What Happened to CIT Collection? Solving the Rates-Revenues Puzzle

Gaëtan Nicodème, Antonella Caiumi and Ina Majewski

No 74, Taxation Papers from Directorate General Taxation and Customs Union, European Commission

Abstract: Despite sharp reductions in corporate income tax (CIT) rates worldwide, CIT revenues have not fallen dramatically in the last two decades. This paper investigates the recent developments in CIT in the European Union, by taking a closer look at the potential driving forces behind this puzzle. Using a unique dataset of national sectoral accounts, we decompose the CIT revenue to GDP ratio for the EU and find that while the decrease in the statutory rates has driven down tax collection, the effect was more than offset by a broadening of the taxable base and a slight increase in the size of the corporate sector. However, this result holds for the period 1995-2015 but not for the last decade where base broadening has not been able to match further cuts in rates.

Keywords: Corporate Tax; Implicit Tax Rate; Tax Reforms; Incorporation; European Union (search for similar items in EconPapers)
JEL-codes: E62 H25 O52 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2018-12
New Economics Papers: this item is included in nep-acc, nep-mac, nep-pbe and nep-pub
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: What Happened to CIT Collection? Solving the Rates-Revenues Puzzle (2018)
Working Paper: What Happened to CIT collection? Solving the Rates-Revenues Puzzle (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:tax:taxpap:0074

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