Tax Reforms and Inter-temporal Shifting of Corporate Income: Evidence from Tax Records in Slovakia

Jaroslav Bukovina, Tomáš Lichard, Jan Palguta and Branislav Zudel

CERGE-EI Working Papers from The Center for Economic Research and Graduate Education - Economics Institute, Prague

Abstract: We use administrative tax return data for all corporations in Slovakia to demonstrate how policies facilitating inter-temporal income shifting result in elevated corporate income tax (CIT) elasticity estimates. Our strategy exploits kinks in the statutory tax schedules and policy reforms of tax carry-forwards. If inter-temporal shifting is neglected, our bunching estimates imply CIT elasticity of up to 0.65, suggesting a highly sensitive tax base with respect to the marginal tax rate. However, we show that CIT elasticity drops at least 21.2-49.1% when we remove the inter-temporal shifting component. This correction significantly reduces the estimated marginal excess burden of corporate taxation.

Keywords: corporate income tax; elasticity; inter-temporal profit shifting; bunching; tax carry-forwards (search for similar items in EconPapers)
JEL-codes: G32 H25 H26 L25 (search for similar items in EconPapers)
Date: 2020-07
New Economics Papers: this item is included in nep-eur, nep-pbe and nep-pub
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Citations: View citations in EconPapers (1)

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