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Abstract
We provide a new explanation why effective tax rates are smaller for larger firms even in the absence of common channels like profit shifting and lobbying. This result emerges in a heterogeneous firms model with endogenous mark-ups. Our framework features imperfect tax pass-through into prices and partial deductibility of production costs. Corporate taxes reduce mark-ups and hence pre-tax profits, especially for high cost firms. As production costs are only partially deductible, high cost producers are affected most by taxes. We further show that shocks which affect mark-ups through competition, like globalization, reinforce the heterogeneity in effective tax rates across firms.
| Dokumententyp: | Paper |
|---|---|
| Keywords: | Heterogeneous firms; Corporate taxation; Effective tax rate; Linear demand; Endogenous mark-ups |
| Fakultät: | Volkswirtschaft > Munich Discussion Papers in Economics |
| Themengebiete: | 300 Sozialwissenschaften > 330 Wirtschaft |
| JEL Classification: | H25, F12, L11 |
| URN: | urn:nbn:de:bvb:19-epub-49717-5 |
| Sprache: | Englisch |
| Dokumenten ID: | 49717 |
| Datum der Veröffentlichung auf Open Access LMU: | 04. Jun. 2018, 10:00 |
| Letzte Änderungen: | 08. Nov. 2020, 11:19 |
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