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Taxes, Corporate Financial Policy and Investment Decisions in Australia *
Author(s) -
BENGE MATT
Publication year - 1997
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/j.1475-4932.1997.tb00974.x
Subject(s) - dividend , incentive , corporate tax , economics , investment (military) , capital (architecture) , double taxation , cost of capital , dividend tax , tax policy , capital budgeting , dividend policy , monetary economics , finance , payment , business , tax avoidance , tax reform , microeconomics , public economics , state income tax , archaeology , politics , political science , gross income , law , history , project appraisal
This paper presents a formal model of an optimizing firm to examine incentives provided by Australia's full imputation scheme in combination with its capital gains tax provisions. It explores how the tax system affects optimal dividend and financial policy. It derives an expression for the cost of capital for corporate investment which takes account of the way in which corporate tax payments influence firms' ability to pay franked dividends and examines how this is affected by capital gains taxation.