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Corporation Tax Buoyancy and Revenue Elasticity in the UK

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  • John Creedy

    (The University of Melbourne)

  • Norman Gemmell

    (University of Nottingham, Oxford University Centre for Business Taxation)

Abstract

Observed changes in corporation tax revenues from year to year, which include the effects of changes in tax rates, deductions and compliance, appear to be highly volatile relative to profits, the tax base. This paper examines whether the ‘built-in’ fiscal drag properties of corporation tax can be expected to display similar properties. Simple, conceptual modelling demonstrates that the corporate tax revenue elasticity does indeed display this property in the presence of regular cyclical fluctuation in profit growth, suggesting that much of the observed volatility is inherent to the corporation tax system.

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File URL: http://www.sbs.ox.ac.uk/centres/tax/Documents/working_papers/WP0712.pdf
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Bibliographic Info

Paper provided by Oxford University Centre for Business Taxation in its series Working Papers with number 0712.

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Date of creation: 2007
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Handle: RePEc:btx:wpaper:0712

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References

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  1. Suman Basu & Carl Emmerson & Christine Frayne, 2003. "An examination of the IFS corporation tax forecasting record," IFS Working Papers W03/21, Institute for Fiscal Studies.
  2. Creedy, J. & Gemmell, N., 2001. "The Revenue Responsiveness of Income and Consumption Taxes in the UK," Department of Economics - Working Papers Series 814, The University of Melbourne.
  3. repec:fth:eeccco:153 is not listed on IDEAS
  4. Creedy, John & Gemmell, Norman, 2002. " The Built-In Flexibility of Income and Consumption Taxes," Journal of Economic Surveys, Wiley Blackwell, vol. 16(4), pages 509-32, September.
  5. Friedrich Heinemann, 2001. "After the death of inflation: will fiscal drag survive?," Fiscal Studies, Institute for Fiscal Studies, vol. 22(4), pages 527-546., December.
  6. Michael Devereux & Rachel Griffith & Alexander Klemm, 2004. "How has the UK corporation tax raised so much revenue?," IFS Working Papers W04/04, Institute for Fiscal Studies.
  7. Michael P. Devereux & Alexander Klemm, 2003. "Measuring Taxes on Income from Capital: Evidence from the UK," CESifo Working Paper Series 968, CESifo Group Munich.
  8. Creedy, John & Gemmell, Norman, 2002. "The Revenue Responsiveness of Consumption Taxes," The Economic Record, The Economic Society of Australia, vol. 78(241), pages 186-94, June.
  9. Nicodeme, Gaetan, 2001. "Computing effective corporate tax rates: comparisons and results," MPRA Paper 3808, University Library of Munich, Germany.
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Cited by:
  1. John Creedy & Norman Gemmell, 2007. "Corporation Tax Revenue Growth in the UK:A Microsimulation Analysis," Department of Economics - Working Papers Series 984, The University of Melbourne.
  2. John Creedy & Norman Gemmell, 2010. "Behavioural responses to corporate profit taxation," Hacienda Pública Española, IEF, vol. 193(2), pages 109-130, June.
  3. John Creedy & Norman Gemmell, 2011. "Corporation tax asymmetries: effective tax rates and profit shifting," International Tax and Public Finance, Springer, vol. 18(4), pages 422-435, August.
  4. John Creedy & Norman Gemmell, 2007. "Modelling Behavioural Responses to Profit Taxation: The Case of the UK Corporation Tax," Department of Economics - Working Papers Series 998, The University of Melbourne.

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