CESifo publishes report on business tax increases

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CESifo publishes report on business tax increases

The investment decisions of companies vary based on the economic situation. In normal economic times, the share of companies that adjust their investment decisions downward in response to tax increases increases by 2 percentage points. During a recession, this figure triples to over 6 percentage points. It would be particularly costly for policymakers to increase corporate tax rates as a way to stabilize tax revenue in turbulent economic times such as the current crisis, according to Peichl, because of the forgone investments.

A representative survey of companies in Germany's manufacturing sector is the basis for measuring corporate investment. The analysis was based on 1,436 business tax increases in 797 German municipalities spread over the period 1980 to 2018.

Econpol is the economic policy platform of CESifo. With key support from the ifo Institute, it seeks to leverage CESifo's network of 1800 high-ranked economists, eleven of whom have won the Nobel Prize and ifo's decades deep research expertise to provide well-founded advice to European policymakers. Econpol's mission is to contribute to the crafting of effective economic policy in the face of the changing challenges faced by the European economies and their global partners, drawing on the wide range of specializations of its members.