American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
The Costs of Corporate Tax Complexity
American Economic Journal: Economic Policy
vol. 13,
no. 2, May 2021
(pp. 467–500)
Abstract
Does tax code complexity alter corporate behavior? We investigate this question by studying the decision to claim refunds for tax losses. In a sample of 1.2 million observations from the population of corporate tax returns, only 37 percent of eligible firms claim their refund. A simple cost-benefit analysis of the tax loss choice cannot explain low take-up, motivating an exploration of how complexity alters this calculation. Research designs exploiting tax preparer switches, deaths, and relocations show that sophisticated preparers increase claim rates for small firms. Imperfect take-up has implications for measuring marginal tax rates and for the design of fiscal policy.Citation
Zwick, Eric. 2021. "The Costs of Corporate Tax Complexity." American Economic Journal: Economic Policy, 13 (2): 467–500. DOI: 10.1257/pol.20180406Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- D61 Allocative Efficiency; Cost-Benefit Analysis
- E62 Fiscal Policy
- H25 Business Taxes and Subsidies including sales and value-added (VAT)
- K34 Tax Law
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