NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

How to Eliminate Pyramidal Business Groups - The Double Taxation of Inter-Corporate Dividends and Other Incisive Uses of Tax Policy

Randall Morck

NBER Working Paper No. 10944
Issued in December 2004
NBER Program(s):   CF

Arguments for eliminating the double taxation of dividends apply only to dividends paid by corporations to individuals. The double (and multiple) taxation of dividends paid by one firm to another -- intercorporate dividends - was explicitly included in the 1930s as part of a package of tax and other policies aimed at eliminating United States pyramidal business groups. These structures remain the predominant form of corporate organization outside the United States. The first Roosevelt administration associated them with corporate governance problems, corporate tax avoidance, market power, and an objectionable concentration of economic power. Future tax reforms in the United States should mind the original intent of Congress and the President regarding intercorporate dividend taxation. Foreign governments may find the American experience of value should they desire to eliminate their business groups.

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Document Object Identifier (DOI): 10.3386/w10944

Published: How to Eliminate Pyramidal Business Groups The Double Taxation of Inter-corporate Dividends and other Incisive Uses of Tax Policy , Randall Morck. in Tax Policy and the Economy, Volume 19, Poterba. 2005

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