The Direct Incidence of Corporate Income Tax on Wages

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The Direct Incidence of Corporate Income Tax on Wages

Author Info

Wiji Arulampalam (University of Warwick and Oxford University Centre for Business Taxation)
Michael P Devereux () (Oxford University Centre for Business Taxation)
Giorgia Maffini () (University of Warwick and Oxford University Centre for Business Taxation)

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Abstract

We examine how far taxes on corporate income are directly shifted onto the workforce. We use data on 55,082 companies located in nine European countries over the period 1996–2003. We identify this direct shifting through cross-company variation in tax liabilities, conditional on value added per employee. Our central estimate is that the long run elasticity of the wage bill with respect to taxation is -0.093. Evaluated at the median, this implies that an exogenous rise of $1 in tax would reduce the wage bill by 75 cents. We find only weak evidence of a difference for multinational companies.

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Paper provided by Oxford University Centre for Business Taxation in its series Working Papers with number 0917.

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Date of creation: 2009
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Handle: RePEc:btx:wpaper:0917

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Paper
- Wiji Arulampalam & Michael P Devereux & Giorgia Maffini, 2007. "The Direct Incidence of Corporate Income Tax on Wages," Working Papers 0707, Oxford University Centre for Business Taxation. [Downloadable!]

This paper has been announced in the following NEP Reports:

NEP-ACC-2009-09-05 (Accounting & Auditing)
NEP-ALL-2009-09-05 (All new papers)
NEP-BEC-2009-09-05 (Business Economics)
NEP-LAB-2009-09-05 (Labour Economics)
NEP-PBE-2009-09-05 (Public Economics)
NEP-PUB-2009-09-05 (Public Finance)

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European Public Finance (ECON-O-403)

References listed on IDEAS
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

David Locke Newhouse & Irene Yackovlev & Robert Gillingham, 2008. "The Distributional Impact of Fiscal Policy in Honduras," IMF Working Papers 08/168, International Monetary Fund. [Downloadable!]
R. Alison Felix & James R. Hines, Jr., 2009. "Corporate Taxes and Union Wages in the United States," NBER Working Papers 15263, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)

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