Optimal Corporation Tax: An I.O. Approach
22 Pages Posted: 11 Jul 2008
Date Written: February 2006
Theory predicts that optimal effective corporation tax rates will be negatively related to industry specific sunk costs, and hence industry concentration. Governments should tax industries with monopolistic power softly. Evidence suggests that this Schumpeterian (1942) principle of corporate taxation was used widely across industries in France, Italy and the UK in the 1990s.
JEL Classification: H25, and, L52
Suggested Citation: Suggested Citation