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Production efficiency and profit taxation

Stephane Gauthier and Guy Laroque

No W18/13, IFS Working Papers from Institute for Fiscal Studies

Abstract: Consider a simple general equilibrium economy with one representative consumer, a single competitive ?rm and the government. Suppose that the government has to ?nance public expenditures using linear consumption taxes and/or a lump-sum tax on pro?ts redistributed to the consumer. We show that, if the tax rate on pro?ts cannot exceed 100 percent, one cannot improve upon the second-best optimum of an economy with constant returns to scale by using a less e?cient pro?t-generating decreasing returns to scale technology.

Keywords: optimal taxation; taxation of pro?ts; production e?ciency (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pbe
Date: 2018-04-10
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Related works:
Journal Article: Production efficiency and profit taxation (2019) Downloads
Working Paper: Production efficiency and profit taxation (2019)
Working Paper: Production Efficiency and Profit Taxation (2017) Downloads
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