Which Workers Bear the Burden of Corporate Taxation and Which Firms Can Pass It On? Micro Evidence from Germany

Clemens Fuest, Andreas Peichl and Sebastian Siegloch

No 1216, Working Papers from Oxford University Centre for Business Taxation

Abstract: In this paper we provide empirical evidence on the wage incidence of the German business tax, which is set at the municipal level. For our analysis, we use a very rich administrative linked employer-employee panel, covering 11 years, and link it to data on the business tax rates of about 11,500 German municipalities. On average 8% of the municipalities adjust their business tax rate per year. We are able to exploit multiple quasi-natural experiments to identify the tax incidence on wages. The detailed administrative data allow us to estimate heterogenous incidence e ects and to explore different channels of how the business tax burden is passed on. We nd a wage elasticity with respect to the e ective marginal tax rate of -0.18. Low-skilled labor shares a relatively higher burden as well as workers in firms with non-binding sectoral collective agreements or firm level bargaining contracts.

Keywords: business taxation; wage incidence; microdata; Germany (search for similar items in EconPapers)
JEL-codes: H22 H25 J30 J38 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (4)

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