Presumptive business taxation and the choice of organizational form

Bergner, Sören ; Heckemeyer, Jost H.

Document Type: Conference presentation
Year of publication: 2013
Conference title: 15. ZEW Summer Workshop 2013
Location of the conference venue: Mannheim
Date of the conference: 02.-05.07.2013
Related URLs:
Publication language: English
Institution: Business School > ABWL u. Betriebswirtschaftliche Steuerlehre II (Spengel 2006-)
Subject: 330 Economics
Keywords (English): Business taxes , tax accounting , organizational form choice , compliance costs
Abstract: The aim of this paper is to assess the impact of presumptive business taxation on the choice of organizational form. Presumptions are simplified methods to determine the tax base for small non-corporate firms and represent reliefs from accounting for tax. Our findings suggest that discriminatory presumptive business taxation indeed affects the choice of organizational form and that the effects strongly depend on the design of presumptions. The more extensive the simplifications in the determination of the tax base and the less restrictive the eligibility criteria of the presumption, the smaller is the corporate share of business in the economy. Quantitatively, we find that a presumptive tax regime, which in terms of scope of eligibility and degree of departure from book-keeping obligations corresponds to the average presumption in Europe, is associated with a decrease in the corporate employment share by 3.6 percentage points and in the corporate firm share by 1.2 percentage points. However, the attractiveness of departures from book-keeping obligations decreases in the simplicity of the “ordinary” tax regime. Besides compliance costs, potential tax savings seem to play a role as well.

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