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Sharing the burden? Empirical evidence on corporate tax incidence

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  • Dwenger, Nadja
  • Rattenhuber, Pia
  • Steiner, Viktor

Abstract

This study empirically investigates the direct incidence of the corporate income tax through wage bargaining, using an industry-region level panel data set on all corporations in Germany over the period 1998 to 2006. Our measure of direct incidence for the first time accounts for employment effects which result from tax induced wage changes. Workers share in reductions of the CIT burden; yet, direct incidence is small and confined to 0.19 0.29. Thus, the net effect of wage bargaining on the corporate wage bill, after an exogenous 1 decrease in the CIT burden, is as little as 19 to 29 cents. This is about half of the effect obtained in prior literature under the assumption that employment remained constant. A focus on wages alone leads to an overestimation of direct tax incidence. --

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Paper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order with number 80040.

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Date of creation: 2013
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Handle: RePEc:zbw:vfsc13:80040

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Cited by:
  1. Fuest, Clemens & Peichl, Andreas & Siegloch, Sebastian, 2013. "Do higher corporate taxes reduce wages? Micro evidence from Germany," ZEW Discussion Papers 13-039, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  2. Li Liu & Rosanne Altshuler, 2011. "Measuring the burden of the corporate income tax under imperfect competition," Working Papers 1105, Oxford University Centre for Business Taxation.
  3. Peichl, Andreas & Fuest, Clemens & Siegloch, Sebastian, 2013. "Wage Incidence of Local Corporate Taxation - Micro Evidence from Germany," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79916, Verein für Socialpolitik / German Economic Association.
  4. Clemens Fuest & Andreas Peichl & Sebastian Siegloch, 2012. "Which Workers Bear the Burden of Corporate Taxation and Which Firms Can Pass It On? Micro Evidence from Germany," Working Papers 1216, Oxford University Centre for Business Taxation.
  5. Sara Torregrosa Hetland, 2014. "A fiscal revolution? Progressivity in the Spanish tax system, 1960-1990," Working Papers 2014/8, Institut d'Economia de Barcelona (IEB).
  6. Mittermaier, Ferdinand & Rincke, Johannes, 2013. "Do countries compensate firms for international wage differentials?," Journal of Public Economics, Elsevier, vol. 102(C), pages 23-36.

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