Nordic Dual Income Taxation of Entrepreneurs

32 Pages Posted: 13 Jan 2006

See all articles by Vesa Kanniainen

Vesa Kanniainen

University of Helsinki - Department of Political and Economic Studies; CESifo (Center for Economic Studies and Ifo Institute)

Seppo Juhani Kari

Government of the Republic of Finland - VATT Institute for Economic Research

Jouko Ylä-Liedenpohja

Tampere University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Date Written: December 2005

Abstract

The paper shows how entrepreneurial taxes interact with the career choice of individuals, the quality of entrepreneurs, and their effort and investments. It is particularly relevant to differentiate the early effects on start-up enterprises with substantial uncertainty from the tax effects on mature firms where the uncertainty is resolved. That is why the neutrality results of dividend taxation from mature company theory do not carry over to start-up enterprises. The Nordic dual model encourages (discourages) the establishment of new enterprises by entrepreneurs who anticipate high (low) profitability.

Keywords: dual income taxation, enterprise taxes

JEL Classification: H25

Suggested Citation

Kanniainen, Vesa and Kari, Seppo Juhani and Ylä-Liedenpohja, Jouko, Nordic Dual Income Taxation of Entrepreneurs (December 2005). CESifo Working Paper Series No. 1623, Available at SSRN: https://ssrn.com/abstract=875579

Vesa Kanniainen (Contact Author)

University of Helsinki - Department of Political and Economic Studies ( email )

P.O. Box 54
FIN-00014 Helsinki
Finland
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CESifo (Center for Economic Studies and Ifo Institute)

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HOME PAGE: http://www.CESifo.de

Seppo Juhani Kari

Government of the Republic of Finland - VATT Institute for Economic Research ( email )

Arkadiankatu 7
P.O Box 1279
Helsinki, FIN-00531
Finland

Jouko Ylä-Liedenpohja

Tampere University - Department of Economics ( email )

P.O. Box 607
Tampere, FIN-33101
Finland

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

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