Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/22477 
Year of Publication: 
2007
Series/Report no.: 
Diskussionsbeitrag No. 365
Publisher: 
Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät, Hannover
Abstract: 
Effective from 2008, Germany´s top marginal income tax rate rises from 42 to 45 der cent. However, sole proprietorships and partnerships can opt for a preferential tax rate of 28,25 per cent for retained profits (§34a EStG-E). If they do so, profits are taxed again upon distribution. Using corporate finance tools we analyse in detail whether or not the option is favourable. However, these tools do nut suffice since the new tax regime is too complicated. Costs of capital cannot be calculated explicitly any more, but we derive exact implicit characterisations. Concrete numerical examples are also provided.
Subjects: 
Business Taxes
German Income Tax
JEL: 
M10
H25
D92
Document Type: 
Working Paper

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