Lagged Reactions in Short-Run Estimates of Tax Shifting of Company Income and Sales Taxes in Kenya
Posted: 29 Oct 2018
Date Written: 1986
The aim is to provide some insights into the short-run dynamics of tax shifting. Using Kenyan cross-section data on firms for 1974 and 1975, estimates are made of current and lagged shifting for both the company income and sales taxes. One of the findings is that the income tax is over-fully shifted. Because this outcome regularly occurs in the empirical literature of tax shifting, the main theoretical effort of the paper is devoted to explaining this result. A Williamson-type model is developed which attributes any excess of 100% shifting to reductions in managerial slack that accompany increases in the income tax.
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