Not(ch) Your Average Tax System : Corporate Taxation under Weak Enforcement

Not(ch) Your Average Tax System : Corporate Taxation under Weak Enforcement

How should developing countries tax corporate income? This paper studies this question in Costa Rica, where firms face discontinuously higher average tax rates on profits when their revenue marginally increases. The paper combines a discontinuity a...

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Bibliographic Details
Main Authors: Bachas, Pierre, Soto, Mauricio
Format: Working Paper
Language:English
Published: World Bank, Washington, DC 2018
Subjects:
TAXATION
TAX ELASTICITY
TAX EVASION
CORPORATE TAX
PROFIT ELASTICITY
Online Access:http://documents.worldbank.org/curated/en/174111531402052903/Not-ch-your-average-tax-system-corporate-taxation-under-weak-enforcement
http://hdl.handle.net/10986/29997
id okr-10986-29997
recordtype oai_dc
spelling okr-10986-299972021-06-08T14:42:46Z Not(ch) Your Average Tax System : Corporate Taxation under Weak Enforcement Bachas, Pierre Soto, Mauricio TAXATION TAX ELASTICITY TAX EVASION CORPORATE TAX PROFIT ELASTICITY How should developing countries tax corporate income? This paper studies this question in Costa Rica, where firms face discontinuously higher average tax rates on profits when their revenue marginally increases. The paper combines a discontinuity and a bunching design to estimate the profit elasticity and separate it into revenue and cost elasticities. Faced with higher tax rates, firms slightly reduce revenue but considerably increase costs, generating a large elasticity of profits. In this context, the revenue maximizing rate for profit taxation is below 25 percent and broadening the tax base while lowering the rate can increase revenue for these firms by 80 percent. 2018-07-16T14:44:34Z 2018-07-16T14:44:34Z 2018-07 Working Paper http://documents.worldbank.org/curated/en/174111531402052903/Not-ch-your-average-tax-system-corporate-taxation-under-weak-enforcement http://hdl.handle.net/10986/29997 English Policy Research Working Paper;No. 8524 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper Latin America & Caribbean Costa Rica
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
topic TAXATION
TAX ELASTICITY
TAX EVASION
CORPORATE TAX
PROFIT ELASTICITY
spellingShingle TAXATION
TAX ELASTICITY
TAX EVASION
CORPORATE TAX
PROFIT ELASTICITY
Bachas, Pierre
Soto, Mauricio
Not(ch) Your Average Tax System : Corporate Taxation under Weak Enforcement
geographic_facet Latin America & Caribbean
Costa Rica
relation Policy Research Working Paper;No. 8524
description How should developing countries tax corporate income? This paper studies this question in Costa Rica, where firms face discontinuously higher average tax rates on profits when their revenue marginally increases. The paper combines a discontinuity and a bunching design to estimate the profit elasticity and separate it into revenue and cost elasticities. Faced with higher tax rates, firms slightly reduce revenue but considerably increase costs, generating a large elasticity of profits. In this context, the revenue maximizing rate for profit taxation is below 25 percent and broadening the tax base while lowering the rate can increase revenue for these firms by 80 percent.
format Working Paper
author Bachas, Pierre
Soto, Mauricio
author_facet Bachas, Pierre
Soto, Mauricio
author_sort Bachas, Pierre
title Not(ch) Your Average Tax System : Corporate Taxation under Weak Enforcement
title_short Not(ch) Your Average Tax System : Corporate Taxation under Weak Enforcement
title_full Not(ch) Your Average Tax System : Corporate Taxation under Weak Enforcement
title_fullStr Not(ch) Your Average Tax System : Corporate Taxation under Weak Enforcement
title_full_unstemmed Not(ch) Your Average Tax System : Corporate Taxation under Weak Enforcement
title_sort not(ch) your average tax system : corporate taxation under weak enforcement
publisher World Bank, Washington, DC
publishDate 2018
url http://documents.worldbank.org/curated/en/174111531402052903/Not-ch-your-average-tax-system-corporate-taxation-under-weak-enforcement
http://hdl.handle.net/10986/29997
_version_ 1764471015549698048

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