Other Tax Models That Alleviate the Burden on Equity Financed Investments: Analysis of the Full Integration Tax System, the Dividend Exemption Tax System and the Flat Tax Rate System

  • Ilija Gruevski Goce Delcev University, Faculty of Economics, Krste Misirkov 10-A, Stip 2000, Republic of Macedonia,
  • Stevan Gaber Goce Delcev University, Faculty of Economics, Krste Misirkov 10-A, Stip 2000, Republic of Macedonia,
Keywords: Full Integration Tax system (FIT), Dividend Exemption Tax system (DET), Flat Tax Rate system (FTR), cost of capital, effective marginal tax rate, Classical Corporation Tax (CCT), debt, new equity issues, double taxation.

Abstract

In our previous articles, we have explained the distortions from the isolated implementation of corporate taxes on company’s investment, a condition that assumes total abstraction of the personal taxes. In this article, we included the personal taxes in our analysis, with intention to explore the investment decision from the shareholder’s point of view as well. With other words, the goal of this serial of  articles is to analyze the effects from the integrated implementation of both, the corporate and the personal taxes, a phenomenon commonly referred as “double taxation”. For that purpose, our basic methodology of effective marginal tax rates is once again modified and extended to express all the newly occurred conditions. The theory refers to many varieties of integrated tax systems that carry some capacities to alleviate the burden targeted exclusively on the external equity investments.From the wide literature, in our two previous articles we narrowed our choice to examine the proposals of the OECD, which included the Comprehensive Business Income Tax system (CBIT), the Allowance for Corporate Equity Tax system (ACE), and the Allowance for Shareholder Equity Tax system (ASE). In this article, we focus our attention specifically on the Full Integration Tax system (FIT), the Dividend Exemption Tax system (DET) and the Flat Tax Rate system (FTR).

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Published
2018-12-16
Section
Articles