We estimate the elasticity of corporate taxable income with respect to
the statutory corporation tax rate using the population of UK corporation
tax returns. We analyze bunching in the distribution of taxable
income at kinks in the marginal rate schedule. We decompose this
elasticity into an elasticity of total income with respect to the corporation
tax rate, and an elasticity of the share of income taken as profit
with respect to the difference between the personal and corporate tax
rates. This implies a marginal deadweight cost at the £10,000 kink of
around 29 percent of tax revenue.
Devereux, Michael P., Li Liu, and Simon Loretz.
"The Elasticity of Corporate Taxable Income: New Evidence from UK Tax Records."
American Economic Journal: Economic Policy,
Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
Business Taxes and Subsidies including sales and value-added (VAT)
Firm Performance: Size, Diversification, and Scope