The Elasticity of Corporate Taxable Income: New Evidence from UK Tax Records

Michael Devereux, Li Liu and Simon Loretz

American Economic Journal: Economic Policy, 2014, vol. 6, issue 2, 19-53

Abstract: We estimate the elasticity of corporate taxable income with respect to the statutory corporation tax rate using the population of UK corporation tax returns. We analyze bunching in the distribution of taxable income at kinks in the marginal rate schedule. We decompose this elasticity into an elasticity of total income with respect to the corporation tax rate, and an elasticity of the share of income taken as profit with respect to the difference between the personal and corporate tax rates. This implies a marginal deadweight cost at the ?10,000 kink of around 29 percent of tax revenue.

JEL-codes: G32 H24 H25 L25 (search for similar items in EconPapers)
Date: 2014
Note: DOI: 10.1257/pol.6.2.19
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Citations: View citations in EconPapers (104)

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Related works:
Chapter: The Elasticity of Corporate Taxable Income: New Evidence from UK Tax Records (2012)
Working Paper: The Elasticity of Corporate Taxable Income: New Evidence from UK Tax Records (2012)
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