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A Panel Data Econometric Study of Corporate Tax Revenue in European Union: Structural, Cyclical Business and Institutional Determinants

Author

Listed:
  • Marta Rodrigues Monteiro

    () (Faculdade de Economia, Universidade do Porto)

  • Elísio Fernando Moreira Brandão

    () (Faculdade de Economia, Universidade do Porto)

  • Francisco Vitorino da Silva Martins

    () (Faculdade de Economia, Universidade do Porto)

Abstract

This paper studies the economic determinants of corporate tax revenue to Gross Domestic Product (GDP) across European Union members over the period 1998-2009. The Feasible Generalized Least Squares (FGLS) regression results suggest that structural, cyclical, international and institutional factors such as GDP, Government Deficit, Industry Turnover, Unemployment, Number of Enterprises, Trade Openness, Foreign Direct Investment (FDI) and Corruption affect revenue performance of an economy. Thus, the findings show that Unemployment Rate and Corruption have an adverse effect on tax collection, while the other analysed factors contribute to a better performance concerning tax collection. In the present paper we also consider as explanatory factors the tax variables Effective Average Tax Rate (EATR) and Effective Marginal Tax Rate (EMTR). In fact, empirical results indicate a parabolic relationship between EMTR and corporate tax revenues, reinforcing the hypothesis of the existence of a Laffer curve. Our findings also suggest that the last two years of European Union enlargement are likely not to have had effect in corporate tax revenue to GDP. In addition, specific factors of some countries (Greece, Portugal and Spain) seem to positively affect corporate revenues.

Suggested Citation

  • Marta Rodrigues Monteiro & Elísio Fernando Moreira Brandão & Francisco Vitorino da Silva Martins, 2011. "A Panel Data Econometric Study of Corporate Tax Revenue in European Union: Structural, Cyclical Business and Institutional Determinants," FEP Working Papers 437, Universidade do Porto, Faculdade de Economia do Porto.
  • Handle: RePEc:por:fepwps:437
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    More about this item

    Keywords

    Corporate Tax Revenue; EATR; EMTR; Corruption; Laffer Curve;

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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