A Horizontal Equity Analysis of the Surtax on Retained Earnings and its Alternative Regimes.

• Main Authors: Wen-Cheng Huang, 黃文傑
• Other Authors: Suming Lin, Ph. D.
• Format: Others
• Language: zh-TW
• Published: 2003
• Online Access: http://ndltd.ncl.edu.tw/handle/80455724967110606576

碩士 === 國立臺灣大學 === 會計學研究所 === 91 === Taiwan has adopted the imputation tax credit system since January 1st 1998. The new income tax system integrates individual income tax and business income tax to eliminate double taxes on business income. Meanwhile, in order to moderate the impact on government financial situation of the implementation of the new tax system, and to maintain the neutrality of corporate dividend policy, a 10% surtax is imposed on corporate retained earnings. Although the new tax system can avoid double taxation, the implementation of surtax on retained earnings has engendered some criticisms. One of the main objectives of the thesis is to examine the horizontal equity (HE) of the new income tax system and of its alternative regimes that have been proposed by the Department of Taxation. The other objective is to simulate a tax-revenue-neutral highest marginal tax rate which will be proposed to replace the 10% surtax. Using “CV Ratio” (Coefficient of Variation Ratio) as the HE measures, the thesis analyzes the firm-level data from the 1998-1999 business income tax returns complied by the Public Finance Data Processing Center to measure the HE of the current income tax system and of the alternative regimes. The findings indicate that the current tax system is more horizontally equitable than is any alternative regime at high income levels, while the opposite is true at low income levels. The findings also indicate, putting both the high and low income levels together, that the current tax system yields less HE than does any alternative regime. According to the simulation, this thesis suggests that the highest tax rate should be 27.5% if the 10% surtax will be replaced.