The Costs of Corporate Tax Complexity

Eric Zwick

No 24382, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Does tax code complexity alter corporate behavior? This paper investigates this question by focusing on the decision to claim refunds for tax losses. In a sample of 1.2M observations from the population of corporate tax returns, only 37% of eligible firms claim their refund. A simple cost-benefit analysis of the tax loss choice cannot explain low take-up, which motivates an investigation of how tax complexity alters this calculation. A research design exploiting tax preparer switches, deaths, and relocations shows that sophisticated preparers increase the claiming behavior of small and mid-market firms. Tax complexity decreases take-up among large firms through interactions of refund claims with other tax code provisions and with the audit process.

JEL-codes: D22 D92 E62 H2 H25 H3 (search for similar items in EconPapers)
Date: 2018-03
New Economics Papers: this item is included in nep-acc, nep-law, nep-mac, nep-pbe and nep-pub
Note: CF ME PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Published as Eric Zwick, 2021. "The Costs of Corporate Tax Complexity," American Economic Journal: Economic Policy, vol 13(2), pages 467-500.

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