While rent taxation in some theories is neutral, and the tax rate could not be set to one hundred percent to minimize the need for distortionary taxes, this does not occur in practice. An important reason for this is the transfer incentives that would result. Monitoring to prevent transfer pricing is difficult, in particular on the cost side. For dorporations, monitoring implies that both transfer pricing and real transfers will be costly. Assuming a convex cost function for cost transfers, it is shown that the optimal tax system combines a cash flow tax with a royalty, i.e., a tax on gross revenues.
Download Info
To our knowledge, this item is not available for
download. To find whether it is available, there are three
options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page
whether it is in fact available.
3. Perform a search for a similarly titled item that would be
available.
Publisher Info
Paper provided by Oslo University, Department of Economics in its series Memorandum with number
20/1998.