THE extent of short-run shifting of the corporation income-tax burden remains an issue of considerable interest to many economists. It is of interest to policy-makers concerned with the consequences of taxing corporate income as well as to macroeconomic theorists concerned with the viability of the traditional theory of profit maximization.2 The recent econometric literature points to two polar conclusions. On the full shifting side, Krzyzaniak-Musgrave [13] estimated the degree of short-run shifting to be 134 per cent. On the zero shifting side, Goode [8] and Slitor [19] showed that the K-M shifting estimate could be substantially lowered below 100 per cent, while Cragg, Harberger, and Mieszkowski [3], and then Gordon [10], reported shifting estimates that were statistically indistinguishable from zero per cent. While the results are disparate, these studies have in common the methodology of specifying single equation models of corporate tax shifting in which the explanatory variables are taken, sometimes unrealistically, to be exogenous or predetermined. Although of great use as a first step, this approach, in precluding explicit econometric consideration of the interdependence of the many economic variables related to the tax shifting phenomenon, has inherent limitations. In this paper an alternative rate of return equation is specified and estimated in the light of being part of a larger system of economic relationships. A multi-equation model which explicitly specifies the jointly dependent nature of the corporate income-tax burden, the return to capital, the level of inventories and sales, the determination of labour input, the payments to labour, and the price level, among other key economic variables, is constructed. The model is seen to provide a set of instruments to be used in the estimation of the rate of return equation, which is estimated by two-stage least squares. In the first stage the set of instruments provided by the model,