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

Caiumi, Antonella; Majewski, Ina; Nicodème, Gaëtan

doi:10.2139/ssrn.3338766

Cited by 5 publications

(7 citation statements)

References 11 publications

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“…Loretz (2008) approximates the tax base definition by the net present value of capital allowances and finds that reductions in corporate tax rates over the last decades were often accompanied by base-broadening reforms. This is in line with the findings of Kawano & Slemrod (2016) and Nicodème et al (2018). Blouin et al (2014) focus on caps in interest deductibility and report an increase in the number of countries with thin capitalization regimes over time.…”

Section: Introductionsupporting

confidence: 87%

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Why Is Corporate Tax Revenue Stable While Tax Rates Fall? Evidence from Firm-Level Data

Fuest

Hugger

Wildgruber³

2022

National Tax Journal

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While corporate tax rates in OECD countries declined over the last decades, revenues from corporate taxation relative to GDP remained remarkably stable. This paper uses a comprehensive firm-level dataset to provide an explanation for this rate-revenue puzzle in corporate taxation. Focusing on the period 1995-2016, we show that the reduction in corporate tax rates was counterbalanced by a pronounced increase in corporate profits before taxes. We decompose the rise in profits into changes in EBITDA, depreciation, and financial profits. On average, these three factors contributed almost equally to the tax base expansion, albeit differently across sectors, countries, and firm sizes. JEL-Codes: H250.

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Section: Introductionsupporting

confidence: 87%

“…Thus, corporate income taxation continues to be an important source of revenue for governments. These developments of corporate income tax (CIT) rates and revenues seem contradictory at first glance and are sometimes referred to as the rate-revenue puzzle in corporate taxation (Nicodème et al, 2018).…”

Section: Introductionmentioning

confidence: 99%

Why Is Corporate Tax Revenue Stable While Tax Rates Fall? Evidence from Firm-Level Data

Fuest

Hugger

Wildgruber³

2022

National Tax Journal

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“…Nonetheless, corporate tax receipts have not decreased. This situation, sometimes referred to as the CIT problem or the tax rate-revenue contradiction, has been the focus of previous academic research (Nicodeme et al, 2018). This issue was first described as "the paradox of collection" (Albi, 2010) and was explained by the fact that two strategies included in the budget reforms-lowering tax rates and changing the tax base-had opposite consequences.…”

Section: Source: European Commission (2023) Taxation Trends In the Eu...mentioning

confidence: 99%

Corporate income tax and the race to the bottom phenomenon

Ristić-Cakić,

Đurović-Todorović,

Đorđević

2024

Econ Sust Dev

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The taxation of business profits has recently garnered considerable attention, not only in developing countries but also among the member states of the European Union (EU). Significant changes in tax rates, the definition of taxable income, tax benefits, and legislation to avoid double taxation, driven by competition in this tax area, have resulted in significant consequences for the economic growth of countries. Although the balance sheet importance of corporate income tax (CIT) is limited, its significance is directly attributed to its impact on economic activities. The focus of this study is the competition within the area of CIT and the examination of the phenomenon related to the "race to the bottom" that arises as a result of this competitiveness. The main goal of the paper is to examine the repercussions of CIT competitiveness on economic growth in the EU and Serbia in the specified time frame from 2007 to 2023. The research results show that CIT competitiveness has a positive and statistically significant impact on economic growth in most of the analysed countries. Based on the obtained results, the authors make recommendations for increasing revenue from CIT.

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“…The G20-OECD BEPS project aimed 3 Figures vary across countries. Nicodème, Caiumi, and Majewski (2018) report that the CIT rate cuts between 1995 and 2015 lowered revenues by 0.81 percent of GDP in the EU 28 and that changes to the base overcompensate the rate effect. to address several areas of concern related to profit shifting (Box 3).…”

Section: Tax Competition In Europementioning

confidence: 99%