The Effect of Loss-Offset Provisions on the Asymmetric Behavior of Corporate Tax Revenues in the Business Cycle

Katarzyna Bilicka

National Tax Journal, 2019, vol. 72, issue 1, 45-78

Abstract: This paper estimates the response of corporate tax revenues to the business cycle fluctuations and calculates a heterogeneous asymmetry in the tax revenue responses between booms and recessions using a new index of loss-offset generosity provisions. I find strong short-run contemporaneous impact of business cycles on corporate tax revenues and a persistent asymmetric response of corporate tax revenues to booms and recession. Loss-offset generosity provisions enhance this asymmetry. Countries with more generous loss-offset provisions experience much more volatile response of corporate tax revenues to business cycles during recessions, magnifying the asymmetry of the cyclicality.

Date: 2019
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