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

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  • Bruno Bises

Abstract

Many non-profit organizations engage in bothcharitable and purely commercial activities, whereprofits from the latter are used to finance theformer. Should business income be tax-exempted becauseof its cross-subsidization function? The effects ofexemption on the product mix are analysed, using amodel incorporating managerial discretion – acrucially different assumption from that of thecurrent literature. Under given assumptions,tax-exemption of commercial income emerges as a lessefficient means of supporting the charitable productthan alternative Government measures, such as anoutput subsidy. Copyright Kluwer Academic Publishers 2000

Suggested Citation

  • Bruno Bises, 2000. "Exemption or Taxation for Profits of Non-Profits? An Answer from a Model Incorporating Managerial Discretion," Public Choice, Springer, vol. 104(1), pages 19-39, July.
    • Handle: RePEc:kap:pubcho:v:104:y:2000:i:1:p:19-39
    DOI: 10.1023/A:1005036514854
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    References listed on IDEAS

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    Cited by:

    1. 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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