Companies’ investment decisions vary depending on the economic situation. In normal economic times, the proportion of companies that change their investment decisions downwards due to tax increases increases by 2 percentage points. During a recession, the number triples to more than 6 percentage points. “Due to the lost investments, it would therefore be particularly expensive for politicians to raise corporate tax rates as a means of stabilizing tax revenues in turbulent economic times, such as the current crisis,” says Peichl.
The basis for measuring company investments is the ifo Investment Survey, which is a representative survey of German industrial companies. Overall, the analysis is based on 1,436 business tax increases in 797 German municipalities between 1980 and 2018.
Econpol is CESifo’s economic policy platform. With key support from the Ifo Institute, it aims to leverage CESifo’s global network of 1,800 high-ranking economists โ eleven of whom have won the Nobel Prize โ and ifo’s decades of deep research expertise to provide informed advice to European policymakers. Econpol’s mission is based on the broad specialization of its members, and its mission is to contribute to the formulation of effective economic policy in the face of the rapidly evolving challenges faced by European economies and their global partners.
HT
Source: EconPol