The Direct Incidence of Corporate Income Tax on Wages

Arulampalam, Wiji, Devereux, Michael and Maffini, Giorgia (2009) The Direct Incidence of Corporate Income Tax on Wages. Centre for Business Taxation WP 09/17.

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Abstract

We examine how far taxes on corporate income are directly shifted onto the workforce. We use data on 55,082 companies located in nine European countries over the period 1996–2003. We identify this direct shifting through cross-company variation in tax liabilities, conditional on value added per employee. Our central estimate is that the long run elasticity of the wage bill with respect to taxation is -0.093. Evaluated at the median, this implies that an exogenous rise of $1 in tax would reduce the wage bill by 75 cents. We find only weak evidence of a difference for multinational companies.

Item Type: Other Working Paper
Centre: Oxford University Centre for Business Taxation > CBT Working Papers
Date Deposited: 23 May 2012 15:39
Last Modified: 15 Oct 2015 02:18
URI: http://eureka.sbs.ox.ac.uk/id/eprint/3293

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