Tax Reforms and Inter-Temporal Shifting of Corporate Income: Evidence from Tax Records in Slovakia

CERGE-EI Working Paper Series No. 660

54 Pages Posted: 27 Oct 2020 Last revised: 24 Feb 2021

See all articles by Jaroslav Bukovina

Jaroslav Bukovina

affiliation not provided to SSRN

Tomas Lichard

Charles University in Prague - CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences

Jan Palguta

Universidad Carlos III de Madrid - Department of Economics

Branislav Zudel

Charles University in Prague - CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences

Date Written: September 1, 2020

Abstract

We use administrative tax return data for all corporations in Slovakia to demonstrate how policies facilitating inter-temporal income shifting result in elevated corporate income tax (CIT) elasticity estimates. Our strategy exploits kinks in the statutory tax schedules and policy reforms of tax carry-forwards. If inter-temporal shifting is neglected, our bunching estimates imply CIT elasticity of up to 0.65, suggesting a highly sensitive tax base with respect to the marginal tax rate. However, we show that CIT elasticity drops at least 21.2-49.1% when we remove the inter-temporal shifting component. This correction significantly reduces the estimated marginal excess burden of corporate taxation.

Keywords: corporate income tax, elasticity, inter-temporal profit shifting, bunching, tax carry-forwards

JEL Classification: G32, H25, H26, L25

Suggested Citation

Bukovina, Jaroslav and Lichard, Tomas and Palguta, Jan and Zudel, Branislav, Tax Reforms and Inter-Temporal Shifting of Corporate Income: Evidence from Tax Records in Slovakia (September 1, 2020). CERGE-EI Working Paper Series No. 660, Available at SSRN: https://ssrn.com/abstract=3688267 or http://dx.doi.org/10.2139/ssrn.3688267

Jaroslav Bukovina

affiliation not provided to SSRN

Tomas Lichard

Charles University in Prague - CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences ( email )

Politickych veznu 7
Prague, 111 21
Czech Republic

HOME PAGE: http://www.cerge-ei.cz

Jan Palguta (Contact Author)

Universidad Carlos III de Madrid - Department of Economics ( email )

Calle Madrid 126
Getafe, 28903
Spain

Branislav Zudel

Charles University in Prague - CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences ( email )

Politickych veznu 7
Prague, 111 21
Czech Republic

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