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Exemption or Taxation for Profits of Non-profits? An Answer from a Model Incorporating Managerial Discretion

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  • Bises, Bruno

Abstract

Many non-profit organizations engage in both charitable and purely commercial activities, where profits from the latter are used to finance the former. Should business income be tax-exempted because of its cross-subsidization function? The effects of exemption on the product mix are analysed, using a model incorporating managerial discretion--a crucially different assumption from that of the current literature. Under given assumptions, tax-exemption of commercial income emerges as a less efficient means of supporting the charitable product than alternative Government measures, such as an output subsidy. Copyright 2000 by Kluwer Academic Publishers

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  • Bises, Bruno, 2000. "Exemption or Taxation for Profits of Non-profits? An Answer from a Model Incorporating Managerial Discretion," Public Choice, Springer, vol. 104(1-2), pages 19-39, July.
    • Handle: RePEc:kap:pubcho:v:104:y:2000:i:1-2:p:19-39
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    Cited by:

    1. Antonelli, Maria Alessandra, 2003. "Managerial discretion, incentives and governance rules for non-profit organizations," MPRA Paper 18849, University Library of Munich, Germany.
    2. Marianne F. Johnson, 2003. "Differential Taxation of for-Profit and Nonprofit Firms: A Computational General Equilibrium Approach," Public Finance Review, , vol. 31(6), pages 623-647, November.

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