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Reforming the German Local Business Tax - Lessons from an International Comparison and a Microsimulation Analysis

Author

Listed:
  • Frank Fossen
  • Stefan Bach

Abstract

The local business tax as the main revenue source of local governments in Germany has been under extensive debate for decades. Proposals for reform range from a pure profit tax to an origin-based value-added tax. Local business taxation systems in OECD countries actually represent the whole spectrum between these two extremes. We use a newly developed microsimulation model for the business sector in Germany to analyze the first round fiscal and distributional effects of the general reform options identified. We also analyze the effects of the actual German business-tax reform 2008 with respect to local-business-tax revenues.

Suggested Citation

  • Frank Fossen & Stefan Bach, 2008. "Reforming the German Local Business Tax - Lessons from an International Comparison and a Microsimulation Analysis," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 64(2), pages 245-272, June.
  • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200806)64:2_245:rtglbt_2.0.tx_2-0
    DOI: 10.1628/001522108X337620
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    References listed on IDEAS

    as
    1. Stefan Bach & Dieter Vesper, 2002. "Finanz- und Investitionskrise der Gemeinden erzwingt grundlegende Reform der Kommunalfinanzen," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 69(31), pages 505-517.
    2. Richard Baldwin & Rikard Forslid & Philippe Martin & Gianmarco Ottaviano & Frederic Robert-Nicoud, 2005. "Economic Geography and Public Policy," Economics Books, Princeton University Press, edition 1, number 7524.
    3. Stefan Bach & Hermann Buslei & Nadja Dwenger & Frank Fossen, 2008. "Dokumentation des Mikrosimulationsmodells BizTax zur Unternehmensbesteuerung in Deutschland," Data Documentation 29, DIW Berlin, German Institute for Economic Research.
    4. Richard Baldwin & Rikard Forslid & Philippe Martin & Gianmarco Ottaviano & Frederic Robert Nicoud, 2003. "Economic Geography and Public Policy," Post-Print halshs-00179815, HAL.
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    Citations

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    Cited by:

    1. Dwenger, Nadja & Rattenhuber, Pia & Steiner, Viktor, 2011. "Sharing the burden: Empirical evidence on corporate tax incidence," Discussion Papers 2011/19, Free University Berlin, School of Business & Economics.
    2. Borck, Rainald & Fossen, Frank M. & Freier, Ronny & Martin, Thorsten, 2015. "Race to the debt trap? — Spatial econometric evidence on debt in German municipalities," Regional Science and Urban Economics, Elsevier, vol. 53(C), pages 20-37.
    3. Nadja Dwenger & Viktor Steiner, 2014. "Financial leverage and corporate taxation: evidence from German corporate tax return data," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 21(1), pages 1-28, February.
    4. Stefan Bach & Michael Broer & Frank Fossen, 2010. "Sollen Freiberufler und Landwirte Gewerbesteuer zahlen?," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 30(1), pages 71-90, February.
    5. 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.
    6. Dwenger, Nadja & Dr. Fossen, Frank & Dr. Simmler, Martin, 2015. "From financial to real economic crisis. Evidence from individual firm-bank relationships in Germany," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113000, Verein für Socialpolitik / German Economic Association.
    7. Stefan Bach & Giacomo Corneo & Viktor Steiner, 2013. "Effective Taxation of Top Incomes in Germany," German Economic Review, Verein für Socialpolitik, vol. 14(2), pages 115-137, May.
    8. Richard Ochmann & Patricia Gallego Granados, 2013. "EUROMOD Country Report Germany: EUROMOD Version F7.0; Project on Behalf of the Directorate-General for Employment, Social Affairs and Equal Opportunities of the European Commission," Data Documentation 67, DIW Berlin, German Institute for Economic Research.
    9. Nadja Dwenger & Viktor Steiner, 2008. "Effective Profit Taxation and the Elasticity of the Corporate Income Tax Base: Evidence from German Corporate Tax Return Data," Discussion Papers of DIW Berlin 829, DIW Berlin, German Institute for Economic Research.
    10. Fossen, Frank & Simmler, Martin, 2012. "Differential taxation and firms' financial leverage: Evidence from the introduction of a flat tax on interest income," Discussion Papers 2012/4, Free University Berlin, School of Business & Economics.
    11. Richard Ochmann & Frank Fossen, 2012. "EUROMOD Country Report Germany: EUROMOD Version F6.0; Project on Behalf of the Directorate-General for Employment, Social Affairs and Equal Opportunities of the European Commission," Data Documentation 64, DIW Berlin, German Institute for Economic Research.
    12. repec:eee:regeco:v:65:y:2017:i:c:p:38-55 is not listed on IDEAS
    13. Dwenger, Nadja & Steiner, Viktor, 2012. "Profit Taxation and the Elasticity of the Corporate Income Tax Base: Evidence From German Corporate Tax Return Data," National Tax Journal, National Tax Association;National Tax Journal, vol. 65(1), pages 118-150, March.

    More about this item

    Keywords

    local business tax; microsimulation; local taxation; tax reform;

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs

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