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A Comment on the Viability of the Allowance for Corporate Equity
Author(s) -
ISSAC JOHN
Publication year - 1997
Publication title -
fiscal studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.63
H-Index - 40
eISSN - 1475-5890
pISSN - 0143-5671
DOI - 10.1111/j.1475-5890.1997.tb00266.x
Subject(s) - economics , equity (law) , income tax , earnings , retained earnings , allowance (engineering) , monetary economics , public economics , finance , debt , law , operations management , political science
This article, acknowledging the potentially important general attractions of the allowance for corporate equity (ACE), looks at some of its more specific implications. On corporate taxes, the article looks at questions about the implied revenue‐neutral rate of corporation tax (and redistribution of the tax burden); the effects on cash flow of both government and companies; and what would become a crucially important charge on capital gains. On income tax, the article comments on the implications for self‐employed earnings (and also, potentially, employees); for investment income and the logically accompanying EXPEP (extended personal equity plan); and therefore for inheritance tax. For international investment, the article notes that unless and until other countries adopt an ACE as the basis for harmonisation, the interaction of the ACE and existing taxes would not always be helpful for outward investment; and on some inward investment, if the most optimistic assumptions are not borne out, the effects could be rather bleak. JEL classification : H25, K34.