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| Author: | Weichenrieder, A. J. |
| Title: | Foreign profits and domestic investment |
| Journal: | Journal of Public Economics
1998 : SEP, VOL. 69:3, p. 451-463 |
| Index terms: | Company taxation Multinational companies Investments Policy |
| Language: | eng |
| Abstract: | Investment incentives are considered in corporate tax systems which grant an imputation credit to shareholders when dividends are distributed from domestic sources. An increase in the dividend tax rate which is induced by lowering the shareholders' imputation rate is shown to potentially depress domestic investment. The result is common to old view models which assume that new equity is the marginal source of firms' finance. In this paper, however, the result is derived in a tax capitalization framework, where retentions are the marginal source of finance and dividend tax rates are usually regarded as neutral. |
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