Tax Neutrality: Illusion or Reality? The Case of Entrepreneurship

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Tax Neutrality: Illusion or Reality? The Case of Entrepreneurship

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Vesa Kanniainen ()
Paolo Panteghini ()

Additional information is available for the following registered author(s):

Paolo M. Panteghini

Abstract

This paper shows that taxes which are understood to be neutral with respect to the marginal investment decisions may be distortionary with respect to entrepreneurial decisions. In particular, we apply an intertemporal model to show that a comprehensive income tax is distortionary unless all kinds of income are subject to the same tax rate and a worker's option to become an entrepreneur is accounted for. Similarly, the harsh condition of a uniform tax rate is necessary but not sufficient under "new view" dividend tax, cash flow tax, and ACE tax, so that the occupational choice is not distorted. In any case, informational problems may arise and lead to distortive effects.

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Paper provided by CESifo GmbH in its series CESifo Working Paper Series with number CESifo Working Paper No. 2306.

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Date of creation: 2008
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Handle: RePEc:ces:ceswps:_2306

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Paper
- Vesa Kanniainen & Paolo M. Panteghini, 2008. "Tax Neutrality: Illusion or Reality? The Case of Entrepreneurship," Working Papers 0803, University of Brescia, Department of Economics. [Downloadable!]

Find related papers by JEL classification:
H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

References listed on IDEAS
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Other versions:
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Other versions:
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Other versions:
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Other versions:
- Vesa Kanniainen & Seppo Kari & Jouko Ylä-Liedenpohja, 2005. "Nordic Dual Income Taxation of Entrepreneurs," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
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Other versions:
- Simeon Djankov & Rafael La Porta & Florencio LopezdeSilanes & Andrei Shleifer, 2000. "The Regulation of Entry," NBER Working Papers 7892, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Other versions:
- Paolo Panteghini, 2005. "S-Based Taxation under Default Risk," Working Papers ubs0506, University of Brescia, Department of Economics. [Downloadable!]
- Paolo Panteghini, 2005. "S-Based Taxation under Default Risk," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
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Other versions:
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Paolo Panteghini, 2001. "On Corporate Tax Asymmetries and Neutrality," German Economic Review, Blackwell Publishing, vol. 2(3), pages 269-286, 08. [Downloadable!] (restricted)
Other versions:
- Panteghini, Paolo, 2000. "On Corporate Tax Asymmetries and Neutrality," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]

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