The effects of corporate taxes on small firms

Jarkko Harju, Aliisa Koivisto and Tuomas Matikka

Journal of Public Economics, 2022, vol. 212, issue C

Abstract: We study the impact of corporate taxes on firm-level investments and business activity by exploiting a 6 percentage-point reduction in the corporate tax rate in 2012–2014 in Finland. We use detailed administrative data and a difference-in-differences method comparing small corporations (tax rate cuts) to similar partnerships (no change in taxes). We find no significant average investment responses but do observe an average increase in annual sales (1.6%) and variable costs (2%) when comparing years before (2008–2011) and after (2014–2016) the tax rate cuts. These effects are driven by more cash-constrained firms and firms where the main owner actively works in the firm.

Keywords: Corporate taxation; Investments; Business activity; Small firms (search for similar items in EconPapers)
JEL-codes: G31 G38 H21 H25 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: The Effects of Corporate Taxes on Small Firms (2022)
Working Paper: The Effects of Corporate Taxes on Small Firms (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:212:y:2022:i:c:s0047272722001062

DOI: 10.1016/j.jpubeco.2022.104704

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