The Non-neutrality of Corporate Tax: An Entrepreneurial Perspective

Valerio Filoso

MPRA Paper from University Library of Munich, Germany

Abstract: While corporate taxation is a major issue in the debate over international finance, economic theory has no clear stance on who bears its burden. On balance, economists seem still more prone to accept that taxing profits does not affect corporations' outcomes. This paper makes three cases for non-neutrality. First, since corporate taxation is asymmetric between profit and loss, the tax rate may change the ranking of alternative investments. Secondly, the imperfect observability of the use of internal resources makes pure economic profits very difficult to detect. Thirdly, when the pervasive role of entrepreneurship is fully taken into account, corporate taxation appears clearly as a direct tax on market adjustments and as an indirect tax on wages.

Keywords: Corporate Taxation; Entrepreneurship; Tax Incidence; Austrian Economics (search for similar items in EconPapers)
JEL-codes: B25 H22 H25 L26 (search for similar items in EconPapers)
Date: 2007-07-20
New Economics Papers: this item is included in nep-acc, nep-bec, nep-ent and nep-pbe
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:4183

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