What happened to CIT collection? : solving the rates-revenues puzzle

Gaetan Nicodeme, Antonella Caiumi, Ina Majewski

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.

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Year of publication:	[2018]
Authors:	Nicodème, Gaëtan ; Caiumi, Antonella ; Majewski, Ina
Publisher:	Munich, Germany : CESifo, Center for Economic Studies & Ifo Institute
Subject:	corporate tax \| implicit tax rate \| tax reforms \| incorporation \| European Union \| Steuerreform \| Tax reform \| EU-Staaten \| EU countries \| Unternehmensbesteuerung \| Corporate taxation \| Körperschaftsteuer \| Corporate income tax \| Steuerbelastung \| Tax burden \| Steuertarif \| Tax rate