Book contents
- Frontmatter
- Contents
- Preface
- 1 Inflation and personal income taxation: an introduction to the main issues
- 2 Inflation and the real progression of the rates: problems and solutions
- 3 Inflation and the real progression of the rates: countries' experiences
- 4 Inflation and the taxation of capital gains: problems and solutions
- 5 Inflation and the taxation of interest income: problems and solutions
- 6 Inflation and the taxation of business incomes
- 7 Inflation, lags in collection, and the real value of income tax revenue
- 8 Sensitivity of personal income tax yield to income changes: theory and measurement
- 9 Indexing the personal income tax for inflation and real growth
- 10 Inflation, income taxes, and the equilibrium rate of interest: theory
- 11 Inflation, income taxes, and interest rates: some empirical results
- 12 Inflation, indexation, and the wage-tax spiral
- 13 Some general conclusions on indexation
- Notes
- Index
6 - Inflation and the taxation of business incomes
Published online by Cambridge University Press: 07 October 2011
- Frontmatter
- Contents
- Preface
- 1 Inflation and personal income taxation: an introduction to the main issues
- 2 Inflation and the real progression of the rates: problems and solutions
- 3 Inflation and the real progression of the rates: countries' experiences
- 4 Inflation and the taxation of capital gains: problems and solutions
- 5 Inflation and the taxation of interest income: problems and solutions
- 6 Inflation and the taxation of business incomes
- 7 Inflation, lags in collection, and the real value of income tax revenue
- 8 Sensitivity of personal income tax yield to income changes: theory and measurement
- 9 Indexing the personal income tax for inflation and real growth
- 10 Inflation, income taxes, and the equilibrium rate of interest: theory
- 11 Inflation, income taxes, and interest rates: some empirical results
- 12 Inflation, indexation, and the wage-tax spiral
- 13 Some general conclusions on indexation
- Notes
- Index
Summary
In addition to incomes from wages and salaries, capital gains, and interest, some individuals receive dividends, rents, and profits from unincorporated business enterprises and partnerships. These other incomes are also distorted by inflation and require corrections that extend beyond that provided by bracket indexation. Although much of the discussion in this chapter is of some relevance to corporate profits and, consequently, to dividends, as our subject is personal income taxation, the problems as well as the solutions typical to corporations are not dealt with in detail.
By and large, business accounting relies on historical data. If prices never changed, historical data would provide accurate information for the preparation of balance sheets and income statements of business enterprises. However, in the real world, some prices are changing at all times and these changes may be either around a relatively stable average or, as it has been more often the case in the period since the end of World War II, around an average that has itself been moving in an upward direction. When prices are changing, and these changes are not taken into account, the balance sheets and the income statements of enterprises will be distorted, and this will affect their tax liabilities, as their measure of taxable profits will be distorted.
The balance sheet will be distorted because the value of assets (land, buildings, machines, etc.) will be kept at the original, and largely outdated, acquisition prices.
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- Chapter
- Information
- Inflation and the Personal Income TaxAn International Perspective, pp. 63 - 73Publisher: Cambridge University PressPrint publication year: 1980