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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- Creedy, John & Gemmell, Norman, 2009.
"Corporation tax revenue growth in the UK: A microsimulation analysis,"
Elsevier, vol. 26(3), pages 614-625, May.
- 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.
- John Creedy & Norman Gemmell, 2007. "Corporation Tax Revenue Growth in the UK: A Microsimulation Analysis," Working Papers 0713, Oxford University Centre for Business Taxation.
- Creedy, J. & Gemmell, N., 2001.
"The Revenue Responsiveness of Income and Consumption Taxes in the UK,"
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.
- Alan J. Auerbach, 1986.
"The Dynamic Effects of Tax Law Asymmetries,"
Review of Economic Studies,
Oxford University Press, vol. 53(2), pages 205-225.
- 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.
- Creedy, John & Gemmell, Norman, 2008. "Corporation tax buoyancy and revenue elasticity in the UK," Economic Modelling, Elsevier, vol. 25(1), pages 24-37, January.
- John Creedy & Norman Gemmell, 2007. "Corporation Tax Buoyancy and Revenue Elasticity in the UK," Working Papers 0712, Oxford University Centre for Business Taxation.
- Rosanne Altshuler & Alan J. Auerbach, 1987.
"The Significance of Tax Law Asymmetries: An Empirical Investigation,"
NBER Working Papers
2279, National Bureau of Economic Research, Inc.
- Rosanne Altshuler & Alan J. Auerbach, 1990. "The Significance of Tax Law Asymmetries: An Empirical Investigation," The Quarterly Journal of Economics, Oxford University Press, vol. 105(1), pages 61-86.
- Michael Devereux & Rachel Griffith & Alexander Klemm, 2004. "How has the UK corporation tax raised so much revenue?," IFS Working Papers W04/04, Institute for Fiscal Studies.
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