Corporate taxation under weak enforcement Pierre Bachas, Mauricio Soto
By: Bachas, Pierre
.
Contributor(s): Soto, Mauricio.
Material type: 
ArticlePublisher: 2021Subject(s): IMPUESTO DE SOCIEDADES | PAISES EN DESARROLLO | ESFUERZO FISCAL | ELASTICIDAD IMPOSITIVA | COSTA RICA
In:
American Economic Journal : Economic Policy v. 13, n. 4, November 2021, p. 36-71Summary: How should developing countries tax corporate income? We study this question in Costa Rica, where firms face higher average tax rates on profits when revenues marginally increase. We combine discontinuity and bunching designs to estimate the elasticity of taxable profit and separate it into revenue and cost elasticities. We find that firms faced with a higher tax rate slightly reduce revenues but considerably increase costs, thus producing a large elasticity of taxable profit of 3–5. In this context, the revenue-maximizing rate for a corporate tax on profit is below 25 percent, and we show that a tax policy that broadens the base while lowering the rate can almost double the tax revenue collected from these firms.
| Item type | Current location | Home library | Call number | Status | Date due | Barcode |
|---|---|---|---|---|---|---|
| Artículos | IEF | IEF | OP 2135/2021/4-2 (Browse shelf) | Available | OP 2135/2021/4-2 |
Browsing IEF Shelves Close shelf browser
| No cover image available | No cover image available | No cover image available | No cover image available | No cover image available | No cover image available | No cover image available | ||
| OP 2135/2021/3-2 Political alignment, attitudes toward Government, and tax evasion | OP 2135/2021/4 American Economic Journal : Economic Policy | OP 2135/2021/4-1 The Internet as a tax haven? | OP 2135/2021/4-2 Corporate taxation under weak enforcement | OP 2135/2021/4-3 Collaborative tax evasion in the provision of services to consumers | OP 2135/2021/4-4 Market power and income taxation | OP 2135/2021/4-5 Fiscal tansfers in the spatial economy |
Resumen.
Bibliografía.
How should developing countries tax corporate income? We study this question in Costa Rica, where firms face higher average tax rates on profits when revenues marginally increase. We combine discontinuity and bunching designs to estimate the elasticity of taxable profit and separate it into revenue and cost elasticities. We find that firms faced with a higher tax rate slightly reduce revenues but considerably increase costs, thus producing a large elasticity of taxable profit of 3–5. In this context, the revenue-maximizing rate for a corporate tax on profit is below 25 percent, and we show that a tax policy that broadens the base while lowering the rate can almost double the tax revenue collected from these firms.
Click on an image to view it in the image viewer
There are no comments for this item.