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The corporate income tax rate-revenue paradox: Evidence in the EU

Author

Listed:
  • Joanna Piotrowska

    (Ministry of Finance, Poland)

  • Werner Vanborren

    () (European Commission)

Abstract

In Europe, the decline in the corporate tax rates has not been reflected in the tax-to-GDP ratios. This paper explores to what extent the observed trend can be explained by changes in the effective tax burden on corporate income, in the share of total income accruing to the corporate sector and in total business income relative to GDP. We present an overview of the findings from previous literature, apply the methodology developed by S?rensen to decompose the most complete data available on the European level and make use of information collected from parallel studies on the effective tax burden and corporatization. The results suggest that corporatization is the driving factor for the trend observed in corporate tax revenues.

Suggested Citation

  • Joanna Piotrowska & Werner Vanborren, 2008. "The corporate income tax rate-revenue paradox: Evidence in the EU," Taxation Papers 12, Directorate General Taxation and Customs Union, European Commission, revised Oct 2008.
  • Handle: RePEc:tax:taxpap:0012
    as

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    File URL: https://ec.europa.eu/taxation_customs/sites/taxation/files/resources/documents/taxation/gen_info/economic_analysis/tax_papers/taxation_paper_12_en.pdf
    File Function: final version, 2008
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    References listed on IDEAS

    as
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    Cited by:

    1. Daxbek, Vincent & Estache, Antonio, 2013. "How would the design of an alternative minimum tax impact the effective corporate tax rate in Belgium?," CEPR Discussion Papers 9481, C.E.P.R. Discussion Papers.
    2. Jan Svitlík, 2015. "ETR Development and Analysis: Case from the Czech Republic," European Financial and Accounting Journal, University of Economics, Prague, vol. 2015(4), pages 05-18.
    3. Jorge Martinez-Vazquez & Violeta Vulovic & Yongzheng Liu, 2011. "Direct versus Indirect Taxation: Trends, Theory, and Economic Significance," Chapters,in: The Elgar Guide to Tax Systems, chapter 2 Edward Elgar Publishing.
    4. Boryana Madzharova, 2012. "Intertemporal Income Shifting in Expectation of Lower Corporate Tax Rates: The Tax Reforms in Central and Eastern Europe," CERGE-EI Working Papers wp462, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    5. De Laet, Jean-Pierre & Wöhlbier, Florian, 2008. "Tax burden by economic function A comparison for the EU Member States," MPRA Paper 14761, University Library of Munich, Germany.
    6. Bernardi, Luigi, 2009. "Le tasse in Europa dagli anni novanta
      [Taxation in Europe since the Years 1990s]
      ," MPRA Paper 23441, University Library of Munich, Germany.
    7. Spengel, Christoph & Heckemeyer, Jost Henrich & Bräutigam, Rainer & Nicolay, Katharina & Klar, Oliver & Stutzenberger, Kathrin, 2016. "The effects of tax reforms to address the debt-equity bias on the cost of capital and on effective tax rates," ZEW Expertises, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research, volume 65, number 148156.
    8. Escudero, Verónica & Ha, Byung-jin & Khatiwada, Sameer & Tobin, Steven, 2011. "Germany : a job-centred approach," Studies on Growth with Equity 463476, International Labour Office, Research Department.
    9. Escudero, Verónica. & Ha, Byung-jin. & Khatiwada, Sameer. & Tobin, Steven., 2011. "Germany : a job-centred approach," Studies on Growth with Equity, International Labour Office, Research Department, number 994634763402676, June.
    10. Yongzheng Liu & Jorge Martinez-Vazquez, 2010. "The Growth-Inequality Tradeo in the Design of Tax Structure: Evidence from a Large Panel of Countries," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1320, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.

    More about this item

    Keywords

    corporate taxation; tax revenues; incorporation; corporatization;

    JEL classification:

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

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