Nassios, Jason ORCID: https://orcid.org/0000-0002-0250-2608 and Dixon, Janine ORCID: https://orcid.org/0000-0002-9514-5450 (2025) Measuring the Deadweight Costs of Corporate Income Tax Thresholds under Monopolistic Competition. Working Paper. Centre of Policy Studies Working Paper Series.

Abstract

This paper extends the model of Dixon et al. (2004) by introducing taxes on non-labour income with thresholds into a simple firm-size framework. The modification allows analysis of how threshold-based corporate tax provisions distort firms' output decisions and create deadweight losses. By linking firm counts and average costs to the presence of a tax threshold, the model quantifies the efficiency costs associated with discontinuities in the effective tax schedule. The framework provides a transparent way to assess how threshold policies influence aggregate efficiency without relying on a full general equilibrium setting.

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