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The Effect of Corporate Taxes on Investment and EntrepreneurshipSimeon DjankovMinistry of Finance; World Bank Tim GanserHarvard University - Department of Economics Caralee McLieshWorld Bank - International Finance Corporation (IFC) Rita Maria RamalhoWorld Bank Group - Private Sector Advisory Services Department Andrei ShleiferHarvard University - Department of Economics; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI) March 12, 2009 Abstract: We present new data on effective corporate income tax rates in 85 countries in 2004. The data come from a survey, conducted jointly with PricewaterhouseCoopers, of all taxes imposed on "the same" standardized mid-size domestic firm. In a cross-section of countries, our estimates of the effective corporate tax rate have a large adverse impact on aggregate investment, FDI, and entrepreneurial activity. Corporate tax rates are correlated with investment in manufacturing but not services, as well as with the size of the informal economy. The results are robust to the inclusion of many controls.
Number of Pages in PDF File: 65 Keywords: corporate taxes, investment, entrepreneurship JEL Classification: G38, H25 working papers seriesDate posted: February 11, 2008 ; Last revised: April 3, 2009Suggested CitationContact Information
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