|
on Public Economics |
| By: | Baumgart, Eike; Blaufus, Kay; Paczkowski, Katharina |
| Abstract: | We provide firm-level evidence on expected tax burdens under the OECD's Pillar Two minimum tax using hand-collected financial statement disclosures from listed multinational groups headquartered in countries where Pillar Two has already taken effect. Our setting exploits a common reporting framework that requires inscope firms to assess and disclose material tax liabilities under the global minimum tax, allowing us to study the early incidence of the reform across firms and jurisdictions. We find that expected burdens are highly concentrated: although most firms disclose exposure to Pillar Two, only 22.5% recognize positive global minimum tax liabilities, and a few firms account for much of the total reported burden. Cross-sectional variation in global minimum tax liabilities is strongly associated with firm exposure to low-taxed foreign income and a group's international presence. At the same time, substantial cross-country differences remain, despite harmonized rules and accounting standards. These differences are positively associated with country-level tax enforcement. Our results suggest that the early expected incidence of Pillar Two is considerably less uniform than its common legal framework might suggest. |
| Keywords: | Global Minimum Tax, Pillar 2, Corporate Taxation, International Taxation, Tax Enforcement |
| JEL: | H25 H26 F23 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:arqudp:340834 |
| By: | Sebastian Eichfelder (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Hang T.T. Nguyen (Otto-von-Guericke-Universität Magdeburg) |
| Abstract: | This study examines the interplay between corporate tax avoidance and the incidence of the corporate income tax falling on wages and employment. Using the German Business Tax Reform 2008 (GBTR 2008) as a natural experiment, we investigate how a large tax cut of about nine percentage points affected wages and the number of employees of low-avoidance firms compared with high-avoidance firms. We expect an abnormal wage response of low-avoidance firms that are more burdened by corporate taxation and benefitted more from the tax cut. In difference-in-differences and triple-difference regressions, we do not find significant evidence for an abnormal wage response of low-avoidance firms. A potential explanation might be strong labour protection regulations in Germany that might limit the ability of German firms to shift corporate taxes on labour. We find some but not very robust evidence for an abnormal increase in employment of low-avoidance firms after the GBTR 2008. Our findings align with recent evidence that German employees bear only a small fraction of German corporate taxation and that this burden primarily falls on employees of very small firms that are only poorly represented in our Amadeus data. |
| Keywords: | Tax Incidence, Corporate Income Tax, Tax Avoidance, Employment Effects, Wage Effects |
| JEL: | E24 H22 H25 J30 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:mag:wpaper:26007 |
| By: | Philippe Demougin; Áron Kiss; Alexander Leodolter; Kristine Van Herck |
| Abstract: | This brief discusses how reforms in Member States related to taxation, in particular business taxation, can contribute to spurring investment, while respecting the need to maintain public revenue in a context of high debt and significant fiscal needs. After describing how corporate taxation contributes to the public finances of EU countries, the brief surveys recent studies analysing the impact of corporate taxation on business investment. Recent studies suggest that cuts to statutory tax rates represent a costly way of spurring investment. Targeted incentives for investment, including investment tax credits and accelerated depreciation rules, may be a more cost-effective way to spur investment, although their stimulative effects are not sufficient to counterbalance the static fiscal costs. Business taxation based on tax bases other than profits (e.g. on real estate or turnover) has also been found to be more distortive and harmful to investment than profit-based taxes. Specific aspects of the tax code may open the way for aggressive tax planning (ATP) whereby taxpayers reduce their corporate tax liability through arrangements that may be legal but are in contradiction with the intent of the law. Through the European Semester and reforms in national Recovery and Resilience Plans, the EU has achieved some success in fighting ATP in a number of countries, although some issues remain. |
| Keywords: | Business taxation, corporate income tax, investment, EU, Draghi report, aggressive tax planning, European Semester. |
| JEL: | H25 H26 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:euf:ecobri:089 |
| By: | Hans A. Holter; Dirk Krueger; Serhiy Stepanchuk |
| Abstract: | This paper argues that a progressive tax system combined with individual taxation of married couples can generate more revenue than the current household-based U.S. system, especially when the extra revenues do not induce negative labor supply effects through increased government transfers. A progressive system that taxes individuals rather than couples jointly leads to larger labor force participation and higher average human capital, creates more “fiscal space”, Laffer curves shift up and social welfare potentially rises. In our model with one- and two-earner households, human capital and an extensive margin labor supply decision, the peak of the Laffer curve is 18 percentage points higher with an individual-based, progressive tax system than with the current U.S. tax system. The maximum revenue is attained with 100% more progressivity than the current system, and at an average tax rate of 42%. Progressive taxation, when imposed on individuals rather than households, lowers the average tax rate for individuals with modest potential income that are close to the participation margin. At the same time, it creates a positive income effect on the labor supply of these individuals by reducing the net income of their higher earning spouses and limiting their net earnings potential in the case of a high temporary labor productivity. Steady state social welfare is larger with individual taxation. The optimal progressivity is higher than the current U.S. status quo, and results in welfare gains of 0.8% in consumption-equivalent variation. Cohorts born during the transition also experience significant welfare gains from this reform. |
| JEL: | E62 H20 H60 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35137 |
| By: | Mara Faccio; Stefano Manfredonia |
| Abstract: | We use establishment-level data to examine the relation between corporate taxes and financial distress. Using a border discontinuity design, we document that higher corporate income tax rates significantly increase financial distress, particularly for geographically concentrated firms, with sizable spillovers across establishments. We further investigate how taxes affect establishment-level financial distress by exploiting the interest limitation rule introduced by the 2017 Tax Cuts and Jobs Act. Using a difference-in-differences design, we find that affected firms experience a decline in financial distress. This occurs because the reduced tax advantage of debt induces firms to deleverage, reducing financial distress through capital structure adjustments. |
| JEL: | G3 G32 G38 H25 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35134 |
| By: | Felix Ward (Erasmus University Rotterdam); Casper de Vries (Erasmus University Rotterdam) |
| Abstract: | Does the preferential tax treatment of debt over equity cause banks to increase their leverage? We construct a novel dataset tracing the evolution of the debt tax shield for banks in advanced economies from 1870 to 2020. Exploiting variation from nearly all changes in banking-sector tax shields since the nineteenth century, we show that a 1 percentage point increase in the tax shield reduces bank capital ratios by 0.25-0.8 percentage points. Our estimates suggest that the tax advantage of debt was an important driver of the rise in bank leverage during the twentieth century. |
| Keywords: | corporate income taxation, debt bias, interest deductibility, financial stability |
| JEL: | E44 G21 G32 |
| Date: | 2026–04–02 |
| URL: | https://d.repec.org/n?u=RePEc:tin:wpaper:20260016 |
| By: | Hang T.T. Nguyen (Otto-von-Guericke University Magdeburg) |
| Abstract: | This paper investigates the relationship between corporate income tax rates (CITR) and firm-level productivity growth using AMADEUS data of 304, 410 observations from 79, 842 European firms from 2006 to 2019. The results imply a robust non-linear relationship: higher CITRs are positively associated with productivity growth for high-productivity firms near the technological frontier and negatively associated with the productivity catch-up of less productive firms. Heterogeneity tests suggest a stronger productivity response to tax rate changes of small and medium-sized enterprises (SMEs) and domestic firms, while I do not find a significant productivity response to tax rate changes for large and multinational firms. The main findings are robust across various productivity estimation methods and model specifications and challenge the conventional view that higher business tax rates have a linear and negative effect on productivity growth. The paper contributes to the ongoing debate about the role of corporate taxation in shaping economic competitiveness and long-term growth. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:mag:wpaper:26006 |
| By: | Takafumi Suzuki (Faculty of Business, Aichi Shukutoku University,); Makoto Hasegawa (The Graduate School of Economics, Kyoto University); Masayoshi Hayashi (Faculty of Economics, The University of Tokyo); Takafumi Kawakubo (Osaka School of International Public Policy, The University of Osak) |
| Abstract: | Border taxes are effective only insofar as customs can verify declarations at the border. We study whether higher border tax rates induce importers to understate the declared tax base, and whether such responses are concentrated where customs has less information from past transactions. Using confidential Japanese customs microdata linked to UN Comtrade, we construct HS6 product–partner–year cells for 2014–2021 and estimate how tax rates affect the trade-cost-adjusted log gap between partnerreported exports and Japan-reported imports, a reduced-form proxy for trade misreporting. The average semi-elasticity of this gap with respect to the tax rate is positive but statistically indistinguishable from zero. Yet the average masks sharp heterogeneity: responses are close to zero in information-rich lanes but economically meaningful in thin-information lanes, and somewhat larger where implied-unit-value dispersion is greater. A decomposition of mirror-data outcomes shows that the tax-responsive component of these discrepancies appears mainly in quantities rather than in implied unit values. The results imply that, even in a high-capacity setting, the effective incidence of border taxes depends on the lane-level information available for enforcement. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:tky:fseres:2026cf1272 |
| By: | Sebastian Eichfelder (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Jochen Hundsdoerfer (Freie Universität Berlin); Martin Kaltenhaeuser (Otto-von-Guericke-Universität Magdeburg); Mona Noack (Freie Universität Berlin) |
| Abstract: | We provide evidence that the capitalization of taxes in share prices depends on investor attention and can create additional implicit taxes for inattentive investors. Interpreting a German capital gains tax reform as a natural experiment, we identify investor attention by the temporal distance to the deadline (deadline effect) and media coverage (media effect). Although the reform was announced 18 months in advance, we find evidence for large abnormal returns around the deadline. In the two days preceding it, daily returns (share prices, trading volumes) of treated stocks increased abnormally by 2.5 pp (7.0%, 296.7%). The cumulative abnormal return CAR one day before the deadline was 10.7%. The media coverage also abnormally increased returns and trading activity. In the last months of 2008, 20 additional articles per week on the reform resulted in a CAR of about 2% in one week. Inattentive investors paid abnormally high prices in periods of high attention, implying an implicit tax burden of up to 67.9% of realized and 130.5% of expected returns one day before the deadline. |
| Keywords: | Implicit taxes, information dissemination, investor attention, announcement effect, deadline effect, tax capitalization |
| JEL: | G12 G14 H24 M40 M48 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:mag:wpaper:26005 |
| By: | Manuel E. Lago; Santiago Lago-Peñas; Jorge Martinez-Vazquez; Cristian Sepulveda |
| Abstract: | This paper offers a comprehensive and updated survey of subnational revenue autonomy and vertical fiscal imbalance in fiscally decentralized systems. We argue that progress in understanding the effects of revenue decentralization has been fundamentally shaped by how it is measured, and that the widespread reliance on transfer-dependence proxies has generated persistent inconsistencies in the empirical literature. Moreover, distinguishing between optimal, actual, and excess Vertical Fiscal Imbalance is essential for policy design. We focus on the effects of revenue autonomy in enhancing spending efficiency, strengthening accountability, and promoting fiscal discipline, while also shaping outcomes in macroeconomic stability, economic growth, and regional redistribution. While the intricate nature of the subject does not allow for an all-inclusive survey, we aim to provide a thorough examination of the most salient effects of subnational revenue autonomy and the pervasiveness of vertical fiscal imbalances. We conclude by highlighting priorities for future research. |
| Keywords: | Revenue Assignments; Vertical Fiscal Imbalances; Tax Autonomy; Fiscal Decentralization; Subnational Governments |
| JEL: | H71 H72 H73 H77 |
| Date: | 2026–05–05 |
| URL: | https://d.repec.org/n?u=RePEc:ida:wpaper:wp2611 |
| By: | Latka, Catharina; Mittenzwei, Klaus; Heckelei, Thomas |
| Abstract: | Many consumers in high-income countries do not adhere to dietary guidelines. This imposes a threat to their health and to the environment as some of the excessively consumed foods also have high emission footprints. Food price changes (e.g. enforced through taxes) are a promising lever to steer consumers toward a recommended diet. However, a country-level pricing policy fails to only target those consumers that do not follow dietary recommendations but affect all consumers. Here, we estimate individual household-specific demand systems using a locally-weighted approach to capture differences in the preference structure and price sensitivity of consumers. We compare these to a pooled estimation and assess elasticity differences and implications for meat tax simulations. Tax-induced meat consumption reductions, embedded greenhouse gas emission savings and the level of adherence to dietary recommendations are compared at the national level and for consumer groups defined based on their baseline meat intake. Our findings stress that without considering heterogeneity in price responsiveness, we tend to over-estimate benefits from pricing policies. Consumers eating more meat than recommended are less responsive to price changes, but would still contribute most to emission savings and show the largest absolute dietary improvements. |
| Keywords: | Consumer/Household Economics |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aes026:397876 |