Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/104725
Authors: 
Fossen, Frank M.
Steiner, Viktor
Year of Publication: 
2014
Series/Report no.: 
DIW Discussion Papers 1424
Abstract: 
Local business profits respond to local business tax (LBT) rates that vary across municipalities. We estimate that a one percent increase in the LBT rate decreases the LBT base by 0.45 percent, based on the universe of German LBT return files, which include corporations and unincorporated businesses. However, the fiscal equalization scheme largely compensates municipalities for the loss in the LBT base when they increase the LBT rate. Our estimates suggest that using taxrevenue data instead of tax return data, as commonly done in the literature, results in a significant bias of the elasticity away from zero.
Subjects: 
local business tax
corporate tax
tax responsiveness
tax-rate elasticity
JEL: 
H25
H71
Document Type: 
Working Paper

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