Corporate tax policy and incorporation in the EU

de Mooij, Ruud (2008) Corporate tax policy and incorporation in the EU. International Tax and Public Finance, 15 (4). pp. 478-498.


In Europe, declining corporate tax rates have come along with rising tax to GDP ratios. This paper explores to what extent income shifting from the personal to the corporate tax base can explain these diverging developments. We exploit a panel of European data on legal form of business to analyze income shifting via incorporation.
The results suggest that the effect is significant and large. It implies that the revenue effects of lower corporate tax rates—possibly induced by tax competition—
will partly show up in lower personal tax revenues rather than lower corporate tax revenues. Simulations suggest that between 12% and 21% of corporate tax revenue can be attributed to income shifting. Income shifting is found to have raised the corporate tax-to-GDP ratio by some 0.25% points since the early 1990s.

Item Type: Article
Keywords: Corporate tax · Personal tax · Incorporation · Income shifting
Subject(s): Taxation
Centre: Oxford University Centre for Business Taxation
Date Deposited: 29 May 2012 12:36
Last Modified: 23 Oct 2015 14:07

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