Do corporate tax cuts increase investments?

Arbeitspapier

This paper studies the effect of corporate taxes on investment. Using firm-level data on German corporations, we investigate the 2008 tax reform that cut corporate taxes by 10 percentage points. We expect heterogeneous investment responses across firms, since firms with a foreign parent have more cross-country profit shifting opportunities than domestically owned firms. Using a matching difference-in-differences approach, we show that, following the corporate tax cut, domestically owned firms increased investments to a larger extent than foreign-owned firms. Our results imply that corporate tax changes can increase corporate investment but have heterogeneous investment responses across firms.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: arqus Discussion Paper ; No. 153

Classification and Topics

• Classification: Wirtschaft ; Capital Budgeting; Fixed Investment and Inventory Studies; Capacity ; Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes ; Business Taxes and Subsidies including sales and value-added (VAT)
• Subject: Corporate taxation ; Investment

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Brandstetter, Laura ; Jacob, Martin
• Event: Veröffentlichung
• (who): Arbeitskreis Quantitative Steuerlehre (arqus)
• (where): Berlin
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/88595
• Last update: 10.03.2025, 11:43 AM CET