The Dividend Divide in Anglo-American Corporate Taxation


Why did the U.S. and U.K. -- two countries with similarly developed economies and corporate cultures -- originally diverge in their approaches to corporate income taxation and why have they continued to vacillate on this issue over time? This Article concludes that it is a result of a divergence in firm dividend policies in the two countries. While firms in both countries maintained liberal dividend policies during the nineteenth century, U.S. firms began to retain more earnings after the turn-of-the-century and this necessitated a change in the method of taxing corporate income. In subsequent years, both countries have undergone major corporate tax reforms during periods of concern about the direction of firm dividend policies in their respective countries. I suggest that this has important implications for predictions about the future of corporate income tax design.


Business Organizations Law | Comparative and Foreign Law | Taxation-Federal

Date of this Version

February 2004