Washington (Aug. 15, 2003) -- Moving from a corporate income tax to a cash-flow business tax would help eliminate the recent wave of corporate scandals that have battered stockholders and pension plans, according to a new study by the research foundation Cato Institute.

"Tax complexity is an enemy to productive business management and sound investment decisions," concluded Chris Edwards, Cato director of fiscal policy, in "Replacing the Scandal-Plagued Corporate Income Tax with a Cash-Flow Tax."

After studying reports on the fall of Enron Corp., Edwards said that a cash-flow tax would eliminate many of the corporate tax code's complications. Edwards said that the move would make it more difficult for companies to create elaborate tax shelter schemes. With numerous corporations moving overseas to jurisdictions that have lower taxes than the United States, scrapping the corporate tax would eliminate that advantage from foreign countries and encourage companies to remain in the U.S.

"Today's combination of corporate management problems and rising global competitive pressures makes this an excellent time to fundamentally rethink U.S. business taxation," Edwards said.

The study can be found online at: http://www.cato.org/pubs/pas/pa-484es.html.

-- WebCPA staff

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