The Direct Incidence of Corporate Income Tax on Wages

Wiji Arulampalam (), Michael P. Devereux () and Giorgia Maffini ()
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Giorgia Maffini: University of Warwick and Oxford University Centre for Business Taxation

No 707, Working Papers from Oxford University Centre for Business Taxation

Abstract: We examine how far taxes on corporate income are directly shifted onto the workforce. We use data on 55,082 companies located in nine European countries over the period 1996-2003. We identify this direct shifting through cross-company variation in tax liabilities, conditional on value added per employee. Our central estimate is that $1 of additional tax reduces wages by 92 cents in the long run. The incidence of a $1 fall in value added is smaller, consistent with our wage bargaining model. We find only weak evidence of a difference in the effective incidence of taxes paid by multinational companies.

New Economics Papers: this item is included in nep-bec and nep-pub
Date: 2007
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Related works:
Working Paper: The Direct Incidence of Corporate Income Tax on Wages (2009)
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Persistent link: http://EconPapers.repec.org/RePEc:btx:wpaper:0707

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