Arbeitspapier
Why Is the Corporate Tax Rate Lower than the Personal Tax Rate?
In many OECD countries, statutory corporate tax rates are lower than personal income tax rates. The present paper argues that this tax rate differentiation is an optimal tax policy if there are problems of asymmetric information between investors and firms in the capital market. The reduction of the corporate tax rate below the personale tax rate encourages equity financing and thus mitigates the excessive use of debt financing induced by asymmetric information. Our main theoretical result stands in marked contrast to the traditional view of corporate taxation and corporate finance theory, according to which there is a tax disadvantage to equity financing. More recent empirical evidence on this issue, however, is in line with our result.
- Language
-
Englisch
- Bibliographic citation
-
Series: EPRU Working Paper Series ; No. 2000-17
- Classification
-
Wirtschaft
- Event
-
Geistige Schöpfung
- (who)
-
Fuest, Clemens
Huber, Bernd
Nielsen, Søren Bo
- Event
-
Veröffentlichung
- (who)
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University of Copenhagen, Economic Policy Research Unit (EPRU)
- (where)
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Copenhagen
- (when)
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2000
- Handle
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Fuest, Clemens
- Huber, Bernd
- Nielsen, Søren Bo
- University of Copenhagen, Economic Policy Research Unit (EPRU)
Time of origin
- 2000
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