This paper analyses the switch to an ACE or to a CBIT type of tax system starting from the present German tax system. We show that in case an ACE type of reform is financed by an increase in the VAT and not in the profit tax, it might be preferred to a CBIT even in the context of an open...

In the spirit of Harberger, we apply a dynamic computable general equilibrium (CGE) model and estimate the excess burden stemming from the tax-induced distortion in the allocation of capital across the corporate and the non-corporate sectors in Germany. In doing so, we perform a counterfactual...

The paper provides a comprehensive assessment of the latest German corporate income and capital tax reform, which entails a major shift of the capital tax burden from the firm to the household level. Using a dynamic two-country computable general equilibrium model with integrated capital...

Using an agency model of firm behavior, the paper analyzes whether the cost of investment should be tax exempt. The findings suggest that, when managers engage in wasteful capital expenditures, welfare may decline if the cost of investment is tax deductible, as commonly advocated. The extent to...

There is ample evidence that internal capital markets incur efficiency costs for multinational enterprises (MNEs). This paper analyzes whether tax avoidance behavior interacts with the costs of running an internal capital market and how policies of competing governments respond to it. We show...

The effects of corporate taxation on firm behavior have been extensively discussed in the neoclassical model of firm behavior which abstracts from agency problems. As emphasized by the corporate governance literature, corporate investment behavior is however crucially influenced by diverging...

In this paper we conduct a counterfactual analysis and estimate the quantitative importance of demand and supply effects on wage inequality in Germany using a dynamic computable general equilibrium (CGE) model of the Auerbach-Kotlikoff (1987) type. Specifically, the methodological contribution...

Profit taxes are widely acknowledged to influence the location of firms’ headquarters. This paper sheds light on the role of aspects of labor taxation for the international location of headquarters. While profit taxes can be avoided in various ways, it is much harder for firms to manipulate...

Not only transition countries but also a large number of developing (and developed) countries have established free economic zones (FEZs) with the aim of attracting foreign capital by providing tax incentives, creating employment opportunities and promoting exports as well as regional...

Corporate tax reforms carried out in EU countries since 1980 entail lower statutory tax rates and reductions in generous tax depreciation provisions. Several countries including the UK have reduced tax rates for SMEs. This study compares incentive effects of such reforms on the SMEs’...