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Do corporate tax cuts increase investments?

  • Brandstetter, Laura
  • Jacob, Martin
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    This paper studies the effect of corporate taxes on investment. Using firm-level data on German corporations, we investigate the 2008 tax reform that cut corporate taxes by 10 percentage points. We expect heterogeneous investment responses across firms, since firms with a foreign parent have more cross-country profit shifting opportunities than domestically owned firms. Using a matching difference-in-differences approach, we show that, following the corporate tax cut, domestically owned firms increased investments to a larger extent than foreign-owned firms. Our results imply that corporate tax changes can increase corporate investment but have heterogeneous investment responses across firms.

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    File URL: http://econstor.eu/bitstream/10419/88595/1/773918515.pdf
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    Paper provided by arqus - Arbeitskreis Quantitative Steuerlehre in its series arqus Discussion Papers in Quantitative Tax Research with number 153.

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    Date of creation: 2013
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    Handle: RePEc:zbw:arqudp:153
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