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Corporation Tax Buoyancy and Revenue Elasticity in the UK

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  • John Creedy
  • Norman Gemmell

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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Bibliographic Info

Paper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 985.

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Length: 29 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:mlb:wpaper:985

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  1. Michael P. Devereux & Alexander Klemm, 2003. "Measuring Taxes on Income from Capital: Evidence from the UK," CESifo Working Paper Series 968, CESifo Group Munich.
  2. Nicodeme, Gaetan, 2001. "Computing effective corporate tax rates: comparisons and results," MPRA Paper 3808, University Library of Munich, Germany.
  3. 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.
  4. repec:fth:eeccco:153 is not listed on IDEAS
  5. Heinemann, Friedrich, 2000. "After the Death of Inflation: Will Fiscal Drag Survive?," ZEW Discussion Papers 00-19, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  6. 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.
  7. 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.
  8. 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.
  9. 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.
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Cited by:
  1. John Creedy & Norman Gemmell, 2007. "Corporation Tax Revenue Growth in the UK: A Microsimulation Analysis," Working Papers 0713, Oxford University Centre for Business Taxation.
  2. 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.
  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, 2008. "Behavioural Responses to Corporate Profit Taxation," Department of Economics - Working Papers Series 1029, The University of Melbourne.

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