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Do corporate tax cuts increase investments?

Do corporate tax cuts increase investments?

 Dobbins, Laura.
 Pages 731-759. English ISSN: 00014788
Investment.
Tác giả CN Dobbins, Laura.
Nhan đề Do corporate tax cuts increase investments? / Laura Dobbins, Martin Jacob.
Mô tả vật lý Pages 731-759.
Tóm tắt This paper studies the effect of corporate taxes on investment. Since firms with a foreign parent have more cross-country profit shifting opportunities than domestically owned firms do, their effective tax rate and, consequently, their tax-induced costs to investment are lower. We therefore expect capital investment responses to a corporate tax cut to be heterogeneous across firms. Using firm-level data on German corporations, we exploit the 2008 tax reform, which substantially cut corporate taxes as an exogenous policy shock and expect domestically owned firms investments to be more responsive to the reform. We show exactly this in a difference-in-differences setting. We find that the reduction in corporate tax payments led to a one-to-one increase in the real investments of domestic firms. The effect is stronger for domestic firms relying more on internal funds. Correspondingly, labor investment increased more for domestic firms, ensuring a constant mix of input factors. In addition, we show that domestic firms sales grew faster after the tax cut than the sales of foreign-owned firms. Our results imply that corporate tax changes can increase corporate investment but that domestic firms benefit more than foreign-owned firms from a tax cut through higher investment responses resulting in greater sales growth.
Từ khóa tự do Investment.
Tác giả(bs) CN Jacob, Martin.
Nguồn trích Accounting and Business Research- 2016, Vol.46, No.7.
Tệp tin điện tử
MARC
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245[1 0] |a Do corporate tax cuts increase investments? / |c Laura Dobbins, Martin Jacob.
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520[ ] |a This paper studies the effect of corporate taxes on investment. Since firms with a foreign parent have more cross-country profit shifting opportunities than domestically owned firms do, their effective tax rate and, consequently, their tax-induced costs to investment are lower. We therefore expect capital investment responses to a corporate tax cut to be heterogeneous across firms. Using firm-level data on German corporations, we exploit the 2008 tax reform, which substantially cut corporate taxes as an exogenous policy shock and expect domestically owned firms investments to be more responsive to the reform. We show exactly this in a difference-in-differences setting. We find that the reduction in corporate tax payments led to a one-to-one increase in the real investments of domestic firms. The effect is stronger for domestic firms relying more on internal funds. Correspondingly, labor investment increased more for domestic firms, ensuring a constant mix of input factors. In addition, we show that domestic firms sales grew faster after the tax cut than the sales of foreign-owned firms. Our results imply that corporate tax changes can increase corporate investment but that domestic firms benefit more than foreign-owned firms from a tax cut through higher investment responses resulting in greater sales growth.
653[0 ] |a Investment.
700[1 ] |a Jacob, Martin.
773[ ] |t Accounting and Business Research |g 2016, Vol.46, No.7.
856[ ] |a http://dx.doi.org/10.1080/00014788.2016.1192985
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