Rodrigo Cerda () (Instituto de Economía. Pontificia Universidad Católica de Chile.) Diego Saravia () (Instituto de Economía. Pontificia Universidad Católica de Chile.)
Additional information is available for the following
registered author(s):
We study capital income taxation in a context where firms differ in productivity and, they decide whether to produce or not after comparing after-tax profits vis-`a-vis an outside alternative option. In our setup, the government taxes capital income, firms’ profits and labor income but does not tax the alternative outside option. In this context, taxation distorts the firms’ decisions to participate in production (extensive margin) as well as the investment decisions once they decide to produce (intensive margin). The key feature for the capital income tax being different from zero is the distortion in the extensive margin. When all firms choose to produce there is no such distortion and not taxing capital income is optimal. However, when some firms choose not to produce the optimal income tax rate is different from zero. The magnitude and sign of this tax depends on the sensibility of capital and labor demand to a change in the interest rate.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Instituto de Economía. Pontificia Universidad Católica de Chile. in its series Documentos de Trabajo with number
316.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.: