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How has the UK corporation tax raised so much revenue?

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Author Info

  • Michael Devereux

    ()
    (Institute for Fiscal Studies and University of Oxford)

  • Rachel Griffith

    ()
    (Institute for Fiscal Studies and University of Manchester)

  • Alexander Klemm

    (Institute for Fiscal Studies)

Abstract

We analyse a puzzle in the UK corporation tax: by both historic and international standards corporation tax revenues have been high while the statutory rate has been low. Possible explanations include the following: changes in tax law that may have increased effective tax rates; other factors such as higher profitability or different macro-economic conditions may have led to higher effective tax rates; and finally the size of the corporate sector may have increased. We find evidence for all three explanations, although none would be sufficient in itself. To the extent that higher profits, particularly financial sector profits may have led to high revenues, there are doubts as to whether revenues will continue to be so strong.

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Bibliographic Info

Paper provided by Institute for Fiscal Studies in its series IFS Working Papers with number W04/04.

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Length: 28 pp
Date of creation: Feb 2004
Date of revision:
Handle: RePEc:ifs:ifsewp:04/04

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Keywords: Corporation tax; revenue;

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  1. Michael Devereux & Alexander Klemm, 2003. "Measuring taxes on income from capital: evidence from the UK," IFS Working Papers W03/03, Institute for Fiscal Studies.
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Cited by:
  1. John Creedy & Norman Gemmell, 2010. "Behavioural responses to corporate profit taxation," Hacienda Pública Española, IEF, vol. 193(2), pages 109-130, June.
  2. John Creedy & Norman Gemmell, 2007. "Corporation Tax Buoyancy and Revenue Elasticity in the UK," Department of Economics - Working Papers Series 985, The University of Melbourne.
  3. 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.
  4. Creedy, John & Gemmell, Norman, 2009. "Corporation tax revenue growth in the UK: A microsimulation analysis," Economic Modelling, Elsevier, vol. 26(3), pages 614-625, May.

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