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Corporate Taxation and Firm Location in Germany

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  • Zeddies, Götz

Abstract

German Fiscal Federalism is characterized by a high degree of fiscal equalization which lowers the efficiency of local tax administration. Currently, a reform of the fiscal equalization scheme is on the political agenda. One option is to grant federal states the right to raise surtaxes on statutory tax rates set by the central government in order to reduce the equalization rate. In such an environment, especially those federal states with lower economic performance would have to raise comparatively high surtaxes. With capital mobility, this could further lower economic performance and thus tax revenues. Although statutory tax rates are so far identical across German federal states, corporate tax burden differs for several reasons. This paper tries to identify the impact of such differences on firm location. As can be shown, effective corporate taxation did seemingly not have a significant impact on firm location across German federal states.

Suggested Citation

  • Zeddies, Götz, 2015. "Corporate Taxation and Firm Location in Germany," IWH Discussion Papers 2/2015, Halle Institute for Economic Research (IWH).
    • Handle: RePEc:zbw:iwhdps:iwh-2-15
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    More about this item

    Keywords

    fiscal equalization; corporate taxation; surtaxes; firm location; Länderfinanzausgleich; Besteuerung; Zuschlagsrechte; Standortwahl;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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