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Optimal Corporation Tax: An I.O. Approach

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  • Luca Colombo
  • Paola Labrecciosa
  • Patrick Paul Walsh

Abstract

Theory predicts that optimal effective corporation tax rates will be negatively related to industry specific sunk costs, and hence industry concentration. Governments should tax industries with monopolistic power softly. Evidence suggests that this Schumpeterian (1942) principle of corporate taxation was used widely across industries in France, Italy and the UK in the 1990s.
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  • Luca Colombo & Paola Labrecciosa & Patrick Paul Walsh, 2005. "Optimal Corporation Tax: An I.O. Approach," The Institute for International Integration Studies Discussion Paper Series iiisdp97, IIIS.
    • Handle: RePEc:iis:dispap:iiisdp97
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    Keywords

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    JEL classification:

    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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