The corporation tax elasticity of charitable donations
Paul L. Baker and
Journal of Economic Behavior & Organization, 2020, vol. 178, issue C, 1-14
With the continued downward pressure on corporation tax rates, this paper analyses the corporation tax elasticity of donations. There is strong evidence of an inverted U-shape relationship between corporation tax rates and donations. Donations are initially increasing at a decreasing rate as a function of the corporation tax rate and are maximised at a rate of 27 percent. Between 2014 and 2018 the UK corporation tax rate decreased from 21 percent to 19 percent. Our results indicate that – ceteris paribus – this equates to a 34 percent decrease in an average UK firm's donations. As corporation tax rates continue to decline, the potential revenue implications for charities are increasing in importance. The evidence also supports the theory of management utility maximisation as a determinant of corporate giving.
Keywords: Corporation tax rate; Charitable donations; Management utility (search for similar items in EconPapers)
JEL-codes: H25 H32 L2 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:178:y:2020:i:c:p:1-14
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