Tax Neutrality in Investment and Finance versus Tax Reform in a Competitive Economy

Dieter Schneider

Public Finance = Finances publiques, 1990, vol. 45, issue 3, 449-69

Abstract: The narrow modeling of tax neutrality until now and the width of violations of efficient allocations of capital by tax legislation are shown by presenting a taxonomy of tax neutrality for entrepreneurial planning. The alleged investment neutrality of cash-flow taxation might be no more than a fata morgana for any tax reform in competitive economies, if the assumptions and administrative problems are taken into account. The methodological consequence of the foregoing results is that models of tax neutrality do not inform about the direction of the path to be followed to achieve a taxation of firms that improves allocative efficiency.

Date: 1990
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Persistent link: https://EconPapers.repec.org/RePEc:pfi:pubfin:v:45:y:1990:i:3:p:449-69

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