Arbeitspapier
Corporate taxation and corporate governance
The effects of corporate taxation on firm behavior have been extensively discussed in the neoclassical model of firm behavior which abstracts from agency problems. As emphasized by the corporate governance literature, corporate investment behavior is however crucially influenced by diverging interests between shareholders and managers. We set up an agency model and analyze the crucial issue in corporate taxation of whether the normal return on investment should be exempted from taxation. The findings suggest that the divergence of interests may be intensified and welfare reduced if the corporate tax system exempts the normal return on investment from taxation. The optimal system may well use the full return on investment as a tax base. Hence, tax systems such as an Allowance for Corporate Equity (ACE) or a Cash-flow tax do not have the familiar efficiency-enhancing effects in the presence of corporate agency problems.
- Language
-
Englisch
- Bibliographic citation
-
Series: CESifo Working Paper ; No. 2881
- Classification
-
Wirtschaft
Business Taxes and Subsidies including sales and value-added (VAT)
Firm Behavior: Theory
- Subject
-
corporate taxation
corporate governance
allowance for corporate equity
comprehensive business income tax
cash flow tax
- Event
-
Geistige Schöpfung
- (who)
-
Köthenbürger, Marko
Stimmelmayr, Michael
- Event
-
Veröffentlichung
- (who)
-
Center for Economic Studies and ifo Institute (CESifo)
- (where)
-
Munich
- (when)
-
2009
- Handle
- Last update
-
10.03.2025, 11:45 AM CET
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
- Köthenbürger, Marko
- Stimmelmayr, Michael
- Center for Economic Studies and ifo Institute (CESifo)
Time of origin
- 2009
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