What future for the corporate tax in the new century?

Research output: Working paperWorking paper series


It has long been recognised that the corporate tax suffers from several inherent deficiencies. However, in recent years, the transformation and integration of the world economy has exacerbated and highlighted these weaknesses, placing a question mark over the future of the tax. Through an examination of the problems besetting the tax today, a critical analysis of the conventional justifications for it, and a review of economic and political factors relevant to its continued existence, this article considers its future in the new century.

Five main criticisms of the tax are identified. First, allocating profit between tax jurisdictions is becoming increasingly problematic. Second, it is poorly equipped to adapt to new forms of commerce. Third, because of the existence of international tax differentials, it distorts the optimum allocation of global investment. Fourth, it distorts the capital structures of companies. Finally, it is increasingly inequitable.

Theoretical justifications for the tax are unconvincing. Its continued existence is more likely due simply to the importance of its revenues to government and political obstacles to its abolition.

The main present threat to the tax’s existence is its possible repeal in an important economy such as the US, subsequent to which smaller countries may have no choice but to follow suit. A further threat is that increased tax competition may reduce the comparative importance of corporate tax revenues to governments. This, together with likely increased costs of compliance and enforcement, may eventually force governments to reconsider the merits of retaining the tax.
Original languageEnglish
Place of PublicationHong Kong
PublisherHong Kong Institute of Business Studies, Lingnan University
Number of pages18
Publication statusPublished - Jun 2006

Publication series

NameHong Kong Institute of Business Studies Working Paper Series
PublisherLingnan University


  • Corporate taxation
  • Tax revenues
  • Tax competition


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