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Title:The welfare loss from differential taxation of sectors in Germany PDF Logo
Authors:Radulescu, Doina Maria
Stimmelmayr, Michael
Issue Date:2008
Series/Report no.:CESifo working paper 2423
Abstract:In the spirit of Harberger, we apply a dynamic computable general equilibrium (CGE) model and estimate the excess burden stemming from the tax-induced distortion in the allocation of capital across the corporate and the non-corporate sectors in Germany. In doing so, we perform a counterfactual analysis and ask how the allocation of capital across sectors would change compared with a sector-neutral tax system which assures an identical effective tax burden on both sectors. Our estimates suggest that the excess burden per period ranges from 2.0 to 3.6 billion Euros or from about 0.1 to 0.16 per cent of GDP. In present value terms, the excess burden translates to about 104 billion Euros or 4.7 per cent of GDP. In order to identify the impact of the firm's financial behaviour on the size of the emerging excess burden, we perform several sensitivity analyses with regard to debt financing, external equity financing and debt constraints via agency cost.
Subjects:Capital income taxation
non-uniform taxation
computable general equilibrium modelling
JEL:C68
C87
D92
H25
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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