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Corporate Minimum Tax and the Elasticity of Taxable Income: Evidence from Administrative Tax Records

Author

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  • Jaroslav Bukovina
  • Tomáš Lichard
  • Ján Palguta
  • Branislav Žúdel

Abstract

We examine business responses to a minimum tax (MT) that prescribed fixed floors on corporate tax liability while permitting MT credit carryforwards. Using 2010–2020 tax-return data on all Slovak corporations, we find that many companies immediately relocated from reporting zero taxable income toward bunching at the new floors. We infer the elasticity of taxable income (ETI) to be between 0.33 and 2.28 across value-added tax (VAT) and turnover categories, and quantify the marginal efficiency burden (MEB) of the corporation tax. Given limited extensive-margin responses, our evidence suggests the MT reduced the overall efficiency burden while raising additional tax revenue.

Suggested Citation

  • Jaroslav Bukovina & Tomáš Lichard & Ján Palguta & Branislav Žúdel, 2025. "Corporate Minimum Tax and the Elasticity of Taxable Income: Evidence from Administrative Tax Records," American Economic Journal: Economic Policy, American Economic Association, vol. 17(2), pages 358-387, May.
    • Handle: RePEc:aea:aejpol:v:17:y:2025:i:2:p:358-87
    DOI: 10.1257/pol.20230108
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    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

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