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The Asymmetric Incidence of Business Taxes: Survey Evidence from German Firms

Author

Listed:
  • Winter, Richard

    (University of Mannheim)

  • Doerrenberg, Philipp

    (University of Mannheim)

  • Eble, Fabian

    (University of Mannheim)

  • Rostam-Afschar, Davud

    (University of Mannheim)

  • Voget, Johannes

    (University of Mannheim)

Abstract

We provide novel evidence on the incidence of business taxes using comprehensive survey and experimental data from German firms. Leveraging randomized variation in hypothetical tax changes, we find that the incidence of profit taxes is highly asymmetric. Tax decreases are more likely to benefit workers and stimulate investment, whereas tax increases tend to be passed on to consumers through higher prices and absorbed by firm owners through reduced profit distributions. Moreover, by varying the magnitude of the tax changes, we demonstrate that worker incidence increases with the absolute size of the tax change, partially offsetting the burden on firm owners.

Suggested Citation

  • Winter, Richard & Doerrenberg, Philipp & Eble, Fabian & Rostam-Afschar, Davud & Voget, Johannes, 2025. "The Asymmetric Incidence of Business Taxes: Survey Evidence from German Firms," IZA Discussion Papers 17983, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp17983
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    Keywords

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    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • H00 - Public Economics - - General - - - General
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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