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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