Exemption or Taxation for Profits of Non-Profits? An Answer from a Model Incorporating Managerial Discretion

Bruno Bises

Public Choice, 2000, vol. 104, issue 1, 19-39

Abstract: Many non-profit organizations engage in bothcharitable and purely commercial activities, whereprofits from the latter are used to finance theformer. Should business income be tax-exempted becauseof its cross-subsidization function? The effects ofexemption on the product mix are analysed, using amodel incorporating managerial discretion – acrucially different assumption from that of thecurrent literature. Under given assumptions,tax-exemption of commercial income emerges as a lessefficient means of supporting the charitable productthan alternative Government measures, such as anoutput subsidy. Copyright Kluwer Academic Publishers 2000

Date: 2000
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DOI: 10.1023/A:1005036514854

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