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Capital taxation and imperfect competition: ACE vs. CBIT

Kurt Brekke (), Armando Garcia Pires (), Dirk Schindler () and Guttorm Schjelderup ()

Journal of Public Economics, 2017, vol. 147, issue C, 1-15

Abstract: This paper compares the Comprehensive Business Income Tax (CBIT) and the Allowance for Corporate Equity tax (ACE) under imperfect competition using an oligopoly Salop model and a monopolistic competition model. A key insight is that the effect of a switch to either tax system depends on technology and the intensity of competition. Both tax systems are distortionary when entry is endogenous. Using the Salop model, we show that ACE (CBIT) tends to improve welfare in decreasing returns (increasing returns) to scale industries, whereas the two regimes are welfare neutral in constant returns to scale industries.

Keywords: Optimal corporate taxation; Corporate tax reform; Imperfect competition; ACE; CBIT (search for similar items in EconPapers)
JEL-codes: D43 H25 (search for similar items in EconPapers)
Date: 2017
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Related works:
Working Paper: Capital taxation and imperfect competition: ACE vs. CBIT (2015) Downloads
Working Paper: Capital Taxation and Imperfect Competition: ACE vs. CBIT (2014) Downloads
Working Paper: Capital Taxation and Imperfect Competition: ACE vs. CBIT (2014) Downloads
Working Paper: Capital Taxation and Imperfect Competition: ACE vs. CBIT (2014) Downloads
Working Paper: Capital Taxation and Imperfect Competition: ACE vs. CBIT (2014) Downloads
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