How low business tax rates attract MNE activity: Municipality-level evidence from Germany

Becker, Sascha O.; Egger, Peter; Merlo, Valeria

doi:10.1016/j.jpubeco.2012.05.006

Cited by 67 publications

(43 citation statements)

References 33 publications

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“…de Mooij and Ederveen (2003) and Devereux (2007); for evidence on investment distortions of the German local business tax, see Becker, Egger, and Merlo (2008)). This suggests that OLS estimates are biased downwards and the true effect of agglomeration economies on the corporate tax rate choice is underestimated in OLS frameworks.…”

Section: Empirical Methodologymentioning

confidence: 99%

Do governments tax agglomeration rents?

Koh¹,

Riedel

2013

Journal of Urban Economics

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Using the German local business tax as a testing ground, we empirically investigate the impact of firm agglomeration on municipal tax setting behavior. The analysis exploits a rich data source on the population of German firms to construct detailed measures for the communities' agglomeration characteristics. The findings indicate that urbanization and localization economies exert a positive impact on the jurisdictional tax rate choice which confirms predictions of the theoretical New Economic Geography (NEG) literature. Further analysis suggests a qualification of the NEG argument by showing that a municipality's potential to tax agglomeration rents depends on its firm and industry agglomeration relative to neighboring communities. To account for potential endogeneity problems, our analysis exploits long-lagged population and infrastructure variables as instruments for the agglomeration measures.JEL Codes: H73, R12

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Section: Empirical Methodologymentioning

confidence: 99%

Do governments tax agglomeration rents?

Koh¹,

Riedel

2013

Journal of Urban Economics

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“…2 While not specifically focusing on revenue and base effects, Becker et al (2012) find for Germany that business tax rates and multinational enterprise activity are negatively correlated. For property taxes, Bradbury et al (2001) analyze the effect of property tax limits in the US on house prices.…”

Section: Introductionmentioning

confidence: 99%

The Revenue and Base Effects of Local Tax Hikes: Evidence from a Quasi-Experiment

Baskaran

2015

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may THE REVENUE AND BASE EFFECT OF LOCAL TAX HIKES: EVIDENCE FROM A QUASI-EXPERIMENT Thushyanthan BaskaranThe revenue and base effects of local tax hikes:Evidence from a quasi-experimentThushyanthan Baskaran * thushyanthan.baskaran@gmail.com AbstractThis paper studies the revenue and base effects of local property and business tax hikes using a natural experiment in the German state of North Rhine-Westphalia (NRW). Due to a reform of the local equalization scheme in 2003, a set of municipalities in NRW increased their local tax rates by one to two percentage points while the remaining municipalities kept their rates constant. Using this variation across municipalities and over time to implement a difference-in-differences design covering the period 1995-2010, I find that property tax hikes have a revenue elasticity of unity and no adverse base effects. Business tax hikes have no discernible base effects but also no statistically significant effect on revenues. Furthermore, the results suggest that the tax hikes have no effect on broader economic outcomes such as local employment, firms' wage bill, and property prices. Overall, increasing local tax rates by one to two percentage points does not seem to affect the local economy adversely.

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“…Research on the effects of municipal fiscal policy is scant. Notable exceptions include Becker, Egger and Merlo (2012), Gabe and Bell (2004), and Jofre-Monseny and Solé-Ollé (2010). There are several reasons to believe that the findings of the research at the federal level are not transferable as such to the local level.…”

Section: Introductionmentioning

confidence: 99%

Effects of local fiscal policy on firm profitability

Schoenmaker

Cauwenberge

Bauwhede

2014

The Service Industries Journal

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Since decades, scholars and policy makers have been interested in how fiscal policy influences entrepreneurship. Until now, research has focused on fiscal policy at the federal or regional level and used macro-economic outcome measures. Considerably less attention was given to how municipal governments can influence economic outcomes at the micro level. The present study examines the effect of municipal taxes, spending and tax compliance costs on firm profitability within the Flemish hospitality industry. This is a unique research setting, since Flemish municipalities have far-ranging fiscal autonomy which has resulted in a proliferation of local taxes, many of which are specific to the hospitality industry. The findings reveal that local taxes have a negative impact on firm profitability, while aggregate public spending has a positive influence. While both influences are economically significant, the tax effect exceeds the public spending impact. Finally, we find no impact of compliance costs from local taxes.

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How low business tax rates attract MNE activity: Municipality-level evidence from Germany

Cited by 67 publications

References 33 publications

Do governments tax agglomeration rents?

Do governments tax agglomeration rents?

The Revenue and Base Effects of Local Tax Hikes: Evidence from a Quasi-Experiment

Effects of local fiscal policy on firm profitability

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