Leiden University. The university to discover. DUAL INCOME TAX & CORPORATE TAX COMPETITION Henk...

Leiden University. The university to discover.

DUAL INCOME TAX & CORPORATE TAX

COMPETITION

Henk Vording


Dual Income Tax: a coherent concept?- PIT vs PCT: conceptual discussion- everyday world: hybrid

income/consumption taxation, different treatment of sources of income- is DIT a useful way to “add system”

to hybrid taxes?- is labour/capital the most important

distinction in taxing income?


Taxing income under varying factor mobility- is capital more mobile than labour?- does capital mobility depend on firm

size, on incorporation etc.?- or is small business income to be

taxed as labour income?- DIT !


Domestic impact of corporate tax competition- Reduction of (effective) corporate tax

rates- Impact on all incorporated firms,

including SMEs- Effect on SMEs decision to incorporate- Spillover effects:- reduced PIT revenue- reduction in effective tax rate on

personal business- wage income => profits income


How to target competitive corporate tax reductions?- Target group: large firms (cross

border activities)- To be excluded: SMEs (domestic

activities)


How to target competitive corporate tax reductions?- Alternative techniques:- DIT(splitting profits in

labour/capital revenue)- fiscal transparency- regressive corporate tax rate- tax incentives for MNEs


How to target competitive corporate tax reductions?- Ranking criteria:- effectiveness- administrative feasibility- stability- EU/legal feasibility


Results?

Effective?

Simple?

Stable?

EU?

DIT + - + 0Trans-parency

+ - + 0

Regres-sive rate

+/? +/? + 0

MNE incentive

+ +/- - -

Leiden University. The university to discover. DUAL INCOME TAX & CORPORATE TAX COMPETITION Henk...

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