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

23 Pages Posted: 21 Feb 2019

See all articles by Gaëtan Nicodème

Gaëtan Nicodème

Université Libre de Bruxelles (ULB) - Solvay Brussels School of Economics and Management; CEPR and CESifo The views expressed in the article are those of the author and should not be attributed to the European Commission.

antonella caiumi

Italian National Institute of Statistics (ISTAT)

Ina Majewski

European Union - European Commission

Multiple version iconThere are 2 versions of this paper

Date Written: 2018

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

JEL Classification: E620, H250, O520

Suggested Citation

Nicodeme, Gaetan and caiumi, antonella and Majewski, Ina, What Happened to Cit Collection? Solving the Rates-Revenues Puzzle (2018). CESifo Working Paper No. 7412, Available at SSRN: https://ssrn.com/abstract=3338766

Gaetan Nicodeme (Contact Author)

Université Libre de Bruxelles (ULB) - Solvay Brussels School of Economics and Management ( email )

50 Avenue Roosevelt
Brussels 1050
Belgium

CEPR and CESifo The views expressed in the article are those of the author and should not be attributed to the European Commission.

No Address Available

Antonella Caiumi

Italian National Institute of Statistics (ISTAT) ( email )

Viale Liegi 13
00198 Rome
Italy

Ina Majewski

European Union - European Commission ( email )

Rue de la Loi 200
Brussels, B-1049
Belgium

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