Not(ch) Your Average Tax System
How should developing countries tax corporate income? This paper studies this question in Costa Rica, where firms face discontinuously higher average tax rates on profits when their revenue marginally increases. The paper combines a discontinuity and a bunching design to estimate the profit elasticity and separate it into revenue and cost elasticities. Faced with higher tax rates, firms slightly reduce revenue but considerably increase costs, generating a large elasticity of profits. In this context, the revenue maximizing rate for profit taxation is below 25 percent and broadening the tax base while lowering the rate can increase revenue for these firms by 80 percent.
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| Format: | Working Paper biblioteca |
| Language: | English |
| Published: |
World Bank, Washington, DC
2018-07
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| Subjects: | TAXATION, TAX ELASTICITY, TAX EVASION, CORPORATE TAX, PROFIT ELASTICITY, |
| Online Access: | http://documents.worldbank.org/curated/en/174111531402052903/Not-ch-your-average-tax-system-corporate-taxation-under-weak-enforcement https://hdl.handle.net/10986/29997 |
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dig-okr-10986299972024-08-09T07:42:38Z Not(ch) Your Average Tax System Corporate Taxation under Weak Enforcement Bachas, Pierre Soto, Mauricio TAXATION TAX ELASTICITY TAX EVASION CORPORATE TAX PROFIT ELASTICITY How should developing countries tax corporate income? This paper studies this question in Costa Rica, where firms face discontinuously higher average tax rates on profits when their revenue marginally increases. The paper combines a discontinuity and a bunching design to estimate the profit elasticity and separate it into revenue and cost elasticities. Faced with higher tax rates, firms slightly reduce revenue but considerably increase costs, generating a large elasticity of profits. In this context, the revenue maximizing rate for profit taxation is below 25 percent and broadening the tax base while lowering the rate can increase revenue for these firms by 80 percent. 2018-07-16T14:44:34Z 2018-07-16T14:44:34Z 2018-07 Working Paper Document de travail Documento de trabajo http://documents.worldbank.org/curated/en/174111531402052903/Not-ch-your-average-tax-system-corporate-taxation-under-weak-enforcement https://hdl.handle.net/10986/29997 English Policy Research Working Paper; 8524 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank application/pdf text/plain World Bank, Washington, DC |
| institution |
Banco Mundial |
| collection |
DSpace |
| country |
Estados Unidos |
| countrycode |
US |
| component |
Bibliográfico |
| access |
En linea |
| databasecode |
dig-okr |
| tag |
biblioteca |
| region |
America del Norte |
| libraryname |
Biblioteca del Banco Mundial |
| language |
English |
| topic |
TAXATION TAX ELASTICITY TAX EVASION CORPORATE TAX PROFIT ELASTICITY TAXATION TAX ELASTICITY TAX EVASION CORPORATE TAX PROFIT ELASTICITY |
| spellingShingle |
TAXATION TAX ELASTICITY TAX EVASION CORPORATE TAX PROFIT ELASTICITY TAXATION TAX ELASTICITY TAX EVASION CORPORATE TAX PROFIT ELASTICITY Bachas, Pierre Soto, Mauricio Not(ch) Your Average Tax System |
| description |
How should developing countries tax
corporate income? This paper studies this question in Costa
Rica, where firms face discontinuously higher average tax
rates on profits when their revenue marginally increases.
The paper combines a discontinuity and a bunching design to
estimate the profit elasticity and separate it into revenue
and cost elasticities. Faced with higher tax rates, firms
slightly reduce revenue but considerably increase costs,
generating a large elasticity of profits. In this context,
the revenue maximizing rate for profit taxation is below 25
percent and broadening the tax base while lowering the rate
can increase revenue for these firms by 80 percent. |
| format |
Working Paper |
| topic_facet |
TAXATION TAX ELASTICITY TAX EVASION CORPORATE TAX PROFIT ELASTICITY |
| author |
Bachas, Pierre Soto, Mauricio |
| author_facet |
Bachas, Pierre Soto, Mauricio |
| author_sort |
Bachas, Pierre |
| title |
Not(ch) Your Average Tax System |
| title_short |
Not(ch) Your Average Tax System |
| title_full |
Not(ch) Your Average Tax System |
| title_fullStr |
Not(ch) Your Average Tax System |
| title_full_unstemmed |
Not(ch) Your Average Tax System |
| title_sort |
not(ch) your average tax system |
| publisher |
World Bank, Washington, DC |
| publishDate |
2018-07 |
| url |
http://documents.worldbank.org/curated/en/174111531402052903/Not-ch-your-average-tax-system-corporate-taxation-under-weak-enforcement https://hdl.handle.net/10986/29997 |
| work_keys_str_mv |
AT bachaspierre notchyouraveragetaxsystem AT sotomauricio notchyouraveragetaxsystem AT bachaspierre corporatetaxationunderweakenforcement AT sotomauricio corporatetaxationunderweakenforcement |
| _version_ |
1807154778893975552 |