The Costs of Corporate Tax Complexity
Does tax code complexity alter corporate behavior? This paper investigates this question by focusing on the decision to claim refunds for tax losses. In a sample of 1.2M observations from the population of corporate tax returns, only 37% of eligible firms claim their refund. A simple cost-benefit analysis of the tax loss choice cannot explain low take-up, which motivates an investigation of how tax complexity alters this calculation. A research design exploiting tax preparer switches, deaths, and relocations shows that sophisticated preparers increase the claiming behavior of small and mid-market firms. Tax complexity decreases take-up among large firms through interactions of refund claims with other tax code provisions and with the audit process.
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Copy CitationEric Zwick, "The Costs of Corporate Tax Complexity," NBER Working Paper 24382 (2018), https://doi.org/10.3386/w24382.
Published Versions
Eric Zwick, 2021. "The Costs of Corporate Tax Complexity," American Economic Journal: Economic Policy, vol 13(2), pages 467-500.