The current debate in corporate taxation is focusing on leveling the tax playing field within the European Union for companies operating across-countries. However, tax burdens could also vary with the size of companies within the same country, raising the question whether large companies pay their share of the burden. This paper uses firm-level data for 21 European countries between 1992 and 2004. The paper finds a robust negative correlation between the number of employees and the effective tax burden of companies. This result tends to validate theories arguing that large companies may enjoy a lower tax burden. As a caveat, using total assets as size variable produces a positive relationship. This relationship is however less robust and less economically significant.
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Paper provided by Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB) in its series Working Papers CEB with number
07-001.RS.
Find related papers by JEL classification: E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
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