Corporation tax revenue growth in the UK: A microsimulation analysis

John Creedy and Norman Gemmell

Economic Modelling, 2009, vol. 26, issue 3, 614-625

Abstract: This paper examines the built-in flexibility properties -- as measured by the elasticity of revenue with respect to profits -- of the UK corporation tax system. Emphasis is placed on determining some of the major influences on the extent to which total corporation tax revenue changes when profits change over the economic cycle. A microsimulation model, CorpSim, is constructed and used to obtain numerical results. In the model, corporations use group relief, capital allowances and losses in a tax-minimising manner. The growth of aggregate corporation tax revenue in practice in the UK appears to be highly volatile in relation to the growth of profits. High volatility in revenue elasticities is found to be especially associated with economic downturns. In mild economic downturns, corporation tax revenue elasticities may rise (because tax growth falls less than profit growth), but in more severe downturns, large but temporary decreases in revenue elasticities (and even negative elasticities) can be expected.

Keywords: Corporation; tax; Microsimulation; modelling; UK; tax; revenue; growth (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0264-9993(09)00017-0
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Corporation Tax Revenue Growth in the UK: A Microsimulation Analysis (2007)
Working Paper: Corporation Tax Revenue Growth in the UK:A Microsimulation Analysis (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:26:y:2009:i:3:p:614-625

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().