IDEAS home Printed from https://ideas.repec.org/p/zbw/zewdip/14090.html
   My bibliography  Save this paper

How do employment tax credits work? An analysis of the German inheritance tax

Author

Listed:
  • Franke, Benedikt
  • Simons, Dirk
  • Voeller, Dennis

Abstract

Employment tax credit programs have been repeatedly used during economic crises, although their usefulness is empirically contestable. The objective of this paper is to quantify the tax effects of employment tax credit programs. A recent revision of the German inheritance tax law provides an eminent opportunity to analyze the effects caused by such a preferential treatment. The tax liability depends on a company's future employment expenses. Hence, we use micro-level data of realized business transfers from the German Inheritance Tax Statistic and combine them with a simulation of the future development of employment over the relevant time-horizon. We identify the magnitude of tax reductions granted to business transfers under a preferential treatment. Further, we demonstrate that these reductions are considerably larger in times of economic growth. Our findings also suggest that employment tax credits have pro-cyclical effects and specifically foster transfers between unrelated parties. Finally, the preferential treatment of business transfers does not provide incentives to increase employment.

Suggested Citation

  • Franke, Benedikt & Simons, Dirk & Voeller, Dennis, 2014. "How do employment tax credits work? An analysis of the German inheritance tax," ZEW Discussion Papers 14-090, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:14090
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/103554/1/802511988.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Thomas Piketty & Emmanuel Saez, 2007. "How Progressive is the U.S. Federal Tax System? A Historical and International Perspective," Journal of Economic Perspectives, American Economic Association, vol. 21(1), pages 3-24, Winter.
    2. Perloff, Jeffrey M & Wachter, Michael L, 1979. "The New Jobs Tax Credit: An Evaluation of the 1977-78 Wage Subsidy Program," American Economic Review, American Economic Association, vol. 69(2), pages 173-179, May.
    3. European Commission, 2013. "Taxation trends in the European Union: 2013 edition," Taxation trends 2013, Directorate General Taxation and Customs Union, European Commission.
    4. Wojciech Kopczuk, 2012. "Taxation of Intergenerational Transfers and Wealth," NBER Working Papers 18584, National Bureau of Economic Research, Inc.
    5. Paola Profeta & Simona Scabrosetti & Stanley Winer, 2014. "Wealth transfer taxation: an empirical investigation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 21(4), pages 720-767, August.
    6. European Commission, 2012. "Taxation trends in the European Union: 2012 edition," Taxation trends 2012, Directorate General Taxation and Customs Union, European Commission.
    7. Miller, Danny & Steier, Lloyd & Le Breton-Miller, Isabelle, 2003. "Lost in time: intergenerational succession, change, and failure in family business," Journal of Business Venturing, Elsevier, vol. 18(4), pages 513-531, July.
    8. Eurostat, 2013. "Handbook on Residential Property Prices Indices," World Bank Publications - Books, The World Bank Group, number 17280, December.
    9. Copenhagen Economics, 2010. "Study on Inheritance Taxes in EU Member States and Possible Mechanisms to Resolve Problems of Double Inheritance Taxation in the EU," Taxation Studies 0034, Directorate General Taxation and Customs Union, European Commission, revised Apr 2011.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. David B. Audretsch & Erik E. Lehmann & Julian Schenkenhofer, 2021. "A Context-Choice Model of Niche Entrepreneurship," Entrepreneurship Theory and Practice, , vol. 45(5), pages 1276-1303, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Benedikt Franke & Dirk Simons & Dennis Voeller, 2016. "Who benefits from the preferential treatment of business property under the German inheritance tax?," Journal of Business Economics, Springer, vol. 86(9), pages 997-1041, December.
    2. Margit Schratzenstaller, 2013. "Vermögensbezogene Steuern. Ansatzpunkte, internationaler Vergleich und Optionen für Deutschland," WIFO Studies, WIFO, number 47219, Juni.
    3. Alexander Krenek & Margit Schratzenstaller, 2018. "A European Net Wealth Tax," WIFO Working Papers 561, WIFO.
    4. Antonio Bassanetti & Matteo Bugamelli & Sandro Momigliano & Roberto Sabbatini & Francesco Zollino, 2014. "The policy response to macroeconomic and fiscal imbalances in Italy in the last fifteen years," PSL Quarterly Review, Economia civile, vol. 67(268), pages 55-103.
    5. Polito, Vito & Wickens, Michael, 2015. "Sovereign credit ratings in the European Union: A model-based fiscal analysis," European Economic Review, Elsevier, vol. 78(C), pages 220-247.
    6. Dolls, Mathias & Fuest, Clemens & Peichl, Andreas, 2012. "Automatic stabilizers and economic crisis: US vs. Europe," Journal of Public Economics, Elsevier, vol. 96(3), pages 279-294.
    7. Jean Pisani-Ferry & André Sapir & Guntram B. Wolff, . "EU-IMF assistance to euro area countries- an early assessment," Blueprints, Bruegel, number 779, December.
    8. BRECHET, Thierry & PERALTA, Susana, 2012. "Markets for tradable emission permits with fiscal competition," LIDAM Discussion Papers CORE 2012054, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    9. Yiannis Kitromilides & Ana Rosa González, 2013. "The EU Financial Transactions Tax: Antecedents and Current Debate," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(3), pages 311-321, May.
    10. Jaanika Merikull & Tairi Room & Karsten Staehr, 2013. "Perceptions of unreported economic activities in Baltic Firms. Individualistic and non-individualistic motives," Bank of Estonia Working Papers wp2012-8, Bank of Estonia, revised 04 Feb 2013.
    11. Leoš Vítek, 2013. "Corporate Income Taxation and the Corporate Tax Base in the Czech Republic [Zdanění firem a jejich daňový základ v České republice]," Český finanční a účetní časopis, Prague University of Economics and Business, vol. 2013(2), pages 38-49.
    12. repec:ilo:ilowps:485510 is not listed on IDEAS
    13. Paola Profeta & Simona Scabrosetti & Stanley Winer, 2014. "Wealth transfer taxation: an empirical investigation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 21(4), pages 720-767, August.
    14. Květa Kubátová & Aneta Borůvková, 2014. "Changes in Tax Mixes of European Union Countries in Crisis [Změny daňových mixů zemí Evropské unie v důsledku krize]," Český finanční a účetní časopis, Prague University of Economics and Business, vol. 2014(1), pages 87-104.
    15. Luca Barbone & Misha V. Belkindas & Leon Bettendorf & Richard Bird & Mikhail Bonch-Osmolovskiy & Michael Smart, 2013. "Study to quantify and analyse the VAT Gap in the EU-27 Member States," CASE Network Reports 0116, CASE-Center for Social and Economic Research.
    16. Sarah Godar & Christoph Paetz & Achim Truger, 2015. "The scope for progressive tax reform in the OECD countries. A macroeconomic perspective with a case study for Germany," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(5), pages 79-117.
    17. European Commission, 2018. "Taxation trends in the European Union: 2018 edition," Taxation trends 2018, Directorate General Taxation and Customs Union, European Commission.
    18. Godar, Sarah. & Paetz, Christoph. & Truger, Achim., 2014. "Progressive tax reform in OECD countries : perspectives and obstacles," ILO Working Papers 994855103402676, International Labour Organization.
    19. Ales S. BERK & Mitja COK & Marko KOSAK & Joze SAMBT, 2013. "CEE Transition from PAYG to Private Pensions: Income Gaps and Asset Allocation," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 63(4), pages 360-381, August.
    20. Virginia Maestri, 2013. "Imputed rent and distributional effects of housing-related policies in Estonia, Italy and the United Kingdom," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 13(2), pages 35-58, December.
    21. European Commission, 2007. "Taxation trends in the European Union: 2007 edition," Taxation trends 2007, Directorate General Taxation and Customs Union, European Commission.

    More about this item

    Keywords

    Alternative tax treatments; Employment tax credits; Inheritance tax; Simulation;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:zewdip:14090. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/zemande.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.