Corporate taxes and their potential effects on investment
Corporate taxes and their potential effects on investment

Summary/Abstract: The following article is aimed to explore the potential (theoretical) effects from corporate taxes on investment according to the source of finance. The purpose is to analyze the investment decision in the case of isolated implementation of corporate taxes through the methodological frame of the effective marginal tax rates. It explains that these conditions generate “uneven” distribution of the burden across the projects covered with different sources of finance. Also, some corporate tax systems with abilities to alleviate the burden are additionally presented and adequately analyzed. For example, a special attention is given to the following corporate tax systems, frequently met in the practice: the comprehensive business income tax system (CBIT), the imputation corporate tax system (ICT), the full imputation corporate tax system (FICT) and the split rate corporate tax system (SRCT). Hopefully, this analysis will prove that some corporate tax systems do have theoretical abilities to produce higher degree of neutrality and are effective for elimination of the distortion between the alternative sources of finance.

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