The Tax Elasticity of Financial Statement Income: Implications for Current Reform Proposals
CESifo, Munich, 2020
CESifo Working Paper No. 8534
![](https://cesifo.org/DocImg/cesifo1_wp8534.jpg?c=1689236856)
Current reform proposals in international and corporate tax (most notably the OECD’s GloBE proposal) envisage taxing financial statement income. This paper develops a conceptual framework – based on the literature on the elasticity of taxable income – for the welfare analysis of such proposals, and discusses the available evidence on the tax elasticity of financial statement income. The central conclusion is that the most relevant evidence suggests a large responsiveness of financial statement income to taxes (and hence, albeit with significant limitations and caveats, arguably a large deadweight loss). The paper also highlights the need for more evidence on this question.
Public Finance