Skip to main content
Cash flow or income? : the choice of base for company taxation
The World Bank research observer
  • Jack M. MINTZ, University of Toronto
  • Jesús SEADE, World Bank's Brazil Department
Document Type
Journal article
Publication Date

Considerable interest has been expressed in recent years by tax theorists as well as practitioners, for the taxation of companies based on their cash flow. Unlike the equity-income tax base, which requires the deductibility of economic depreciation and debt financing costs, the cash-flow base expenses capital at the point of purchase, eliminating the need for the subsequent costing of this capital. This paper raises some of the issues that would arise in trying to implement a company tax either in the form of an indexed equity-income or a cash-flow tax. Issues raised include: (i) administrative complexity; (ii) international tax coordination and competition; and (iii) transition problems. In a closed economy the cash-flow tax seems a simple, efficient form of company taxation, administratively straightforward and neutral with regard to investment decisions. The more complicated equity-income tax is harder to defend in a closed economy.

Publisher Statement
Copyright © 1991 The International Bank for Reconstruction and Development/THE WORLD BANK. Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Citation Information
Mintz, J. M. and Seade, J. (1991). Cash flow or income? : the choice of base for company taxation". The World Bank research observer, 6(2), 177-190. Retrieved from: