Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/226307 
Year of Publication: 
2020
Series/Report no.: 
CESifo Working Paper No. 8605
Publisher: 
Center for Economic Studies and Ifo Institute (CESifo), Munich
Abstract: 
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.
Subjects: 
corporate income taxation
corporate tax revenues
corporate profitability
JEL: 
H25
Document Type: 
Working Paper
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