This paper focuses on the effects of a corporate income flat tax reform on businesses’ investment decisions. Since 1990, several Swiss states (cantons) have been switching from a graduated to a flat tax rate scheme on profits. The paper assesses the effects of such a reform both on the number of establishments (i.e. extensive margin of investment) and on the number of employees (i.e. intensive margin) in a given jurisdiction by computing a difference-in-differences estimation. Our results suggest that the introduction of a flat tax reform on corporate income taxes has a negative and statistically significant impact on both margins of investment. Moreover, the effect is considerably larger for riskier firms, suggesting that progressive taxation acts as an insurance effect for risk-averse entrepreneurs.

(2017). Corporate flat tax reforms and businesses’ investment decisions: evidence from Switzerland [journal article - articolo]. In INTERNATIONAL TAX AND PUBLIC FINANCE. Retrieved from http://hdl.handle.net/10446/149406

Corporate flat tax reforms and businesses’ investment decisions: evidence from Switzerland

Galletta, Sergio;
2017-01-01

Abstract

This paper focuses on the effects of a corporate income flat tax reform on businesses’ investment decisions. Since 1990, several Swiss states (cantons) have been switching from a graduated to a flat tax rate scheme on profits. The paper assesses the effects of such a reform both on the number of establishments (i.e. extensive margin of investment) and on the number of employees (i.e. intensive margin) in a given jurisdiction by computing a difference-in-differences estimation. Our results suggest that the introduction of a flat tax reform on corporate income taxes has a negative and statistically significant impact on both margins of investment. Moreover, the effect is considerably larger for riskier firms, suggesting that progressive taxation acts as an insurance effect for risk-averse entrepreneurs.
articolo
Galletta, Sergio; Redonda, Augustin
(2017). Corporate flat tax reforms and businesses’ investment decisions: evidence from Switzerland [journal article - articolo]. In INTERNATIONAL TAX AND PUBLIC FINANCE. Retrieved from http://hdl.handle.net/10446/149406
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