Split-rate tax system

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Split-rate tax system

A tax system that taxes retained earnings at a higher rate than earnings that are distributed as dividends.

Split-Rate Tax System

A tax system that taxes retained earnings (profits a company keeps) at a higher rate than the profits it pays out as dividends. This can encourage companies to have a lower plowback ratio and, instead, pay higher dividends.
References in periodicals archive ?
As a conclusion, the implementation of the split rate tax system resulted with lower tax burden on investments financed with retentions (since retained profits are exempt from taxation) and higher burden on investments covered with equity issues (since distributions of profits are taxed).
This is mainly due to lowering of the CIT rates in the relevant period, and exceptionally due to implementation of the split rate tax system.