Corporate tax policy and incorporation in the EU
AbstractIn Europe, declining corporate tax rates have come along with rising tax-to-GDP ratios. This paper explores to what extent income shifting from the personal to the corporate tax base can explain these diverging developments. We exploit a panel of European data on legal form of business to analyze income shifting via incorporation. The results suggest that the effect is significant and large. It implies that the revenue effects of lower corporate tax rates ? possibly induced by tax competition ? will partly show up in lower personal tax revenues rather than lower corporate tax revenues. Simulations suggest that between 12% and 21% of corporate tax revenue can be attributed to income shifting. Income shifting is found to have raised the corporate tax-to-GDP ratio by some 0.25%-points since the early 1990s.
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Bibliographic InfoPaper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 97.
Date of creation: Jan 2008
Date of revision:
Other versions of this item:
- Ruud A. de Mooij & Gaëtan Nicodème, 2007. "Corporate tax policy and incorporation in the EU," Working Papers CEB 07-016.RS, ULB -- Universite Libre de Bruxelles.
- Ruud A. de Mooij & Gaëtan Nicodème, 2007. "Corporate Tax Policy and Incorporation in the EU," Working Papers 0716, Oxford University Centre for Business Taxation.
- Ruud de Mooij & Gaetan Nicodeme, 2007. "Corporate tax policy and incorporation in the EU," Taxation Papers 11, Directorate General Taxation and Customs Union, European Commission, revised Nov 2007.
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-02-09 (All new papers)
- NEP-EEC-2008-02-09 (European Economics)
- NEP-PBE-2008-02-09 (Public Economics)
- NEP-PUB-2008-02-09 (Public Finance)
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