The German Business Tax Reform of 2000: A General Equilibrium Analysis

Sørensen Peter Birch
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Sørensen Peter Birch: University of Copenhagen, EPRU and CESifo,Copenhaga, Denmark

German Economic Review, 2002, vol. 3, issue 4, 347-378

Abstract: In the year 2000 Germany enacted a major tax reform involving significant cuts in corporate and personal tax rates and a controversial change in the system of dividend taxation. This paper discusses the effects of the business tax reform on the German economy. The analysis is based on a detailed general equilibrium model of the OECD economy which is designed to illustrate the domestic and international effects of national tax policies. The simulations indicate that the German business tax reform will raise domestic economic activity and welfare, although the welfare gain will accrue disproportionately to households with a high ratio of property income to total income.

Date: 2002
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DOI: 10.1111/1468-0475.00064

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