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How has the UK corporation tax raised so much revenue?

Author

Listed:
  • Michael Devereux

    () (Institute for Fiscal Studies and University of Oxford)

  • Rachel Griffith

    () (Institute for Fiscal Studies and IFS and Manchester)

  • Alexander Klemm

    (Institute for Fiscal Studies)

Abstract

We analyse a puzzle in the UK corporation tax: by both historic and international standards corporation tax revenues have been high while the statutory rate has been low. Possible explanations include the following: changes in tax law that may have increased effective tax rates; other factors such as higher profitability or different macro-economic conditions may have led to higher effective tax rates; and finally the size of the corporate sector may have increased. We find evidence for all three explanations, although none would be sufficient in itself. To the extent that higher profits, particularly financial sector profits may have led to high revenues, there are doubts as to whether revenues will continue to be so strong.

Suggested Citation

  • 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.
  • Handle: RePEc:ifs:ifsewp:04/04
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    File URL: http://www.ifs.org.uk/wps/wp0404.pdf
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    References listed on IDEAS

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    1. Michael Devereux & Alexander Klemm, 2003. "Measuring taxes on income from capital: evidence from the UK," IFS Working Papers W03/03, Institute for Fiscal Studies.
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    Cited by:

    1. John Creedy & Norman Gemmell, 2010. "Behavioural responses to corporate profit taxation," Hacienda Pública Española, IEF, vol. 193(2), pages 109-130, June.
    2. 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.
    3. Creedy, John & Gemmell, Norman, 2008. "Corporation tax buoyancy and revenue elasticity in the UK," Economic Modelling, Elsevier, vol. 25(1), pages 24-37, January.
    4. repec:mup:actaun:actaun_2012060020465 is not listed on IDEAS
    5. repec:mup:actaun:actaun_2016064051699 is not listed on IDEAS
    6. John Creedy & Norman Gemmell, 2007. "Modelling Behavioural Responses to Profit Taxation: The Case of the UK Corporation Tax," Department of Economics - Working Papers Series 998, The University of Melbourne.

    More about this item

    Keywords

    Corporation tax; revenue;

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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