The Corporate Elasticity of Taxable Income: Event Study Evidence from Switzerland
CESifo, Munich, 2020
CESifo Working Paper No. 8715
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We estimate the corporate elasticity of taxable income. Our analysis draws on panel variation in the decentralized system of corporate taxation in Switzerland. We find that an increase in a jurisdiction's corporate net-of-tax rate by 1% results in an increase in aggregate corporate income by about 3.5% over a time span of 4 years. The elasticity is larger in remote, non-central locations. Firm entry, exit, and mobility only account for a small share of the overall elasticity.
Public Finance
Fiscal Policy, Macroeconomics and Growth