Corporation tax revenue growth in the UK: A microsimulation analysis
This paper examines the built-in flexibility properties -- as measured by the elasticity of revenue with respect to profits -- of the UK corporation tax system. Emphasis is placed on determining some of the major influences on the extent to which total corporation tax revenue changes when profits change over the economic cycle. A microsimulation model, CorpSim, is constructed and used to obtain numerical results. In the model, corporations use group relief, capital allowances and losses in a tax-minimising manner. The growth of aggregate corporation tax revenue in practice in the UK appears to be highly volatile in relation to the growth of profits. High volatility in revenue elasticities is found to be especially associated with economic downturns. In mild economic downturns, corporation tax revenue elasticities may rise (because tax growth falls less than profit growth), but in more severe downturns, large but temporary decreases in revenue elasticities (and even negative elasticities) can be expected.
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- John Creedy & Norman Gemmell, 2007.
"Corporation Tax Revenue Growth in the UK:A Microsimulation Analysis,"
Department of Economics - Working Papers Series
984, The University of Melbourne.
- Creedy, John & Gemmell, Norman, 2009. "Corporation tax revenue growth in the UK: A microsimulation analysis," Economic Modelling, Elsevier, vol. 26(3), pages 614-625, May.
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Department of Economics - Working Papers Series
814, The University of Melbourne.
- John Creedy & Norman Gemmell, 2003. "The Revenue Responsiveness of Income and Consumption Taxes in the UK," Manchester School, University of Manchester, vol. 71(6), pages 641-658, December.
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- Creedy, John & Gemmell, Norman, 2008.
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Elsevier, vol. 25(1), pages 24-37, January.
- John Creedy & Norman Gemmell, 2007. "Corporation Tax Buoyancy and Revenue Elasticity in the UK," Department of Economics - Working Papers Series 985, The University of Melbourne.
- John Creedy & Norman Gemmell, 2007. "Corporation Tax Buoyancy and Revenue Elasticity in the UK," Working Papers 0712, Oxford University Centre for Business Taxation.
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