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The Relationship between Privatization and Corporate Taxation Policies

Yi Liu, Toshihiro Matsumura () and Chenhang Zeng

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigate how the corporate (profit) tax rate affects the optimal degree of privatization in a mixed duopoly, while introducing a minimum profit constraint for the private firm. Firstly, we show that the profit tax rate directly affects the behavior of the partially privatized firm and affects the behavior of the private firm through strategic interaction. In addition, we investigate the relationship between the optimal privatization policy and corporate tax policy, and find that the optimal degree of privatization increases with the corporate tax rate, regardless of whether the constraint is binding. The optimal degree of privatization decreases (increases) with the foreign ownership share in the private firm if the constraint is ineffective (effective). This result suggests that a minimum profit constraint can be crucial in the optimal privatization policy.

Keywords: profit tax; minimum profit constraint; foreign ownership; optimal public ownership (search for similar items in EconPapers)
JEL-codes: D43 H44 L33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc, nep-pbe and nep-pub
Date: 2018-08, Revised 2018-10
References: View references in EconPapers View complete reference list from CitEc
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