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Investors' Portfolio Choice and Tax Reforms: The 2008 German Corporate Tax Reform Reconsidered

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  • Michael Stimmelmayr

Abstract

The paper provides a comprehensive assessment of the latest German corporate income and capital tax reform, which entails a major shift of the capital tax burden from the firm to the household level. Using a dynamic two-country computable general equilibrium model with integrated capital markets, we show that economic growth and domestic welfare are negatively affected by the reform. Key to the limited growth is the domestic investors' portfolio choice as a channel for tax avoidance at the household (i.e. investor) level. While international investors may well counteract the negative impact on growth, their privileged tax treatment erodes the domestic capital income tax base and thus creates adverse welfare effects.

Suggested Citation

  • Michael Stimmelmayr, 2015. "Investors' Portfolio Choice and Tax Reforms: The 2008 German Corporate Tax Reform Reconsidered," CESifo Working Paper Series 5311, CESifo.
    • Handle: RePEc:ces:ceswps:_5311
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    9. Katharina Finke & Jost H. Heckemeyer & Timo Reister & Christoph Spengel, 2013. "Impact of Tax-Rate Cut cum Base-Broadening Reforms on Heterogeneous Firms: Learning from the German Tax Reform of 2008," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 69(1), pages 72-114, March.
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    17. Mintz, Jack M. & Weichenrieder, Alfons J., 2010. "The Indirect Side of Direct Investment: Multinational Company Finance and Taxation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262014491, December.
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    Cited by:

    1. Schock, Matthias Malte, 2019. "Steuerreformvorschläge des Mirrlees Committee und der Stiftung Marktwirtschaft [Tax Reform Proposals of the Mirrlees Committee and the Stiftung Marktwirtschaft]," MPRA Paper 96689, University Library of Munich, Germany.
    2. Florian Chatagny & Marko Koethenbuerger & Michael Stimmelmayr, 2017. "Introducing an IP license box in Switzerland: quantifying the effects," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(6), pages 927-961, December.

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    More about this item

    Keywords

    portfolio investment; corporate tax reform; foreign firm ownership; computable general equilibrium;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models

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