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Sharing the burden? Empirical evidence on corporate tax incidence

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  • Dwenger, Nadja
  • Rattenhuber, Pia
  • Steiner, Viktor

Abstract

This study empirically investigates the direct incidence of the corporate income tax through wage bargaining, using an industry-region level panel data set on all corporations in Germany over the period 1998 to 2006. Our measure of direct incidence for the first time accounts for employment effects which result from tax induced wage changes. Workers share in reductions of the CIT burden; yet, direct incidence is small and confined to 0.19 0.29. Thus, the net effect of wage bargaining on the corporate wage bill, after an exogenous 1 decrease in the CIT burden, is as little as 19 to 29 cents. This is about half of the effect obtained in prior literature under the assumption that employment remained constant. A focus on wages alone leads to an overestimation of direct tax incidence.

Suggested Citation

  • Dwenger, Nadja & Rattenhuber, Pia & Steiner, Viktor, 2013. "Sharing the burden? Empirical evidence on corporate tax incidence," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 80040, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc13:80040
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    1. repec:aea:aecrev:v:108:y:2018:i:2:p:393-418 is not listed on IDEAS
    2. Kenneth J. McKenzie & Ergete Ferede, 2017. "The Incidence of the Corporate Income Tax on Wages: Evidence from Canadian Provinces," SPP Research Papers, The School of Public Policy, University of Calgary, vol. 10(7), April.
    3. Sara Torregrosa Hetland, 2015. "Did democracy bring redistribution? Insights from the Spanish tax system, 1960–90," European Review of Economic History, Oxford University Press, vol. 19(3), pages 294-315.
    4. Clemens Fuest & Andreas Peichl & Sebastian Siegloch, 2018. "Do Higher Corporate Taxes Reduce Wages? Micro Evidence from Germany," American Economic Review, American Economic Association, vol. 108(2), pages 393-418, February.
    5. Barrios, Salvador & Nicodème, Gaëtan & Sanchez Fuentes, Antonio Jesus, 2014. "Effective Corporate Taxation, Tax Incidence and Tax Reforms: Evidence from OECD Countries," CEPR Discussion Papers 10198, C.E.P.R. Discussion Papers.
    6. Peichl, Andreas & Fuest, Clemens & Siegloch, Sebastian, 2013. "Wage Incidence of Local Corporate Taxation - Micro Evidence from Germany," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79916, Verein für Socialpolitik / German Economic Association.
    7. Nelly Exbrayat & Benny Geys, 2016. "Economic Integration, Corporate Tax Incidence and Fiscal Compensation," The World Economy, Wiley Blackwell, vol. 39(11), pages 1792-1811, November.
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    10. Clemens Fuest & Andreas Peichl & Sebastian Siegloch, 2012. "Which Workers Bear the Burden of Corporate Taxation and Which Firms Can Pass It On? Micro Evidence from Germany," Working Papers 1216, Oxford University Centre for Business Taxation.
    11. Clément Carbonnier & Gwenaële Rot & Clément Malgouyres, 2016. "Evaluation interdisciplinaire des impacts du CICE en matière de compétitivité internationale, d'investissement, d'emploi, de résultat net des entreprises et de salaires," Sciences Po publications info:hdl:2441/4v8c8tnfgu8, Sciences Po.
    12. Vincent Charlet & Philippe Frocrain, 2017. "Les limites des allégements de charges sur les bas salaires," Working Papers hal-01695167, HAL.

    More about this item

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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