Why is there corporate taxation? The role of limited liability revisited.

Becker, Johannes and Fuest, Clemens (2007) Why is there corporate taxation? The role of limited liability revisited. Journal of Economics, 92 (1). pp. 1-10.

Abstract

Most economists reject the idea that corporate taxation should be interpreted as a price for the privilege of limited liability. In this paper, we reconsider this idea and show that limited liability can lead to over investment if information is incomplete. In this setting, introducing an additional tax on limited liability contracts is welfare-enhancing. Our model thus offers an explanation for the nexus between double taxation and limited liability observed in many existing tax systems.

Item Type: Article
Keywords: corporate taxation, limited liability
Subject(s): Taxation
Centre: Oxford University Centre for Business Taxation
Date Deposited: 29 May 2012 14:04
Last Modified: 23 Oct 2015 14:07
URI: http://eureka.sbs.ox.ac.uk/id/eprint/3464

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