(精品)Chap019

Click to edit Master title style,Click to edit Master text styles,Second level,Third level,Fourth level,Fifth level,19-,*,CHAPTER 19,The Corporation Tax,Copyright 2010 by the McGraw-Hill Companies,Inc.All rights reserved.,McGraw-Hill/Irwin,Ill probably kick myself for having said this,but when are we going to have the courage to point out that in our tax structure,the corporation tax is very hard to justify?,President Ronald W.Reagan,Corporations,Corporation A state-chartered form of business organization,usually with limited liability for shareholders(owners)and an independent legal status,Limited liability,Corporations are“artificial legal persons”,Why Tax Corporations?,Only real people can pay a tax,Justifications,Corporations are distinct entities,Corporations receive special privileges from society,Protects integrity of personal income tax,Structure,Revenue,-,Expenses incurred earning revenues,Taxable Income,*,Tax rate,(15%-35%),Tax,-,Credits,Total Tax,Alternative Minimum Tax,Treatment of Losses,Treatment of Dividends versus Retained Earnings,Double taxation,Effective Tax Rate on Corporate Capital,Statutory rate versus effective rate,Interest deductibility,Depreciation allowances,Inflation,Double taxation,Gravelle 2004,Effective corporate rate=32%;non-corporate rate=18%,Sensitivity of estimate,Incidence and Excess Burden,A tax on corporate capital,Incidence in a general equilibrium model,Excess burden on a general equilibrium model,A tax on economic profits,Incidence and excess burden of a tax on economic profits,Actual corporate profits versus economic profits,Stiglitz 1973 model,Effects on Behavior Total Physical Investment,Accelerator Model,Neoclassical Model,Cash Flow Model,Effects on Behavior-Type of Asset,Tax system encourages purchase of assets that receive relatively generous depreciation allowances,Effects on Behavior-Corporate Finance,Why do firms pay dividends?,Dividends as a signal of firms financial strength,Clientele effect,Effect of taxes on dividend policy,Empirical evidence Chetty and Saez 2004,Effect on savings,Debt versus Equity Finance,State Corporation Taxes,State taxes have similar incidence and efficiency problems as federal taxes,Variation of tax rates across state lines,Taxation of Multinational Corporations,Structure,U.S.corporations pay tax at standard rate on global taxable income,Credit for foreign taxes paid,Subsidiary status,Deferral of taxes on income from foreign enterprise,Repatriation,Income allocation,Arms length system,Transfer-pricing problem,Evaluation of Tax Treatment of Multinational Firms,Maximization of world income,Maximization of national income,Corporation Tax Reform,Full Integration(Partnership Method),Issues,Nature of the corporation,Administrative feasibility,Effects on efficiency,Effects on saving,Effect on distribution of income,Dividend Relief,Allow corporation to deduct dividends,Exclude dividends from individual taxation,2003 legislation 15%maximal tax rate on dividends,Allowable Expenses,Employee Compensation,Except compensation in excess of$1,000,000,Options do not have to be included,Cost of Material Inputs,Taxes including employer contributions to Social Security,Repairs and advertising,Interest but not dividends,Depreciation,No investment tax credit,Depreciation,What is depreciation?,Tax life of an asset,3,5,7,10,15,20,27.5,and 39 years,Most 5 years,Calculating the Value of Depreciation Allowances Straight-Line Depreciation,10 year tax life,Year,Write-off,Tax Savings,Present Value of Tax Savings,1,$10,000.00,$3,500.00,$3,181.82,2,$10,000.00,$3,500.00,$2,892.56,3,$10,000.00,$3,500.00,$2,629.60,4,$10,000.00,$3,500.00,$2,390.55,5,$10,000.00,$3,500.00,$2,173.22,6,$10,000.00,$3,500.00,$1,975.66,7,$10,000.00,$3,500.00,$1,796.05,8,$10,000.00,$3,500.00,$1,632.78,9,$10,000.00,$3,500.00,$1,484.34,10,$10,000.00,$3,500.00,$1,349.40,Total,$100,000.00,$35,000.00,$21,505.98,Calculating the Value of Depreciation Allowances Straight-Line Depreciation,5 year tax life,Year,Write-off,Tax Savings,Present Value of Tax Savings,1,$20,000.00,$7,000.00,$6,363,64,2,$20,000.00,$7,000.00,$5,785.12,3,$20,000.00,$7,000.00,$5,259.20,4,$20,000.00,$7,000.00,$4,781.09,5,$20,000.00,$7,000.00,$4,346.45,Total,$100,000.00,$35,000.00,$26,535,51,Calculating the Value of Depreciation Allowances Double Declining Balance Depreciation,10 year tax life,Year,Write-off,Tax Savings,Present Value of Tax Savings,1,$20,000.00,$7,000.00,$6,363.64,2,$16,000.00,$5,600.00,$4,628.10,3,$12,800.00,$4480.00,$3,365.89,4,$10,240.00,$3,584.00,$2,447.92,5,$6,826.67,$2,389.33,$1,483.59,6,$6,826.67,$2,389.33,$1,348.72,7,$6,826.67,$2,389.33,$1,226.11,8,$6,826.67,$2,389.33,$1,114.64,9,$6,826.67,$2,389.33,$1,013.31,10,$6,826.67,$2,389.33,$921.19,Total,$100,000.00,$35,000.00,$23,913.10,General Analysis of Depreciation Tax Savings,T=tax life,D(n)=proportion of asset that can be written off against taxable income in,n,th year,=corporate tax rate,Present value of tax savings:,=,*D(1),+,*D(2),+,*D(T),1+r (1+r),2,(1+r