The Effects of Taiwan's Integrated Income Tax System on Capitalization of Dividend Tax

兩稅合一稅制對上市公司股利稅評價效果影響之研究

趙雅儀(Ya-Yi Chao) ； 吳清在(Tsing-Zai C. Wu)

《中華會計學刊》 5卷2期 (2005/04) Pp. 169-205

摘要

This study examines how individual tax on dividend affects the relative valuation of retained earnings versus contributed capital, and how the implementation of integrated income tax (hereafter IIT) system in Taiwan since 1998 affects the capitalization of dividend tax. Based on the equity valuation model on an after-dividend-taxes basis developed by Harris and Kemsley (1999) under classical separate income tax (hereafter SIT) system, we extend their study with the implementation of IIT and other factors affecting the capitalization of dividend taxes. Sample consists of firms listed in the Taiwan Stock Exchange from 1994 through 2001. Our empirical results show the followings: (1) The potential dividend taxes liabilities on retained earnings have significant negative impact on equity valuation before the IIT was implemented in 1998 in Taiwan. The capitalization of dividend tax reduces significantly after the IIT was implemented in Taiwan because corporate income taxes paid at the corporate level can be used to offset shareholders' individual income taxes under IIT. (2) The capitalization of dividend tax is positively correlated with the firm's dividends payout ratio before IIT was implemented in Taiwan. However, such relationship weakens significantly after the IIT implementation. (3) The reduction in capitalization of dividend tax after the implementation of IIT is negatively related with the percentage of local institutional ownership (which has less tax benefit from new tax system). But it is not significantly related with the ownerships of local tax-exempted shareholders and that of nonresident shareholders (which has no tax benefits from new tax system at all).

關鍵字

兩稅合一 ； 股利稅資本化 ； 股利稅評價模式 ； 股利政策 ； 股權結構

並列摘要

This study examines how individual tax on dividend affects the relative valuation of retained earnings versus contributed capital, and how the implementation of integrated income tax (hereafter IIT) system in Taiwan since 1998 affects the capitalization of dividend tax. Based on the equity valuation model on an after-dividend-taxes basis developed by Harris and Kemsley (1999) under classical separate income tax (hereafter SIT) system, we extend their study with the implementation of IIT and other factors affecting the capitalization of dividend taxes. Sample consists of firms listed in the Taiwan Stock Exchange from 1994 through 2001. Our empirical results show the followings: (1) The potential dividend taxes liabilities on retained earnings have significant negative impact on equity valuation before the IIT was implemented in 1998 in Taiwan. The capitalization of dividend tax reduces significantly after the IIT was implemented in Taiwan because corporate income taxes paid at the corporate level can be used to offset shareholders' individual income taxes under IIT. (2) The capitalization of dividend tax is positively correlated with the firm's dividends payout ratio before IIT was implemented in Taiwan. However, such relationship weakens significantly after the IIT implementation. (3) The reduction in capitalization of dividend tax after the implementation of IIT is negatively related with the percentage of local institutional ownership (which has less tax benefit from new tax system). But it is not significantly related with the ownerships of local tax-exempted shareholders and that of nonresident shareholders (which has no tax benefits from new tax system at all).

並列關鍵字

Integrated income tax system ； Capitalization of dividend tax ； Valuation model ； Dividend policy ； Ownership structure

參考文獻

Amoako-Adu, B.(1983).Corporate valuation and personal taxes: Extension and application to Canada.The Financial Review.18,281-291.

Amoako-Adu, B.,M. Rashid,M. Stebbins.(1992).Capital gains tax and equity values: Empirical test of stock price reaction to the introduction and reduction of capital gains tax exemption.Journal of Banking and Finance.16,275-287.

Ayers, B. C.,C. B. Cloyd,J. R. Robinson.(2002).The effect of shareholder-level taxes on stock prices: evidence from the Revenue Reconciliation Act of 1993.The Accounting Review.77,933-947.

Bradford, D. F.(1981).The incidence and allocation effects of a tax on corporate distributions.Journal of Public Economics.15,1-22.

Chang, Hui-Shan.(2002).The effects of imputed tax credit system on equity valuation.Graduate Institute of Accountancy, National Taiwan University.