Taxation and Incorporation

Christian Keuschnigg, Peter Egger and Hannes Winner

VfS Annual Conference 2011 (Frankfurt, Main): The Order of the World Economy - Lessons from the Crisis from Verein für Socialpolitik / German Economic Association

Abstract: This paper provides a theory of incorporation and taxation that emphasizes the role of the corporate legal form in facilitating access to external capital and the potential advantages of limited liability. Incorporation relaxes financing constraints and makes corporations larger than comparable non-corporate firms. For the same reason, a tax on corporations imposes a smaller first order welfare loss than a tax on non-corporate firms. We study the consequences of tax reform and compare the role of taxation with other institutional reforms.

Keywords: Incorporation; corporate tax; external capital; limited liability (search for similar items in EconPapers)
JEL-codes: G38 H25 K34 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc11:48729

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