Profit vs. distributed profit based taxation and companies' capital structure
by Aaro Hazak
International Journal of Entrepreneurship and Innovation Management (IJEIM), Vol. 8, No. 5, 2008

Abstract: A theoretical model highlighting the impact of the differences between a profit based and a distributed profit based corporate taxation system on companies' capital structure is introduced in this paper. The practical rationale for undertaking the research is to understand the company level financial consequences of the distributed profit taxation regime of Estonia, experimentally introduced since 2000. Distributed profit taxation as opposed to profit taxation is comparable to Government granting an interest free loan to companies, whereas the corporate tax is not collected in the period when profit is earned, but a 'tax credit' is given until the profit is distributed.

Online publication date: Wed, 31-Dec-2008

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