Despite weakening global growth prospects, inflation has risen around the world during the current economy and financial crises. Besides its direct impacts, e.g. increased purchase prices or wages, the rapid increase in the rate of inflation in recent years has led to a great deal of concern about the effects on inflation on corporate taxation, tax payments and firm’s cash-flow. Against this background it is important to examine the relation between inflation and corporate tax burdens in detail. This being said, the aim of this study is to analyze certain inflation-induced tax distortions and discuss the consequences for corporate tax policy and tax planning. In doing so, we determine firm-specific effective tax burdens under several economic scenarios, e.g. different inflation rates, for three German corporations. The calculations are based on the European Tax Analyzer, which allows us to account for inflationary trends in great detail. In a second step we extent the numerical analysis by benchmarking the selected corporations to the average tax burden in the respective industries. These additional analyses are important to determine and highlight the individual firm’s competitive position and its sensitivity to changes in different rates of inflation.   

Client

PricewaterhouseCoopers AG Dt. , Frankfurt am Main , DE

Project duration

01.01.2012 - 31.12.2013

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