Replacing Corporate Income Tax with a Cash Flow Tax
AuthorGarnaut, R; Emerson, C; Finighan, R; Anthony, S
Source TitleThe Australian Economic Review
University of Melbourne Author/sGarnaut, Ross
AffiliationBusiness & Economics
Document TypeJournal Article
CitationsGarnaut, R., Emerson, C., Finighan, R. & Anthony, S. (2020). Replacing Corporate Income Tax with a Cash Flow Tax. The Australian Economic Review, 53 (4), pp.463-481. https://doi.org/10.1111/1467-8462.12385.
Access StatusThis item is embargoed and will be available on 2022-12-01.
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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