Do Consumers Pay the Corporate Tax?

53 Pages Posted: 22 Oct 2019 Last revised: 21 Jan 2022

See all articles by Martin Jacob

Martin Jacob

WHU - Otto Beisheim School of Management

Maximilian A. Müller

University of Cologne

Thorben Wulff

WHU - Otto Beisheim School of Management

Date Written: January 20, 2022

Abstract

Using granular gas price data and rich variation in corporate tax rates, we find that corporate taxes lead to higher consumer prices, especially when firms have limited access to tax avoidance opportunities or tax shields and face stricter tax enforcement. This effect is rooted in the adverse effect of taxes on capital investment and is stronger when consumer demand is less elastic. Our results suggest that tax policies that increase statutory tax rates or combat tax avoidance may have unintended consequences for consumers through higher prices.

Keywords: Corporate tax, tax incidence, tax avoidance, tax enforcement, tax policy

JEL Classification: D12; H22; H25; H26

Suggested Citation

Jacob, Martin and Müller, Maximilian A. and Wulff, Thorben, Do Consumers Pay the Corporate Tax? (January 20, 2022). TRR 266 Accounting for Transparency Working Paper Series No. 15, Available at SSRN: https://ssrn.com/abstract=3468142 or http://dx.doi.org/10.2139/ssrn.3468142

Martin Jacob (Contact Author)

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
D-56179 Vallendar, 56179
Germany

HOME PAGE: http://www.whu.edu/steuer

Maximilian A. Müller

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

Thorben Wulff

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany

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