Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/19015
Authors: 
Sørensen, Peter Birch
Year of Publication: 
2005
Series/Report no.: 
CESifo Working Paper 1551
Abstract: 
The dual income tax combines a progressive tax schedule for labour income with a low flat tax rate on capital income and corporate income. This paper restates the case for the dual income tax and discusses alternative methods of taxing business income under such a tax system, paying special attention to the taxation of income from closely held corporations. It is argued that the imputed normal return to shares in unlisted companies should be taxed as capital income, while above-normal returns should be subject to labour income tax. The paper demonstrates that such a tax scheme can be designed to be neutral towards the firm's investment and financing decisions and towards the decisions of shareholders to realize their shares.
Subjects: 
dual income tax
tax neutrality
taxation of business income
shareholder income tax
JEL: 
H25
H24
Document Type: 
Working Paper

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