Document Type

Article

Publication Date

12-2025

Abstract

This article suggests a tax-law-based approach to curtailing the harm that might be posed by algorithmic tacit collusion in response to the inability of antitrust laws to offer viable solutions. It suggests that progressive corporate tax rates, including higher tax rates, could alleviate the harm caused by algorithmic tacit collusion (“alleviate” because our tax-based approach would not entirely solve the problem of pricing algorithms’ ability to imitate prices of other algorithms without any form of agreement or communication). As we show, progressive and higher tax rates can lead to a redistribution of wealth and ultimately mitigate algorithmic supracompetitive pricing harm. Simply put, a higher tax rate would target the excess profits that firms derive from algorithmic tacit collusion.

The article follows the argument we previously presented,13 and also the line of argument presented in publications by other tax scholars, that higher tax rates can be used to mitigate the harms caused by rent-seeking behavior. However, it is imperative to note that previous articles chiefly dealt with the question of how tax law can be used to curb monopolistic misconduct (especially by incumbent firms in their relevant markets), while this one shows how corporate tax can be used to mitigate the harm caused by tacit collusion, commonly deemed lawful under antitrust laws, despite the unquestionable harm that it can cause to competition and consumers.

Comments

Reprinted with the permission of Tax Analysts

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