Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/82730
Authors: 
Lindhe, Tobias
Södersten, Jan
Öberg, Ann
Year of Publication: 
2003
Series/Report no.: 
Working Paper, Department of Economics, Uppsala University 2003:19
Abstract: 
This paper analyzes the economic effects of different income splitting rules for closely held corporations and sole proprietorships/partnerships in a tax system with a dual income tax. We conclude that the tax rules for closed corporations offer roughly the same cost of capital as for widely held corporations. Compared to corporate firms, the cost of capital is lower for sole proprietorships/partnerships, because the income-splitting rules both neutralize the impact of the high labor income tax and avoid the two-tier taxation on the corporate form of organization. Adding risk to the model shows that closely held corporations have a lower cost of capital than would be the case without income-splitting rules.
Subjects: 
Dual income taxation
small business taxation
tax avoidance
income splitting
cost of capital
JEL: 
H24
H25
H32
Document Type: 
Working Paper

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