Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/90791
Authors: 
Halvorsen, H.E.
Lund, D.
Year of Publication: 
1998
Series/Report no.: 
Memorandum, Department of Economics, University of Oslo 20/1998
Abstract: 
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.
Subjects: 
rent
taxation
pricing
income
JEL: 
H21
H22
Document Type: 
Working Paper

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