Effects of temporary corporate income tax cuts: Evidence from Vietnam

Anh Pham

Journal of Development Economics, 2020, vol. 146, issue C

Abstract: Using a quasi-experimental design and panel data from 2004 to 2014, I estimate how temporary 30% corporate income tax cuts affected firm investment, employment, profits, and tax revenue during the Global Financial Crisis in Vietnam. I find that investment increased during the policy year and came back to its pre-policy level after the policy ended. The evidence does not suggest there were any significant changes in employment. Reported profits of eligible foreign-owned firms doubled in the policy year and remained high after the policy ended. I find no evidence that profits of foreign-owned firms increased because of changes in labor or capital. Instead, multinational firms likely shifted reported profits to take advantage of the tax policy. Tax payments by foreign-owned firms increased, while those by domestic firms decreased.

Keywords: Corporate tax; Profit-shifting; Investment; Development (search for similar items in EconPapers)
JEL-codes: H25 O12 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:146:y:2020:i:c:s0304387820300511

DOI: 10.1016/j.jdeveco.2020.102476

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