Tax Burden and Impact on National and Trans-National Business Activity
Company decisions regarding locations, financing and investments are influenced in many different ways by taxation. From a methodological point of view the following preconditions have to be met in order to measure the influence of taxation on these decisions. Firstly, the different taxation systems, all relevant tax types, assessment bases, and tax scales have to be considered. Moreover, purely national situations as well as cross-border situations have to be included in the calculation. In addition, the relevant tax burden has to be identified. Depending on the respective decisions, this is either the marginal tax burden or the average tax burden. With the European Tax Analyzer, which was developed in collaboration with the University of Mannheim, the ZEW already has a comprehensive tool for the measurement of corporate tax burdens. The expressiveness of the European Tax Analyzer, however, was until recently limited to companies operating at the national level, and to the calculation of effective average tax burdens. Against this background, the research project aims at investigating in methodical terms which tax burden is relevant for which decisions, i.e. the marginal tax burden or the average tax burden. In a second step, we will extend the methodical instrument, the European Tax Analyzer, in order to calculate effective marginal tax burdens. Following this phase, we will integrate cross-border company connections into the model so as to examine the respective tax effects on location, financing and investment decisions. The intended result of this research projects is a methodical amplification of the analysis spectrum for national and international tax burden comparisons. In future, marginal tax burdens will be determined in addition to average tax burdens. For this reason, we will also conduct a more comprehensive analysis of the impacts of tax burdens on corporate decisions. This also allows for a broader analysis of the impacts of national tax reforms and EU harmonisation plans on corporate decisions.
Duration: 01.10.1999 - 31.03.2003
Publications in Journals
Jacobs, Otto H. and Christoph Spengel (2000), Measurement and Development of the Effective Tax Burden of Companies - An Overview and International Comparison, Intertax, 334-352.