Capital Taxation and Rent Seeking

Nikolay Arefiev () and Tatyana Baron

MPRA Paper from University Library of Munich, Germany

Abstract: We find the optimal capital income tax rate in an imperfectly competitive economy, where some part of recourses is devoted to rent-seeking activity. Optimal tax offsets the difference between marginal social and marginal private return to capital, which is a result of rent seeking, and the difference between the before tax interest rate and the marginal productivity of capital, which arises from imperfect competition. Optimal capital income tax rate depends neither on other tax rates nor on overall tax burden. Numerically it is close to zero.

Keywords: Capital taxation; rent seeking; imperfect competition (search for similar items in EconPapers)
JEL-codes: E62 H21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac, nep-pbe and nep-pub
Date: 2006-12-11
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Persistent link: http://EconPapers.repec.org/RePEc:pra:mprapa:9988

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