8 Pages Posted: 15 Oct 2004 Last revised: 31 Dec 2013
Date Written: August 29, 2004
The paper analyzes the case of tax planning that tilts the government gain/loss ratio below one, and provides a proof of a certain type of inefficiency caused by tax planning. As the paper shows, the tax imbalance distorts the firm's output level, providing the firm with an incentive to produce more than the social optimum. This inefficiency is different from the general inefficiency entailed by income taxation, captured by the conventional notion of excess burden. The paper also examines the determinants of this type of distortion and offers some policy implications.
Keywords: tax planning, imbalance, asymmetry, production, inefficiency
JEL Classification: H20, H26, H32, E23, D61, D20
Suggested Citation: Suggested Citation
Margalioth, Yoram Y. and Sulganik, Eyal and Eldor, Rafi (Rafael) and Edrey, Yoseph M., A Cost of Tax Planning (August 29, 2004). International Review of Law and Economics, Vol. 5, 2009. Available at SSRN: https://ssrn.com/abstract=593243 or http://dx.doi.org/10.2139/ssrn.593243