BizCLIR

Author (s):

Simeon Djankov, Tim Ganser, Caralee McLiesh, Rita Ramalho, and Andrei Shleifer

Date:

Forthcoming

Publication (if applicable):

N/A

Abstract (if Available):

We present new data on effective corporate income tax rates in 85 countries in 2004 from a survey of all taxes imposed on “the same” standardized mid-size domestic firm. In this cross-section, our estimates of the effective corporate tax rate have a large adverse impact on aggregate investment, FDI, and entrepreneurial activity. A 10 percent increase in the effective corporate tax rate reduces the aggregate investment-to-GDP ratio by 2 percentage points. Corporate tax rates are negatively correlated with growth, and positively correlated with the size of the informal economy. The results are robust to the
inclusion of several controls.

URL:

http://www.doingbusiness.org/documents/AEJ-Manuscript.pdf