Advertising, Profits, and Corporate Taxes

摘要: SOME of the highest profit rates appear in industries that advertise heavily. These high earnings have been attributed to barriers entry associated with product differentiation [2, 6]. A possible alternative explanation is treatment long-lived advertising as current expenses leads firms invest heavily such intangibles overstate their return since equity understated [1, p. 153; 15, 167]. The same practice may result understatement dollar profits so they pay less tax than other whose investments are all tangible. purpose this paper work out more precisely overor under-statement and rate involved "expensing" evaluate mis-statement practice.' Part I develops conceptually conditions under which under-statements can be expected. II recomputes for a variety industries, estimates avoidance results, examines relationship between recomputed advertising. III contains proposal policy change.