Gross profit taxation versus distributed profit taxation and firm perfomance: effects of Estonia,s corporate income tax reform

Jaan Masso (), Jaanika Meriküll and Priit Vahter

No wp2011-02, Bank of Estonia Working Papers from Bank of Estonia

Abstract: This paper estimates the effect of the corporate tax reform in Estonia in the year 2000. This unique reform nullified the taxation of retained earnings and retained the corporate income tax only on distributed profits. The effect of the reform is identified by comparing the performance of Estonian firms that were affected with that of firms from Latvia and Lithuania, the two other Baltic states. We use firm-level financial data and the difference in differences and propensity score matching methods for our analysis. The results show that the corporate tax reform has resulted in increased holdings of liquid assets and lower use of debt financing. These developments have contributed positively to firms' survival during the recent global economic crisis. A positive effect on investment and labour productivity has also been found

Keywords: corporate income tax; capital structure; liquidity; investments; productivity; comparative economic development (search for similar items in EconPapers)
JEL-codes: D22 H25 H32 O16 (search for similar items in EconPapers)
Date: 2011-04-27, Revised 2011-04-27
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.eestipank.ee/sites/eestipank.ee/files/p ... ers/2011/_wp_211.pdf (application/pdf)

Related works:
Working Paper: GROSS PROFIT TAXATION VERSUS DISTRIBUTED PROFIT TAXATION AND FIRM PERFORMANCE: EFFECTS OF ESTONIA’S CORPORATE INCOME TAX REFORM (2011)
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:eea:boewps:wp2011-02

Ordering information: This working paper can be ordered from
Estonia bld. 13, 15095 Tallinn, ESTONIA

Access Statistics for this paper

More papers in Bank of Estonia Working Papers from Bank of Estonia Estonia bld. 13, 15095 Tallinn, ESTONIA. Contact information at EDIRC.
Bibliographic data for series maintained by Peeter Luikmel ().