Author(s)

Wolfgang Eggert^1,2,3, Sebastian Heitzmann¹

¹University of Freiburg, Freiburg, Germany.
²Ifo Institute for Economic Research, University of Munich, Munich, Germany.
³Norwegian Center for Taxation (NoCeT), NHH, Bergen, Norway.

Corporate income tax systems around the world typically favor debt over equity in the tax base definition. The resulting distortions on financing and investment decisions of corporations are well documented in the existing literature. In this paper, we focus on the ACE proposal by the Mirrlees Review [1]. It is shown that an ACE, which mitigates the unequal treatment of returns to owned and borrowed capital, fosters innovation by financing startups.

Allowance for Corporate Equity, Corporate Income Tax Systems, Entrepre-neurship, Finance, Public Policy

Eggert, W. and Heitzmann, S. (2017) Corporate Deductibility Provisions and Financial Constraints of Innovative Entrepreneurs. Theoretical Economics Letters, 7, 1602-1606. doi: 10.4236/tel.2017.76108.