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on Public Finance |
| 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: | 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: | 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: | 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 |