Corporate taxation under the coalition government

In this second article on Coalition Economics, Giorgia Maffini (Said Business School, Oxford University) analyses the changes in corporate taxation over the period. She argues that the UK’s international competitive position has been improved, but at considerable cost, while little has been done to assist the UK manufacturing sector and promote the rebalancing of the economy. Maffini’s earlier assessment of the Labour government, 1997-2010, is included in the special journal edition which is free to download until the election.

  1. Introduction

Over the last 30 years and until the global financial crisis, governments across the OECD have gradually cut statutory rates of corporation tax to attract mobile activities and profits (see figure 1). This trend had slowed by 2010. At the height of the global financial crisis, governments were struggling to reduce their budget deficits. There was little room for tax cuts and most OECD countries decided to avoid large tax reductions. The Coalition had a very different plan:

“Our aim is to create the most competitive corporate tax regime in the G20, while protecting manufacturing industries”

- The Coalition agreement, May 2010.

Over five years the government unrolled an intense reform programme which would substantially reduce the tax burden on business and make the UK business tax regime substantially more attractive.

  1. Changes to the statutory corporate tax rate and to capital allowances

As of 2015, the main statutory corporation tax rate has been cut from 28 to 20%. This is the (equal)[1] lowest corporation tax rate in the G20 and the lowest in UK history. The small profits rate applicable to profits below £300,000 was cut from 21 to 20% in 2011.[2]

In terms of tax revenue, rate cuts have been partially compensated for by enlarging the tax base. In 2012, writing-down allowances for the main pool of plant and machinery were cut from 20 to 18%.[3] Additionally, the government did not repeal Labour’s decision to phase out allowances for industrial buildings by 2011.

The value of allowances for small and medium sized enterprises (SMEs) differs markedly, due primarily to the Annual Investment Allowance (AIA). Introduced by the Labour government in 2008, the AIA gives a 100% deduction for expenditure in plant and machinery with a threshold of investment initially of £50,000 and then of £100,000. The Coalition announced temporary changes to the AIA threshold several times (mainly increases). If the government’s announcement were credible, a temporarily higher threshold could provide an incentive for business to bring investment forward.[4]

  1. Effects of rates cuts on the competitiveness of the UK tax system

Three measures are used to assess the tax costs associated with corporation tax: the main statutory rate and two summary measures that account for both the statutory rate and the tax base: the effective average tax rate (EATR) and the effective marginal tax rate (EMTR).

The statutory tax rate affects profit-shifting as the marginal incentive to shift an additional unit of corporate profits after all deductions depends on the corporate statutory tax rate. Figure 1 shows that the UK rate was substantially lower than the OECD average until 2004 when cuts in other OECD countries meant that the UK 30% rate was higher than the OECD average for the first time in 20 years.

Figure 1. Statutory corporate tax rates (1994-2015)

maff4fig1Source: OUCBT tax database

In 2012 the UK rate dropped again below the OECD average and by 2015, it is about 7.5 percentage points lower.[5] Although the UK rate is consistently lower than the French and German rates, smaller, low-tax OECD jurisdictions (e.g. Ireland) have had very attractive rates for profit shifting activities. Such small jurisdictions have now become less appealing if compared to the UK corporate tax rate of 20% or to the 10% rate available with the Patent Box, a scheme granting a reduced rate to income generated by patents held in the UK.

Figure 2 shows the evolution of the EATR which depends on the statutory rate and on capital allowances. It is the proportion of pre-tax profit of a typical investment project that would be taken in tax. It affects the location of investment in the UK, i.e. it affects inward foreign direct investment (FDI). Until 2013, the UK EATR was not particularly competitive compared to the OECD average, although the OECD average includes smaller countries which would not necessarily be competitors of the UK. Starting in 2011, the UK EATR began declining and by 2015, it is well below the OECD average. Historically, the UK EATR is lower than the French and German rates, with the gap widening substantially since 2011.

Figure 2. Effective average tax rates (1994-2015)

maff4fig2

Source: OUCBT tax database

If the UK has improved its competitive position substantially in terms of attracting profits and FDI, the EMTR which affects the size of investment remains relatively high. The EMTR measures the proportionate increase in the cost of capital due to the tax. It accounts for both the statutory rate and for capital allowances. It affects the size of investment, given the decision to locate in the UK. The EMTR focuses on the margin, i.e. it focuses on a project that just breaks even by earning a return equal to the cost of capital.

The tax base and hence capital allowances are very important for the marginal investment project and that is why the UK ranks low on this measure: the UK capital allowances regime is one of the least generous in the OECD (OUCBT, 2015). Historically, the UK EMTR has been higher than the OECD average (figure 3). It declined after 2011 but in 2015 it remains well above the OECD average.

Figure 3. Effective marginal tax rates (1994-2015)

maff4fig3Source: OUCBT tax database

  1. Effects of rates cuts on investment and FDI

At the beginning of the Coalition term in 2010, investment and FDI were considerably lower than their pre-crisis peak. There was little doubt about the need to stimulate investment at that time. To calculate the effect that the tax reform could have had, we use estimates in the economic literature (Feld and Heckemeyer, 2011).

The cut in the EATR from 26 to 18% could have increased inbound FDI by 12.5% and the reduction in the EMTR from 22 to 17% could have increased the capital stock by about 2%.This does not necessarily mean that FDI and the capital stock have increased. It could also be that they have decreased but less than they would have done without the reform. As explained in OUCBT (2015), although there is uncertainty in these estimates, economic evidence points to large effects of tax cuts on FDI and capital stock.

The assessment of the effect of the AIA is different. The AIA only affects the cost of capital of companies with investment below the AIA threshold[6] and these are likely to be smaller companies. The AIA threshold only covers investment of smaller firms, generally with less than 100 employees (OUCBT, 2015). These companies only account for about 20% of aggregate investment. Hence, the AIA is unlikely to have had a large effect on aggregate investment.

  1. Additional changes and impact on competitiveness

There are some very important elements of the UK tax system such as the controlled foreign corporation (CFC) regime, the Patent Box (PB) and the R&D tax incentives which are not reflected in the statutory rate, the EATR or the EMTR.[7]

CFC rules are anti-avoidance provisions whereby under certain conditions profits of CFCs located in low-tax jurisdictions are taxed upon accrual at the domestic corporation tax rate. The old UK CFC rules had been deemed very stringent and not in line with business practices. The Coalition continued Labour’s plan to reform the CFC rules and delivered the final regime[8] which is considered more business friendly.[9] Despite being controversial, some of its provisions create a competitive advantage to locating a headquarters company in the UK and certainly lower the cost of capital for multinationals, for example, by facilitating financing of the group through low-tax subsidiaries.[10]

The PB entered into force on 1 April 2013.[11] It provides that corporate profits derived from patents held by a UK-resident company are taxed at a reduced rate of 10%.[12] The scheme was welcomed by business but some countries, particularly Germany, raised concerns that the PB could be used as a tool to shift profits out of their high-tax jurisdictions.

Under the initial version, patents created elsewhere and possibly awarded tax incentives by other countries could have been easily shifted to a UK company and their income (i.e. royalties) would have enjoyed the reduced rate of corporation tax available under the PB.[13] In November 2014, after an agreement with Germany, the UK accepted to reform its PB regime with the aim of introducing a closer link between the jurisdiction where the patents have been developed and the jurisdiction where the income from such patents enjoys the benefits of a lower corporate statutory rate.[14]

Although the initial version was probably more competitive, the existence of a PB encourages companies to hold intellectual property rights in the UK, rather than shifting them to a low-tax jurisdiction. There are concerns that such schemes could provide a further incentive to profit-shifting[15] by multinational companies (Griffith et al., 2014). Legislation regulating the new PB regime will be implemented by the next government and its role in increasing the attractiveness of the UK for mobile, intangible assets and profits will depend on the details of the law.

The Coalition has also expanded the generosity of R&D tax incentive schemes for both SMEs and larger companies. It has simplified the system and made it more salient for larger companies by transforming R&D deductions into a credit (the so-called “above the line credit”).[16]

  1. Costs of the reform

Such a comprehensive reform of business taxation implies large costs. In terms of foregone revenues, the reform will cost £7.5 billion a year by 2015/16 (or 21% of average annual corporate income revenues). Adding the initial version of the PB brings annual costs to £8.2 billion (or 23% of annual corporate income tax revenues). By any standards, these are large costs which will translate into a higher deficit or lower public spending and/or they will need to be financed by other taxes, such as VAT.[17] Figure 4 shows that VAT revenues (as a share of total tax revenues) have increased under the Coalition, after the standard rate of VAT was raised from 17.5 to 20% in 2011. Revenues from other taxes remained stable or declined.

Figure 4. Own revenues, share of total tax revenues (%).

maff4fig4Source: OECD Revenue Statistics, series 1110 (personal income tax), 1210 (corporate income tax), 2000 (social security contributions), 4120 (Business rates), 5111 (VAT).

The Coalition has also introduced new taxes, in particular on the banking sector. The 2010 Budget introduced a Bank Levy applied to banks’ total liabilities.[18] Before the crisis, the financial industry contributed between 21 and 26% of net corporate tax receipts. From 2008/09 onwards, its contribution declined to between 11 and 16%. Figure 5 shows that even accounting for the Bank Levy receipts, the contribution of the financial sector remains well below its pre-crisis level.

Figure 5. Financial sector corporation tax revenues (% total corporation tax revenues)

maff4fig5Source: HMRC Corporation Tax Statistics, table 11.1A, 2014.

  1. Avoidance

The government has been very active on tax-avoidance.[19] It was one of the key priorities of its tax reform programme and overall the Coalition has not allowed a lax anti-avoidance strategy to affect its competitiveness agenda.[20] The fight against avoidance was considered as a way to finance rate cuts and other business tax reforms. The Coalition introduced significant measures such as the General Anti-Abuse Rule (GAAR), probably the most significant domestic development in the fight against avoidance over the past five years. The UK has also actively participated in the OECD/G20 Base Erosion and Profit Shifting (BEPS) project.

Nonetheless, some anti-avoidance measures have been controversial.[21] Very recently, in its 2014 Autumn Statement, the government introduced the Diverted Profits Tax (DPT) which applies a rate of 25% (instead of the standard 20% corporation tax rate) to profits “diverted” from the UK.[22] The DPT seems to target a small number of companies[23] but, in fact, some of its provisions could draw in companies not intentionally targeted. This creates uncertainty for business and some observers have wondered whether the DPT signals a change of course in the Coalition’s competitiveness agenda.

  1. Conclusion

The competitive position of the UK with respect to the OECD has improved substantially since 2011, and by 2015, the main corporate statutory tax rate and the EATR are well beneath the OECD average. This suggests that for the location of profits and of FDI, the UK has become very attractive.

The government has failed to make the tax component of the user cost of capital (EMTR) particularly competitive, though. The UK EMTR has historically been higher than the OECD average and this has not changed under the Coalition. For large companies, the UK capital allowances regime remains one of the least generous in the OECD. This affects firms’ cost of capital negatively and hence reduces their incentive to expand the size of their investment in physical assets such as plant and machinery and buildings. It is difficult to reconcile a regime of low capital allowances with the Coalition’s ambition of protecting the manufacturing sector.

Although relatively less attractive for industries with large investment in physical assets, overall, today’s UK tax system is very attractive for the location of company headquarters and more generally for the location of activities of multinational companies. There are seven main reasons.

  • First, the exemption system of taxation of foreign profits[24] allows parent companies located in the UK to receive dividends exempt from UK corporate income tax. Because of the substantial shareholding exemption introduced in 2002, foreign capital gains are also exempt.
  • Second, the rate of corporate income tax is low with respect to other OECD countries, reaching 20% in 2015.
  • Third, the presence of a PB regime with a rate of 10% lowers the tax burden on very mobile factors such as intangibles and together with a relatively simple R&D tax incentives regime makes it more attractive to research and own UK-developed patents in the UK, rather than locate them in a low-tax entity.
  • Fourth, the new CFC regime allows important exemptions which essentially lower the tax burden on CFCs located in low-tax jurisdictions. In particular, the finance company exemption allows financing of high-tax subsidiaries via a low-tax CFC.
  • Fifth, historically the UK system does not charge withholding taxes on dividends paid from UK companies to their foreign shareholders. And the UK has signed a large number of tax treaties reducing outbound withholding taxes on interest payments and on royalties.
  • Sixth, the UK is part of the European Union: the EU Parent-Subsidiary Directive provides that intra-EU dividends paid by EU subsidiaries to an EU parent are exempt from withholding taxes, and the Interest and Royalties Directive provides that withholding taxes on intra-EU royalty and interest payments are set to zero.
  • Finally, the UK has generous rules for the deduction of interest payments. Although a worldwide debt cap for large companies was introduced in 2009 under the Labour government,[25] current interest rules remain relatively generous by international standards.

In this competitive context, at the end of the Coalition’s term, some questions remain. Primarily, was the increase in competitiveness worth £7.5 billion (or more)? The economic literature points to large effects of tax cuts on FDI and on investment. The Government and a large part of the business community seem to agree that the gain in competitiveness was worth forsaking some revenues. Some of the specific reform proposals originated with the Labour government and the Coalition’s business tax reforms have not generally been strongly contested politically.

If the gain in competitiveness outweighs the loss in revenues, why not cut even further and, indeed, what’s the optimal corporate tax rate for the UK?

The Coalition and business seem satisfied with where the statutory tax rate is now. If elected, the Labour Party has pledged not to cut the statutory corporate tax rate to 20% in 2015 but to keep it at 21%. The difference between 20 and 21% is minimal and hence, there seems to be a broad consensus on the fact that, for now, the appropriate UK corporate statutory tax rate is around 20%.

The political debate has not yet addressed some of the weaknesses of the UK business tax regime considered in this paper. In particular, the relatively ungenerosity of the capital allowances regime has been subject to very little discussion. According to the latest data, business investment fell in quarter 3 of 2014, leaving the annual pace of growth at 6.3%.

The UK is today one of the fastest growing developed economies but its productivity has historically been lower than that of other comparable countries such as Germany and France. For productivity to increase, investment has to hold up. Capital allowances are a key policy tool for stimulating investment. The issue then becomes which capital assets should be incentivised.

With new business models heavily relying on information and communications technology and the growing importance of the services sector, the tax system should not only target traditional capital such as machinery, equipment and buildings but also intangible assets which have a high potential to increase productivity.

 

Notes

  1. In 2015, three other G20 countries have a statutory corporate tax rate of 20%: Russia, Saudi Arabia and Turkey.
  2. In fiscal year 2015/16, if after the election the new government confirms the changes introduced by the Coalition, the UK will have a single statutory corporation tax rate of 20%.
  3. The main pool attracts the majority of standard plant and equipment, including computers and software. The rate of capital allowances was reduced from 10 to 8% for the special pool. The main items in the special pool are long-life assets or cars with higher CO2 emissions.
  4. Frequent and close announcements of temporary increases reduce the credibility of each further announcement. In its first emergency Budget in June 2010, the Coalition announced a cut in the AIA threshold to £25,000 to be implemented almost two years after the announcement, for expenditures incurred on or after 1 April 2012. However, subsequently, the AIA threshold was kept at £25,000 only for eight months (between 1 April and the 31 December 2012). It was then raised tenfold, again on a temporary basis, to £250,000 for expenditures incurred on or after 1 January 2013 and then doubled – yet again on a temporary basis – to £500,000 for expenditures incurred on or after 1 April 2014. Although the AIA is available for all companies, it narrows the tax base for SMEs substantially as it covers all or most of their investment in plant and machinery.
  5. In 2015, the OECD average is about 25.7% against the 20% corporate statutory rate for the UK.
  6. The tax burden on the marginal unit of investment affects the incentive to invest and hence, the size of investment.
  7. Such elements will only affect some firms whilst changes in the statutory rate and in general capital allowances affect all corporations.
  8. The new regime is applicable to financial years starting on or after 1 January 2013. A reform of the CFC regime was first launched by the Labour government and in part motivated by a ruling of the Court of Justice of the European Union (CJEU). In September 2006 in the Cadbury Schweppes plc case, the CJEU held that the old UK CFC rules restricted the freedom of establishment within the EU.
  9. The new regime is now based on an estimate of the amount of profit diverted from the UK whilst the previous regime had an entity-based approach: all or none of the profit of a CFC was subject to the CFC rules. The new regime targets the “artificial” diversion of profits and passive income when there is no economic substance in the low-tax location of the profits whereas in the previous regime all passive income and profits located in a low-tax jurisdiction may have been subject to the CFC rules. The principles underlying the new regime are reflected in the introduction of specific exemptions. For example, the new regime provides for a 12 months’ exemption for foreign subsidiaries which come under UK control, after the restructuring of a group. This facilitates reorganizations involving UK companies.
  10. In particular, the finance company exemption provides that only one quarter of profits earned by a CFC from loans to overseas companies is taxable at the main UK corporate income tax rate. This implies that the effective tax rate for such companies in 2015 is 5%.
  11. The PB was first proposed by the Labour government in its 2009 Pre-Budget Report.
  12. The PB benefits are phased in gradually so that companies need to apply an appropriate percentage to the company earnings from patented inventions, i.e. 1 April 2013 to 31 March 2014: 60%; 1 April 2014 to 31 March 2015: 70%; 1 April 2015 to 31 March 2016: 80%; 1 April 2016 to 31 March 2017: 90%; and from 1 April 2017: 100%.
  13. In this form, the UK regime seemed to be in contrast with the principles emerging from the OECD Base Erosion and Profit Shifting (BEPS) Action Plan (in particular, Action 5). At the same time, the Council of the European Union and the European Commission started investigating the UK Patent Box (OUCBT, 2015, sec 2.3).
  14. This is the so-called modified nexus approach. The existing regime needs to be closed to new entrants by 30 June 2016 and should be abolished by 30 June 2021. A new regime incorporating the modified nexus approach will co-exist in parallel with the old one until 2021. After this date, all countries have to maintain “nexus-compliant” regimes (OUCBT, 2015). For a more detailed description of the challenges for the new PB regime, see OUCBT (2015), section 2.3 and Englisch and Yevgenyeva (2013).
  15. A multinational company would locate patents in low-tax jurisdictions or in jurisdictions where a lower corporate tax rate is available through a PB regime. Royalties for the exploitation of the patents will then be paid from the operational subsidiaries located in high-tax jurisdictions to the owner of the patents located in a low-tax jurisdiction. This mechanism reduces taxable income in high-tax jurisdictions to shift it to low-tax countries.
  16. This implies that such credit could be added to the corporate pre-tax profit and hence be more easily incorporated into the decisions of the research and operative departments. For a more detailed description of the British R&D regime, see OUCBT (2015), section 2.4 and 3.2.
  17. For an analysis of the UK public finances, see Crawford et al. (2015) and Emmerson et al. (2015).
  18. The Bank Levy is not applied to tier 1 capital, insured retail deposits, repos secured on sovereign debt, and policyholder liabilities of retail insurance businesses within banking groups. It only applies to financial institutions with aggregate liabilities of £20 billion or more from 1 January 2011. For more details, see OUCBT (2015), section 2.7.
  19. For a more detailed description of the anti-avoidance measures introduced under the Coalition government, see OUCBT (2015), section 4. For an evaluation of the principles which should guide anti-avoidance tax policy, see Vella et al. (2012).
  20. To get some order of magnitude of the revenues involved in the fight against avoidance, OUCBT (2015) estimates that revenues raised from specific measures implemented between 2010 and 2015 amount to about £7.5 billion a year. Although these estimates are uncertain, these are large numbers which could partially offset the cost of the reform to the business tax system.
  21. There are other examples of controversial anti-avoidance measures. For example, the Chancellor has asked banks to sign up to the Code of Conduct for Banks detailing that financial institutions should respect not only the letter but also the spirit of the law. The Code has also been used to introduce retrospective legislation. All this clearly raises serious concerns about the rule of law (OUCTB, 2015).
  22. These are profits generated but not taxed in the UK because the company involved does not have a taxable presence in the UK or because of other arrangements lacking economic substance.
  23. The government’s own costings also seem to confirm that the DPT is narrowly targeted (£270m in 2016/17).
  24. The system was introduced under the Labour government in 2009.
  25. The worldwide debt cap was introduced with the Finance Bill 2009 under the Labour government and applies to financial accounts beginning on or after 1 January 2010. The objective of the regime is to restrict deductions for interest payments and other finance expenses claimed by members of a large group. A group is defined as large if at least one of its members has at least 250 employees, an annual turnover of at least EUR50 million, and/or a balance sheet total of at least EUR43 million. The cap will only apply if the UK net debt of the worldwide group exceeds 75% of the group’s worldwide debt. Once the cap applies, complex rules provide that the excess deductions for interest payments will be disallowed.

References

  • Crawford, R., Emmerson, C., Keynes, S. and Tetlow, G. (2015) “Fiscal aims and austerity: the parties’ plans compared”, IFS briefing note BN158, election briefing note 2015, no. 1.
  • Emmerson, C., Johnson, P. and Joyce, R. (2015) “IFS Green Budget”, January.
  • Englisch, J., and Yevgenyeva A. (2013) “The ‘Upgraded’ Strategy against Harmful Tax Practices under the BEPS Action Plan”, British Tax Review, 5, 620-637.
  • Feld, L. P. and Heckemeyer, J. H. (2011) “FDI and taxation: a meta-study”, Journal of Economic Surveys, 25(2), 233-272.
  • Griffith R, Miller H, O’Connell M. “Ownership of Intellectual Property and Corporate Taxation”, Journal of Public Economics 111(2014): 12-23.
  • Oxford University Centre for Business Taxation (OUCBT), (2015) “Business Taxation under the Coalition Government”, OUCBT Report. Available at: http://www.sbs.ox.ac.uk/sites/default/files/Business_Taxation/Docs/Publications/Reports/cbt-coalition-report-final.pdf
  • Vella, J., Devereux M. and Freedman, J, (2012) “Tax Avoidance”, Report commissioned by the UK National Audit Office. Available at: http://www.sbs.ox.ac.uk/sites/default/files/Business_Taxation/Docs/Publications/Reports/TA_3_12_12.pdf

2 thoughts on “Corporate taxation under the coalition government

  1. This is a peculiar article, for a couple of fundamental reasons.

    First, it says “the UK has improved its competitive position substantially.” But if you admit that the ‘competitive’ attractions for corporations are offset by revenue losses (including much leakage to foreign MNCs) then how does this make “the UK” more competitive? It seems like this paper falls for the fallacy of composition (and it uses this c-word all over the place.) OxfTax certainly isn’t alone in being a sucker for this particular ‘competitiveness’ fallacy, but it doesn’t make it any less egregious. This is fundamental.

    The second point makes me even more suspicious of the motivations behind this article.

    It does correctly note the £8.2 billion revenue cost to the UK, and rightly asks “was the increase in competitiveness worth £7.5 billion (or more)?” Which is a very, very good question. (e.g. see Tom Bergin’s story, linked here. http://foolsgold.international/the-false-promise-of-corporation-tax-cuts/ )

    But then the end of the document contains this.
    “The political debate has not yet addressed some of the weaknesses of the UK business tax regime considered in this paper. In particular, the relatively ungenerosity of the capital allowances regime . . . For productivity to increase, investment has to hold up. Capital allowances are a key policy tool for stimulating investment. . . .the tax system should not only target traditional capital such as machinery, equipment and buildings but also intangible assets which have a high potential to increase productivity.”

    To summarise the article, then:
    Corporate tax cuts promote something called “the competitiveness of the UK,” which isn’t unpacked. These tax cuts came at high revenue costs: were these costs worth it? Conclusion: the answer is to cut the tax burden on corporations.

    Could you explain how, in light of this, it would be unfair to describe this as a lobbying document? I just don’t see how it can be portrayed in any other way.

  2. Giorgia replies:

    The benefits from tax cuts come from increased investment and economic activity (“economic evidence points to large effects of tax cuts on FDI and capital stock” (section 4)). A high capital stock implies higher productivity, leading to higher living standards. My analysis of the impact of tax on FDI and the capital stock is based on academics studies over at least 30 years. For an independent analysis of that literature, see, for example, Lars P. Feld & Jost H. Heckemeyer, 2011. “FDI And Taxation: A Meta‐Study,” Journal of Economic Surveys, 25(2), 233-272, 04.

    It is true that the process of competition drives down corporation tax revenues. These costs are harder to evaluate. Clearly, other taxes have to rise to compensate for the foregone corporation tax revenue. We can compare corporation tax with other taxes on grounds of economic efficiency and fairness. On efficiency, the literature generally points to corporation tax as being one of the least efficient taxes. For independent analysis of that see, for example, Jens Matthias Arnold, Bert Brys, Christopher Heady, Åsa Johansson, Cyrille Schwellnus & Laura Vartia, 2011, “Tax Policy for Economic Recovery and Growth”, Economic Journal, 121, F59–F80, February 2011. The question of how fair is corporation tax has been the subject of much debate in the academic literature, and is still unresolved. Much of the literature points to a large part of corporation tax being passed on in lower wages, although there are mixed results on that. But there are no serious studies that have been able to identify whether corporation tax is progressive or regressive.

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