Does Corporate Tax Burden Affect Growth? Evidences from OECD Countries

Abstract

This paper explores the tax burden - economic growth nexus. It advances an explanatory framework for the existence of such nexus. First, we argue that tax burden reduces the income remaining at the disposal of the private sector. Second, we empirically test for the existence of a non-linear impact of corporate tax burden on growth for a dataset of 21 OECD countries, for the period 1975 - 2012. We mostly involve mixed effects models with three levels of nested random effects. Our main empirical result consists in the evidences of a non-linear relation between corporate tax burden and economic growth.

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“…The paper focuses on the impact of corporate taxation government revenues and employment levels in countries that belong to the Organization of Economic Cooperation and Development (OECD) group. In OECD countries, a non-linear relationship exists between economic growth and corporate tax burden (Bodgan & Maria, 2017). Increasing the tax burden was found to have a detrimental effect on economic growth in OECD countries in the long run (Bodgan & Maria, 2017).…”

“…In OECD countries, a non-linear relationship exists between economic growth and corporate tax burden (Bodgan & Maria, 2017). Increasing the tax burden was found to have a detrimental effect on economic growth in OECD countries in the long run (Bodgan & Maria, 2017). The effect on the economy of increasing the tax burden in countries belonging to the OECD group was negative when the surplus tax revenues were spent on unproductive expenditures (Connolly & Li, 2016).…”

Empirical Relationship Between Corporate Income Tax, Government Revenue, and Employment in Oecd Countries

“…The paper focuses on the impact of corporate taxation government revenues and employment levels in countries that belong to the Organization of Economic Cooperation and Development (OECD) group. In OECD countries, a non-linear relationship exists between economic growth and corporate tax burden (Bodgan & Maria, 2017). Increasing the tax burden was found to have a detrimental effect on economic growth in OECD countries in the long run (Bodgan & Maria, 2017).…”

“…In OECD countries, a non-linear relationship exists between economic growth and corporate tax burden (Bodgan & Maria, 2017). Increasing the tax burden was found to have a detrimental effect on economic growth in OECD countries in the long run (Bodgan & Maria, 2017). The effect on the economy of increasing the tax burden in countries belonging to the OECD group was negative when the surplus tax revenues were spent on unproductive expenditures (Connolly & Li, 2016).…”