Economic incidence of corporate income tax

• Název práce v češtině: Ekonomická incidence daně z příjmů právnických osob
• Název v anglickém jazyce: Economic incidence of corporate income tax
• Akademický rok vypsání: 2017/2018
• Typ práce: bakalářská práce
• Jazyk práce: angličtina
• Ústav: Institut ekonomických studií (23-IES)
• Vedoucí / školitel: doc. Petr Janský, M.Sc., Ph.D.
• Řešitel: skrytý - zadáno vedoucím/školitelem
• Datum přihlášení: 30.05.2019
• Datum zadání: 30.05.2019
• Datum a čas obhajoby: 10.06.2020 09:00
• Datum odevzdání elektronické podoby: 05.05.2020
• Datum proběhlé obhajoby: 10.06.2020
• Oponenti: Sarah Godar, M.A., Ph.D.

Seznam odborné literatury

- Agarwal, Samiksha, Lekha Chakraborty, 2018. "Who Bears the Corporate Tax Incidence? Empirical Evidence from India," MPRA Paper 85186, University Library of Munich, Germany.
- Arulampalam, Wiji, Michael P. Devereux, Giorgia Maffini, 2012. “The Direct Incidence of Corporate Income Tax on Wages,” European Economic Review, 56(6): 1038-54
- Bilicka, Katarzyna, M. P. Devereux, Clemens Fuest, 2011. G20 Corporate Tax Ranking 2011. Oxford: Oxford University, Centre for Business Taxation.
- Clausing, Kimberly A., 2013. “Who pays the corporate tax in a global economy?” National Tax Journal, March 2013, 66 (1), 151–184.
- Devereux, Michael P., Ben Lockwood, Michela Redoano, 2012. “Do Countries Compete over Corporate Tax Rates?” University of Warwick.
- Fuest, Clemens, Andreas Peichl, Sebastian Siegloch. 2018. “Do Higher Corporate Taxes Reduce Wages? Micro Evidence from Germany,” American Economic Review 2018, 108(2): 393–418. - Quinn, Mr Dennis P., Manmohan S. Kumar, 2012. Globalization and Corporate Taxation. International Monetary Fund.
- Romer, David. 2012. Advanced Macroeconomics 4th ed. McGraw-Hill/Irwin, Boston.
- Serrato, Juan Carlos Suárez, Owen Zidar, 2016. “Who Benefits from State Corporate Tax Cuts? A Local Labor Markets Approach with Heterogeneous Firms,” American Economic Review, 106(9): 2582–2624.
- Sokolovska, Olena, 2017. "Corporate tax incidence and its implications for the labor market," MPRA Paper 83401, University Library of Munich, Germany.

Předběžná náplň práce v anglickém jazyce

Research question and motivation

I would like to ask a fundamental research question: Who is primarily affected by corporate tax in a global economy?

This specific topic might be important in the sense that most people assume corporate tax harm especially companies themselves. But theoretically the corporate tax has larger impact on labor force (Clausing 2013). Some part or the entire tax burden might be shifted onto labor. This can be done by reducing wages or deteriorating working conditions (Sokolovska 2017). According to earlier research, it was not possible to confirm or disprove this strong statement because these works were not entirely convincing and had many weaknesses. However in a globally integrated world capital moves according to a tax differentials (Devereux et al. 2012). Countries that have a high corporate tax rates may experience a capital outflow to those countries where the corporate tax rates are lower. This increases wages in low-tax countries (Arulampalam et al. 2012). According to other studies workers bear about 50 percent of total tax burden which is quite a significant amount (Fuest et al. 2018). However, this is not about a simple calculation of corporate tax rate. Many factors such as the political situation, the influence of neighboring states and, with globalization, the power of integration are also interfering (Quinn and Kumar 2012).

I would like to focus on new approaches to determine how strong the relationship between corporate taxes and wages is. It is assumed that there is an inversely proportional relationship, namely that wages are decreasing as corporate tax increases (Arulampalam et al. 2012).


Contribution

There is no extensive review of corporate tax incidence in recent years, therefore, I would like to follow up on those which are several years old, using some proven methods and find out what the situation is like today.

The conclusion will certainly not be unambiguous. Workers definitely do not bear a 100 percent of corporate income tax cuts (Serrato and Zidar 2016). And for example Agarwal and Chakraborty (2018) say that corporate tax can affect especially corporations and the effect on labor is not essential. This is supported by their empirical study of India in the period 20002015. On the other hand, another empirical study from Germany, which is similarly focused on companies, shows that labor might carry a significant part of tax burden (Fuest et al. 2018). This knowledge, which is rather micro-level, will definitely be beneficial to me and already proves in advance that the difference between developed and developing countries could be significant.

If we focus on the G20 countries, we find that there is a huge difference in corporate tax rates - from 20% in Saudi Arabia to 40.8% in Japan (Bilicka et al. 2011). This can lead us to the question of whether the states are competing in the level of corporate tax rates. Devereux et al. (2012) say that it depends on effective average tax rate and effective marginal tax rate because these are estimates in which governments compete. Of course, investment also plays a major role (Romer 2012). I would also like to take this global perspective, but with the difference that I would examine the impact of corporate tax in the US and the EU with the latest data.

This thesis aims to collect already existing estimates and surely discover some new ones. I would like to contribute to making the corporate tax impact more evident nowadays. Whether its increase will mostly affect owners, employees, or consumers. It might be beneficial for anyone who deals with corporate tax.


Methodology

I would like to focus on a time period of approximately 10 years and first examine the US and the EU corporate taxation through those years. And second study tax fluctuations and whether wages have fallen or risen as a result. As for data on average wages across a given period and the development of corporate income tax, I will draw mainly from the official statistical offices and laws of the countries concerned. Below are the individual institutions:

USA - Bureau of Labor Statistics and EU: Belgium - Statbel, the Belgian Statistical Office, Bulgaria - National Statistical Institute, Czech - Czech statistical office, Denmark - Statistics Denmark, Estonia - Statistics Estonia, Finland - Statistics Finland, France - Insee - National Institute of Statistics and Economic Studies, Croatia - Croatian Bureau of Statistics, Ireland - Central Statistics Office, Italy - Italian National Institute of Statistics, Cyprus - Statistical Office, Lithuania - Statistics Lithuania, Latvia - Central Statistical Bureau of Latvia, Luxembourg - STATEC - Statistics Portal, Hungary - Hungarian Central Statistical Office, Malta - National Statistics Office, Germany - Federal Statistical Office, Netherlands - Statistics Netherlands, Poland - Statistics Poland, Portugal - Statistics Portugal, Austria - Statistics Austria, Romania - National Institute of Statistics, Greece - Hellenic Statistical Authority, Slovakia - Statistical Office of the Slovak Republic, Slovenia - Statistical Office of the Republic of Slovenia, United Kingdom - Office for National Statistics, Spain - National Statistics Institute and Sweden - Statistics Sweden.

All of them provide these macroeconomic information.


Outline

Abstract
Introduction
a. why is my topic interesting
b. brief overview of existing knowledge
c. how I add to existing research
d. main results and what they mean
e. how is the thesis organized
Literature review
a. literature on the economic incidence of corporate income tax
b. evidence of corporate tax impact on wages
c. review of existing empirical estimates
Methodology
a. relevant description of data
Results
a. a higher corporate tax reduce / does not reduce wages
b. my interpretation of the results
Conclusion
a. broader interpretation of results
b. implications for practice c. topics for further research