Companies investment decisions can be made 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. This figure triples to over 6 percentage points during a recession. It would be particularly costly for policymakers to increase corporate tax rates in order to stabilize tax revenue in turbulent economic times, such as the current crisis, as a result of the forgone investments.
The ifo Investment Survey, a representative survey of companies in Germany s manufacturing sector, is the basis for measuring corporate investment. The analysis is 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 the support of the ifo Institute, it seeks to leverage CESifo's globe-spanning 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 rapidly evolving challenges faced by the European economies and their global partners, drawing on the wide range of specializations of its members.