Corporation Tax Asymmetries and Cartel Unity
AbstractThis paper examines the impact of changing the extent to which tax losses are refunded to firms in a model of imperfect competition. It proposes a particular collusive equilibrium in a repeated oligopoly with homogeneous quantity-setting firms. The industry sustains tacit collusion by using credible and severe punishments of deviations. The analysis of the most collusive equilibrium with losses indicates that a tax policy which increases refunds reduces output, increases market price, and therefore strengthens tacit collusion. In addition, the policy increases government revenue. An increase in the corporation tax rate has similar effects. Copyright Kluwer Academic Publishers 2001
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Bibliographic InfoArticle provided by Springer in its journal International Tax and Public Finance.
Volume (Year): 8 (2001)
Issue (Month): 5 (November)
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Web page: http://www.springerlink.com/link.asp?id=102915
tax asymmetries; collusive equilibrium; losses; punishment;
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