EconPapers    
Economics at your fingertips  
 

The Non-linear Effect of Corporate Taxes on Economic Growth

Jan Hunady () and Marta Orviská
Additional contact information
Marta Orviská: Matej Bel University in Banská Bystrica, Slovakia

Timisoara Journal of Economics and Business, 2015, vol. 8, issue 1s, 14-31

Abstract: The paper deals with the problem of taxation and its potential impact on economic growth and presents some new empirical insights into this topic. The main aim of the paper is to verify an assumed nonlinear impact of corporate tax rates on economic growth. Based on the theory of public finance and taxation, we hypothesize that at relatively low tax rates it is possible that the impact of taxation on economic growth become slightly positive. On the other hand when the tax rates are higher a negative impact of taxation on economic growth could be expected. Despite the fact that the most of the existing studies find a negative linear relationship between these variables, we can also find strong support for a non-linear relationship from several theoretical models as well as some empirical studies. Based on panel data fixed-effects econometric models, we, as well, find empirical evidence for a non-linear relationship between nominal and effective corporate tax rates and economic growth. Our data consists of annual observations for the period 1999 to 2011 for EU Member States. Based on the results, we also estimated the optimal level of the corporate tax rate in terms of maximizing economic growth in the average of the EU countries.

Keywords: taxation; economic growth; corporate tax; effective tax rate. (search for similar items in EconPapers)
JEL-codes: H25 E6 O40 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://tjeb.ro/index.php/tjeb/article/download/tjeb-vol8-2015-1s-02/pdf (application/pdf)
http://tjeb.ro/index.php/tjeb/article/view/tjeb-vol8-2015-1s-02 (text/html)

Related works:
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:wun:timjeb:tjeb:v08:y2015:i01s:a02

Ordering information: This journal article can be ordered from
16 J. H. Pestalozzi Street, 300115 Timisoara Romania
http://www.tjeb.ro

Access Statistics for this article

Timisoara Journal of Economics and Business is currently edited by Mihaela Neamtu and Camelia Margea

More articles in Timisoara Journal of Economics and Business from West University of Timisoara, Romania, Faculty of Economics and Business Administration Contact information at EDIRC.
Bibliographic data for series maintained by Romeo Margea ().

 
Page updated 2020-07-19
Handle: RePEc:wun:timjeb:tjeb:v08:y2015:i01s:a02