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Capital Taxation and Imperfect Competition: ACE vs. CBIT

Dirk Schindler (), Kurt Brekke (), Armando Garcia Pires () and Guttorm Schjelderup ()

Annual Conference 2014 (Hamburg): Evidence-based Economic Policy from Verein für Socialpolitik / German Economic Association

Abstract: This paper sets up an imperfect-competition model of a small open economy, and undertakes a welfare comparison of the Corporate Business Income Tax (CBIT) and the Allowance for Corporate Equity tax (ACE). A main result is that a small open economy should levy a positive source tax on capital in a market with free firm entry. Our analysis also shows that the well known neutrality property of the ACE tax is no longer true when firms are mobile and can enter the market. Which tax system is better from a welfare point of view, CBIT or ACE, is shown to depend on assumptions about production technology and entry.

JEL-codes: H25 D43 H32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pub
Date: 2014
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https://www.econstor.eu/bitstream/10419/100486/1/VfS_2014_pid_481.pdf (application/pdf)

Related works:
Journal Article: Capital taxation and imperfect competition: ACE vs. CBIT (2017) Downloads
Working Paper: Capital taxation and imperfect competition: ACE vs. CBIT (2015) Downloads
Working Paper: Capital Taxation and Imperfect Competition: ACE vs. CBIT (2014) Downloads
Working Paper: Capital Taxation and Imperfect Competition: ACE vs. CBIT (2014) Downloads
Working Paper: Capital Taxation and Imperfect Competition: ACE vs. CBIT (2014) Downloads
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