The Impact of Taxes on Competition for CEOs” (EAR)

This paper, written by Peter Krenn (DART) and recently published in the European Accounting Review (EAR), contributes to the question of how taxation of corporate profits and wages affects competition among firms for highly skilled human resources such as CEOs. Using an LEN model, he Shows that wage taxes can have a substantial impact on the outcome of such a competition if marginal tax rates are different, as in an international labor market. Furthermore, he shows that increasing the wage tax rate unilaterally can have an ambiguous effect on observed gross compensation levels. However, in a local Labor market for CEOs, observed gross fixed salaries should decline in the wage tax rate. Tax effects in a market for

CEOs is a particularly interesting topic because many countries around the world use tax incentives to facilitate

immigration of highly skilled human resources. Moreover, recent developments in compensation practices of toplevel

managers have opened a public debate about the need to regulate compensation practices.