What Happened to CIT Collection? Solving the Rates-Revenues Puzzle

Arbeitspapier

Despite sharp reductions in corporate income tax (CIT) rates worldwide, CIT revenues have not fallen dramatically in the last two decades. This paper investigates the recent developments in CIT in the European Union, by taking a closer look at the potential driving forces behind this puzzle. Using a unique dataset of national sectoral accounts, we decompose the CIT revenue to GDP ratio for the EU and find that while the decrease in the statutory rates has driven down tax collection, the effect was more than offset by a broadening of the taxable base and a slight increase in the size of the corporate sector. However, this result holds for the period 1995-2015 but not for the last decade where base broadening has not been able to match further cuts in rates.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 7412

Classification and Topics

• Classification: Wirtschaft ; Fiscal Policy ; Business Taxes and Subsidies including sales and value-added (VAT) ; Economywide Country Studies: Europe
• Subject: corporate tax ; implicit tax rate ; tax reforms ; incorporation ; European Union

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Nicodeme, Gaetan ; Caiumi, Antonella ; Majewski, Ina
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2018

Further information

• Handle: http://hdl.handle.net/10419/198772
• Last update: 10.03.2025, 11:42 AM CET