How do corporate tax bases change when corporate tax rates change? With implications for the tax rate elasticity of corporate tax revenues

Abstract

We construct a new database of extensive margin changes to multiple aspects of corporate tax bases for OECD countries between 1980 and 2004. We use our data to systematically document the tendency of countries to implement policies that both lower the corporate tax rate and broaden the corporate tax base. This correlation informs our interpretation of previous estimates of the relationship between corporate tax rates and corporate tax revenues, which typically do not include comprehensive measures of the corporate tax base definition. We then re-examine the relationship between corporate tax rates and corporate tax revenues. We find that accounting for unobserved heterogeneity attenuates the relationship between corporate tax rates and corporate tax revenues, and increases the implied revenue-maximizing tax rate. Controlling for our new tax base measures does not substantively impact the magnitude of this relationship.

Rethinking the shadow economy in terms of happiness. Evidence for the European Union Member States

“…To get a high robustness results, the fiscal burden is estimated by three variables: total tax rate (as % of commercial profit), tax revenue (% of GDP) and the fiscal freedom index (provided by Heritage Foundation). Even if these results were surprising for us, they are similar to those of various author who used some similar estimators for tax burden (Friedman et al 2000;Dreher, Schneider 2006;Torgler, Schneider 2007;Kawano, Slemrod 2014). They also found out that tax burden is not correlated with shadow economy and their results were also confirmed by using various robustness checks test (various estimators for tax burden).…”

“…Moreover, in their study conducted in 55 countries over the period 1990 to 1999, Torgler and Schneider (2007) do not find a consistently statistically significant correlation between the fiscal burden and shadow economy. Kawano and Slemrod (2014) also find a weak relationship between corporate tax rates and corporate tax revenues at least on short-term, but do not exclude a stronger relationship on long-term.…”

“…Making a big survey on OECD countries between 1980 and 2004, Kawano and Slemrod (2014) also found that the relationship between corporate tax rates and corporate tax revenues is tenuous.…”

The Development of Corporate Tax Structures in the European Union from 1998 to 2015 Qualitative and Quantitative Analysis

“…As shareholder taxation is especially relevant for small and medium-sized enterprises that are also less mobile than multinational corporations, 12 there might be incentives for Member States to attract comparatively mobile multinational enterprises by means of low corporate income tax rates and to compensate associated revenue losses through an increased dividend taxation of shareholders. 13 The qualitative analysis is based on a comprehensive and hand-collected examination of the database of the International Bureau for Fiscal Documentation (IBFD), the IBFD's annual 8 See for instance Clausing (2007); Devereux (2007); Kawano/Slemrod (2016). 9 Despite a few exceptions, existing studies have predominantly only focused on depreciation rules.…”

“…17-19. As an exception, Kawano/Slemrod (2016) provide for a very detailed description of tax base definitions.…”