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Tax loss offset restrictions: Last resort for the treasury? An empirical evaluation of tax loss offset rectrictions based on micro data

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  • Dwenger, Nadja

Abstract

In Germany, the tax loss carry-forward of corporations significantly increased over the last decade. At the same time only a small percentage of losses have been effectively offset. One potential reason for this puzzle is that stricter loss offset restrictions have been introduced in recent years. I use a newly developed micro simulation model for the German corporate sector to evaluate the fiscal effects of these restrictions. Additionally, distributional breakdowns are provided. I find that the restrictions on the use of tax loss carry-back are rather ineffective while the newly introduced minimum taxation considerably increases yearly tax revenue by 1.1 billion €.

Suggested Citation

  • Dwenger, Nadja, 2008. "Tax loss offset restrictions: Last resort for the treasury? An empirical evaluation of tax loss offset rectrictions based on micro data," arqus Discussion Papers in Quantitative Tax Research 44, arqus - Arbeitskreis Quantitative Steuerlehre.
  • Handle: RePEc:zbw:arqudp:44
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    References listed on IDEAS

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    1. Jack M. Mintz, 1988. "An Empirical Estimate of Corporate Tax Refundability and Effective Tax Rates," The Quarterly Journal of Economics, Oxford University Press, vol. 103(1), pages 225-231.
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    5. Graham, John R., 1996. "Debt and the marginal tax rate," Journal of Financial Economics, Elsevier, vol. 41(1), pages 41-73, May.
    6. Ramb, Fred, 2007. "Corporate marginal tax rate, tax loss carryforwards and investment functions: empirical analysis using a large German panel data set," Discussion Paper Series 1: Economic Studies 2007,21, Deutsche Bundesbank.
    7. Rosanne Altshuler & Alan J. Auerbach, 1990. "The Significance of Tax Law Asymmetries: An Empirical Investigation," The Quarterly Journal of Economics, Oxford University Press, vol. 105(1), pages 61-86.
    8. MacKie-Mason, Jeffrey K, 1990. " Do Taxes Affect Corporate Financing Decisions?," Journal of Finance, American Finance Association, vol. 45(5), pages 1471-1493, December.
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    10. Stefan Bach & Nadja Dwenger, 2007. "Unternehmensbesteuerung: trotz hoher Steuersätze mäßiges Aufkommen," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 74(5), pages 57-65.
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    Cited by:

    1. Edgerton, Jesse, 2010. "Investment incentives and corporate tax asymmetries," Journal of Public Economics, Elsevier, vol. 94(11-12), pages 936-952, December.
    2. Ortmann, Regina & Sureth, Caren, 2014. "Can the CCCTB alleviate tax discrimination against loss-making European multinational groups?," arqus Discussion Papers in Quantitative Tax Research 165, arqus - Arbeitskreis Quantitative Steuerlehre.
    3. Lina Cui, 2013. "A Markov Chain Analysis on the Impact of German Tax Loss Offset Restrictions," Economic Papers, The Economic Society of Australia, vol. 32(1), pages 122-134, March.
    4. European Commission, 2010. "Tax Policy after the Crisis: Monitoring Tax Revenues and Tax Reforms in EU Member States 2010 Report," Taxation Papers 24, Directorate General Taxation and Customs Union, European Commission.
    5. Walch, Florian & Dwenger, Nadja, 2011. "Tax Losses and Firm Investment: Evidence from Tax Statistics," Annual Conference 2011 (Frankfurt, Main): The Order of the World Economy - Lessons from the Crisis 48699, Verein für Socialpolitik / German Economic Association.
    6. Regina Ortmann & Caren Sureth-Sloane, 2016. "Can the CCCTB alleviate tax discrimination against loss-making European multinational groups?," Journal of Business Economics, Springer, vol. 86(5), pages 441-475, July.
    7. Dahle, Claudia & Sureth, Caren, 2008. "Income-related minimum taxation concepts and their impact on corporate investment decisions," arqus Discussion Papers in Quantitative Tax Research 55, arqus - Arbeitskreis Quantitative Steuerlehre.

    More about this item

    Keywords

    micro simulation; loss offset restrictions; corporate taxation; tax loss carryforward; tax loss carry-back;

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs

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