The Tax Elasticity of Corporate Debt: A Synthesis of Size and Variations

28 Pages Posted: 2 May 2011

See all articles by Ruud A. De Mooij

Ruud A. De Mooij

International Monetary Fund (IMF); CESifo (Center for Economic Studies and Ifo Institute); Oxford University Centre for Business Taxation

Date Written: April 2011

Abstract

Although the empirical literature has long struggled to identify the impact of taxes on corporate financial structure, a recent boom in studies offers ample support for the debt bias of taxation. Yet, studies differ considerably in effect size and reveal an equally large variety in methodologies and specifications. This paper sheds light on this variation and assesses the systematic impact on the size of the effects. We find that, typically, a one percentage point higher tax rate increases the debt-asset ratio by between 0.17 and 0.28. Responses are increasing over time, which suggests that debt bias distortions have become more important.

Keywords: Corporate sector, Corporate taxes, Cross country analysis, Debt, Economic models, Tax elasticity

Suggested Citation

De Mooij, Ruud A., The Tax Elasticity of Corporate Debt: A Synthesis of Size and Variations (April 2011). IMF Working Paper No. 11/95, Available at SSRN: https://ssrn.com/abstract=1826548

Ruud A. De Mooij (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Oxford University Centre for Business Taxation ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

HOME PAGE: http://people.few.eur.nl/demooij/

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
199
Abstract Views
889
Rank
275,958
PlumX Metrics