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Local neutrality of Corporate Tax systems

Pablo Gutiérrez C. (), Ramon Lopez () and Eugenio Figueroa

Working Papers from University of Chile, Department of Economics

Abstract: This paper shows one important result, namely, that corporate tax systems that allow at least for two sources of investment tax deductions (e.g., accelerated arbitrary investment depreciation and deductibility of part of interest payments on the firm`s debt) can be, under certain plausible conditions, locally neutral. That is, they allow for the existence of at least one positive corporate tax rate that renders the user cost of capital equal to the undistorted (without taxes) level of this cost.

Pages: 24 pages
Date: 2014-10
New Economics Papers: this item is included in nep-acc, nep-pbe and nep-pub
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