Transcript The corporate income tax-revenue paradox: Evidence in the EU

The corporate income tax rate-revenue
paradox: Evidence in the EU
JOANNA PIOTROWSKA
&
WERNER VANBORREN
PRESENTED BY:
GEORGES VIVIEN HOUNGBONON
Outlines
 Preliminaries
 Outcomes of the study
Corporate income tax-revenue paradox?
 Corporate tax competition within EU.
 Corporate tax rate decreases from 1994 to 2005 :
From 33% to 27%.
 But corporate income tax revenues relative to GDP
has been relatively stable around 3%.
 Purpose of the article: explain why? (Graph 1)
Some reasons given in the litterature
 First thoughts: data limitations, lack of specific
analyses.
 The specificities of the corporate tax system;
Auerbach (2006); Creedy and Gemmell (2007).
 Corporatization and income shifting; Clausing
(2006); Sørensen (2006).
 Corporate profitability and capital income;
Auerbach and Poterba (1987); Douglas (1990); Swiston and
al. (2007).
Methodology
 Data from Eurostat on 16 selected EU countries from
1994 to 2005
 Decomposition of the ratio : corporate income tax
revenues over GDP (R/GDP).
 Let R = Corporate income tax revenues;
C = corporate income and P = Business income
 According to Sørensen’s formula:
 R/GDP = (R/C)*(C/P)*(P/GDP)
The outcomes of the study at the regional scale
 R/C = corporate tax level has increased and also
decreased.
 C/P = corporatization has increased by 8,2%.
 P/GDP = part of business income in GDP has been
relatively stable. (Graph 2)
 Corporatization
is the most driven factor of
the stability of corporate income tax revenues
relative to the GDP in the EU.
The outcomes of the study at country scale
 The three indicators vary differently according to
countries.
 However C/P (share of total business income
accruing to the corporate sector) seems to have
increased in many countries (table on next slide)
 Except from Slovakia and Finland respectively where
R/GDP has decrease and increased steadily, this
ratio has remained stable throughout the period of
study.
• Corporatization is again found to be the
driving factor of R/GDP within EU coutries.
Country
R/C
C/P
P/GDP
Belgium
+
+
-
Czech R.
-
+
+
Danemark
+
+
0
Estonia
-
+
+
Spain
+
-
-
France
+
+
0
Italy
-
+
-
Lithuania
-
+
-
Netherland
-
+
+
Austria
+
+
+
Poland
-
+
+
Portugal
+
-
-
Slovakia
-
-
-
Finland
0
+
+
Sweden
+
+
-
UK
-
+
0
+ : increase
- : decrease
Source: Autors’ computations
0: stable
Conclusion
 Corporatization which is the share of total business
income accruing to the corporate sector is the most
driving factor of the corporate income tax revenue
relative to the GDP evolution both at regional and
country level.
Thanks for your attention