The Costs of Corporate Tax Complexity

Eric Zwick

American Economic Journal: Economic Policy, 2021, vol. 13, issue 2, 467-500

Abstract: Does tax code complexity alter corporate behavior? We investigate this question by studying the decision to claim refunds for tax losses. In a sample of 1.2 million observations from the population of corporate tax returns, only 37 percent of eligible firms claim their refund. A simple cost-benefit analysis of the tax loss choice cannot explain low take-up, motivating an exploration of how complexity alters this calculation. Research designs exploiting tax preparer switches, deaths, and relocations show that sophisticated preparers increase claim rates for small firms. Imperfect take-up has implications for measuring marginal tax rates and for the design of fiscal policy.

JEL-codes: D22 D61 E62 H25 K34 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (25)

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DOI: 10.1257/pol.20180406

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