Should continued family firms face lower taxes than other estates?

Arbeitspapier

Inheritance taxes may induce heirs to discontinue family firms. Because firm dissolution incurs transaction costs, a preferential tax treatment of transferred family businesses seems to be desirable from a macroeconomic viewpoint. The support of dynastic succession, however, entails also a cost on the economy if firm continuation by less able heirs prevents entry into entrepreneurship. Here, we investigate analytically and quantitatively the trade-off between transaction costs saved and creative destruction prevented. We find that a unique general equilibrium exists at which, depending on the institutional setup, low-ability heirs either abandon (Type 1) or continue (Type 2) a family business. A calibration of the model with German data suggests that preferential tax treatment of family firms has severe negative consequences on macroeconomic performance if it causes a threshold crossing from Type 1 to Type 2 equilibrium. It also reveals that the targeted persons, i.e. the entrepreneurs that are caused to continue a business, always lose relative to their status in an economy without continuation-friendly tax policy.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: CESifo Working Paper ; No. 2235

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Business Taxes and Subsidies including sales and value-added (VAT) ; Entrepreneurship ; Human Capital; Skills; Occupational Choice; Labor Productivity
• Thema: bequest taxation ; creative destruction ; entrepreneurship ; family firms ; preferential tax treatment ; Steuerbegünstigung ; Familienunternehmen ; Betriebsübergang ; Unternehmer ; Innovation ; Transaktionskosten ; Allgemeines Gleichgewicht ; Deutschland

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Grossmann, Volker ; Strulik, Holger
• Ereignis: Veröffentlichung
• (wer): Center for Economic Studies and ifo Institute (CESifo)
• (wo): Munich
• (wann): 2008

Weitere Informationen

• Handle: http://hdl.handle.net/10419/26280
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ