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- Title
Corporate flat tax reforms and businesses' investment decisions: evidence from Switzerland.
- Authors
Galletta, Sergio; Redonda, Agustin
- Abstract
This paper focuses on the effects of a corporate income flat tax reform on businesses' investment decisions. Since 1990, several Swiss states (cantons) have been switching from a graduated to a flat tax rate scheme on profits. The paper assesses the effects of such a reform both on the number of establishments (i.e. extensive margin of investment) and on the number of employees (i.e. intensive margin) in a given jurisdiction by computing a difference-in-differences estimation. Our results suggest that the introduction of a flat tax reform on corporate income taxes has a negative and statistically significant impact on both margins of investment. Moreover, the effect is considerably larger for riskier firms, suggesting that progressive taxation acts as an insurance effect for risk-averse entrepreneurs.
- Subjects
SWITZERLAND; CORPORATE taxes; TAX reform; TAXATION; RISK aversion; MARGINS (Futures trading)
- Publication
International Tax & Public Finance, 2017, Vol 24, Issue 6, p962
- ISSN
0927-5940
- Publication type
Article
- DOI
10.1007/s10797-017-9446-3