The latest German tax reform addresses the reduction of the corporate tax burden as well as the issue of tax shifting activities by multinationals. With the aid of ifoMOD, a dynamic computable general equilibrium model, we quantify the outcome of this reform. Our results show that the reform induces a significant decline in corporate sector investments since those firms suffer a cumulative double taxation. As a consequence, GDP decreases by 0.6% in the long-run and overall welfare declines by 0.7% in terms of GDP. The economic activity could, however, be enhanced, if one would abstract from taxing capital gains. Copyright 2007 die Autoren Journal compilation 2007, Verein für Socialpolitik und Blackwell Publishing Ltd.
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