Do Corporate Tax Cuts Increase Investments?
Free University of Berlin (FUB)
WHU - Otto Beisheim School of Management
December 2, 2013
FAccT Center Working Paper Nr. 14/2013
This paper studies the effect of corporate taxes on investment. Using firm-level data on German corporations, we investigate the 2008 tax reform that cut corporate taxes by 10 percentage points. We expect heterogeneous investment responses across firms, since firms with a foreign parent have more cross-country profit shifting opportunities than domestically owned firms. Using a matching difference-in-differences approach, we show that, following the corporate tax cut, domestically owned firms increased investments to a larger extent than foreign-owned firms. Our results imply that corporate tax changes can increase corporate investment but have heterogeneous investment responses across firms.
Number of Pages in PDF File: 27
Keywords: Corporate taxation, Investment
JEL Classification: G31, H24, H25working papers series
Date posted: December 3, 2013
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