10% tax rate on corporate retained earnings. However, countries adopting either imputation or classic system have changed their paths to reduced-dividend systems recently and very few countries adopt split-rate system nowadays. Furthermore, more and more countries adopt participation exemption methods rather than indirect methods to reduce economic double taxation on international inter-corporate dividends. These are current trends in the development of integrating corporate and individual income taxes all over the world. The reason behind the phenomenon is because the imputation system which discriminates against foreign dividends and shareholders can result in obstacles to cross-border movement of capital. Last, lacking relief of international double taxation on iner-corporate dividends may cause competitive disadvantages for Taiwanese corporations in the global market. Therefore, this article suggests that we should adopt reduced-dividend systems instead of imputation systems and introduce participation exemption methods to relive economic double taxation on dividends.
Subjects
Integration
Dividend income
Economic double taxation
Imputation system
Discrimination against foreign shareholders
Discrimination against foreign dividends
Reduced-dividend systems
Indirect credit methods
Participation exemption methods
Capital export neutrality
Capital import neutrality
Type
thesis
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