Tax Loss Offset Restrictions - Last Resort for the Treasury? An Empirical Evaluation of Tax Loss Offset Restrictions Based on Micro Data

22 Pages Posted: 12 Feb 2008 Last revised: 6 Jan 2011

See all articles by Nadja Dwenger

Nadja Dwenger

Max Planck Institute for Tax Law and Public Finance

Date Written: January 2008

Abstract

In Germany, the tax loss carry-forward of corporations significantly increased over the last decade. At the same time only a small percentage of losses have been effectively offset in the following periods. One potential reason for this puzzle is that stricter loss offset restrictions have been introduced in recent years. I use a newly developed micro simulation model for the corporate sector in Germany to evaluate the fiscal effects of these restrictions. Additionally, distributional breakdowns concerning the amounts of tax loss carry-forward and the effects of loss offset restrictions are provided. I find that the restrictions on the use of tax loss carryback are rather ineffective while the newly introduced minimum taxation considerably increases yearly tax revenue by 1.1 billion Euro.

Keywords: micro simulation, loss offset restrictions, corporate taxation, tax loss carryforward, tax loss carry-back, tax reform

JEL Classification: H25, C8

Suggested Citation

Dwenger, Nadja, Tax Loss Offset Restrictions - Last Resort for the Treasury? An Empirical Evaluation of Tax Loss Offset Restrictions Based on Micro Data (January 2008). DIW Berlin Discussion Paper No. 764, Available at SSRN: https://ssrn.com/abstract=1092448 or http://dx.doi.org/10.2139/ssrn.1092448

Nadja Dwenger (Contact Author)

Max Planck Institute for Tax Law and Public Finance ( email )

10117
Germany

HOME PAGE: http://www.tax.mpg.de/en/pub/public_economics/public_economics_people/dwenger_nadja.cfm

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