The Impact of an Allowance for Corporate Equity on Location Attractiveness

The discourse on sophisticated and modern tax systems is generally accompanied by a variety of challenges which are not only based on traditional tax law principles but also on objectives and ideals well-established in economics. Based on a long-term research commitment, the postulate of decision neutrality has brought forward efficiency-enhancing approaches such as the Allowance for Corporate Equity (ACE). The intended guarantee of a decision neutral corporate taxation system implies the prevention of any means of taxation distorting an efficient allocation of goods and is therefore connected with advantages in a decision theory context. So far, the impact of such an approach on the international competition of tax systems are largely unexplored and therefore object of Mr. Busch`s dissertation project. The aim is to analyse the effects of an interest-adjusted profit tax on the location attractiveness of countries, which seems inevitable due to increasing international competition. In the case of Liechtenstein, the ACE-concept was implemented into the tax system in the form of a Notional Interest Deduction. Therefore the tax system of the Principality of Liechtenstein shall form the basis for the intended scientific analysis.