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Which Workers Bear the Burden of Corporate Taxation and Which Firms Can Pass It On? Micro Evidence from Germany

Author

Listed:
  • Clemens Fuest

    () (Oxford University Centre for Business Taxation, University of Cologne, CESifo and IZA)

  • Andreas Peichl

    (IZA, University of Cologne, ISER and CESifo)

  • Sebastian Siegloch

    () (IZA and the University of Cologne)

Abstract

In this paper we provide empirical evidence on the wage incidence of the German business tax, which is set at the municipal level. For our analysis, we use a very rich administrative linked employer-employee panel, covering 11 years, and link it to data on the business tax rates of about 11,500 German municipalities. On average 8% of the municipalities adjust their business tax rate per year. We are able to exploit multiple quasi-natural experiments to identify the tax incidence on wages. The detailed administrative data allow us to estimate heterogenous incidence e ects and to explore different channels of how the business tax burden is passed on. We nd a wage elasticity with respect to the e ective marginal tax rate of -0.18. Low-skilled labor shares a relatively higher burden as well as workers in firms with non-binding sectoral collective agreements or firm level bargaining contracts.

Suggested Citation

  • 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.
  • Handle: RePEc:btx:wpaper:1216
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    File URL: http://www.sbs.ox.ac.uk/sites/default/files/Business_Taxation/Docs/WP1216.pdf
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    References listed on IDEAS

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    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.
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    5. Bradford, David F., 1978. "Factor prices may be constant but factor returns are not," Economics Letters, Elsevier, vol. 1(3), pages 199-203.
    6. Arulampalam, Wiji & Devereux, Michael P. & Maffini, Giorgia, 2012. "The direct incidence of corporate income tax on wages," European Economic Review, Elsevier, vol. 56(6), pages 1038-1054.
    7. Arnold C. Harberger, 1962. "The Incidence of the Corporation Income Tax," Journal of Political Economy, University of Chicago Press, vol. 70, pages 215-215.
    8. Alison Felix, 2007. "Passing the burden: corporate tax incidence in open economies," Regional Research Working Paper RRWP 07-01, Federal Reserve Bank of Kansas City.
    9. Alan J. Auerbach, 2006. "Who Bears the Corporate Tax? A Review of What We Know," NBER Chapters,in: Tax Policy and the Economy, Volume 20, pages 1-40 National Bureau of Economic Research, Inc.
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    12. Liu, Li & Altshuler, Rosanne, 2013. "Measuring the Burden of the Corporate Income Tax Under Imperfect Competition," National Tax Journal, National Tax Association, vol. 66(1), pages 215-237, March.
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    Cited by:

    1. Salvador Barrios & Gaetan Nicodeme & Antonio Jesus Sanchez Fuentes, 2014. "Effective Corporate Taxation, Tax Incidence and Tax Reforms: Evidence from OECD Countries," Taxation Papers 45, Directorate General Taxation and Customs Union, European Commission.
    2. Liu, Li & Altshuler, Rosanne, 2013. "Measuring the Burden of the Corporate Income Tax Under Imperfect Competition," National Tax Journal, National Tax Association, vol. 66(1), pages 215-237, March.
    3. 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.

    More about this item

    Keywords

    business taxation; wage incidence; microdata; Germany;

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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