The course will use economic theory to investigate how taxes affect the decisions of investors, firms, employees, and consumers. We also investigate how taxation may distort or enhance economic efficiency. The latter relates in particular to taxes as an instrument to internalize external effects (e.g. pollution) and thereby promote a sustainable approach to the use of public resources. Moreover, we study how the burden of taxation is shared between producers and consumers in the economy.
The topics covered in this course will be closely related to pressing policy questions that are discussed by tax practitioners, managers, politicians, special-interest groups and policy consultants. For example, how are international companies taxed? How do they respond to tax policy? An interesting policy example is tax reductions for corporate income from intangible assets such as patents. The rationale is that lower tax rates on the output of research activity will increase corporate investment in R&D and generate positive externalities within the economy. Is this a useful policy to foster innovative activity? Under what circumstances would such policies be welfare-improving in small open economies such as Norway?