The Elasticity of Corporate Taxable Income Across Countries

Claudio Agostini, Zareh Asatryan, Laurent Bach, Govindadeva Bernier, Marinho Berthana, Katarzyna Bilicka, Anne Brockmeyer, Jaroslav Bukovina, Guillermo Falcone, Pablo Garriga, Yuxuan He, Janský, Petr, Evangelos Koumanakos, Tomas Lichard, Jan Palguta, Elena Patel, Pereira dos Santos, João, Louis Perrault, Thomas Schwab, Nathan Seegert, Oliver Skultety, Kristina Strohmaier, Maximilian Todtenhaupt, Guillermo Vuletin and Branislav Zudel

No 21274, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Do firms respond similarly to corporate tax incentives across countries? We provide globally comparable estimates of the corporate elasticity of taxable income using administrative tax return data from sixteen countries and a unified empirical framework. Exploiting bunching at a common kink, zero taxable income, we estimate elasticities ranging from 0.08 to 1.9, with an average of 0.79. To explain this heterogeneity, we link elasticities to tax policy, firm characteristics, and country fundamentals. These differences imply that identical corporate tax reforms can generate sharply different revenue effects across countries, leading to substantial heterogeneity in the efficiency costs of corporate taxation.

Keywords: Corporate taxation; Elasticity; Bunching (search for similar items in EconPapers)
JEL-codes: C14 H25 (search for similar items in EconPapers)
Date: 2026-03
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