Seminar: 'Do Small and Medium-Sized Enterprises respond to the Corporate Tax System?'

Time: 13.00-14.00 hours
Location: CPB-office, Van Stolkweg 14, The Hague

Presentation: Hendrik Vrijburg (EUR)

Discussant: Leon Bettendorf (CPB)

Language: English

Registration:  Please register by sending an email to seminars@cpb.nl.

Abstract subject
This paper uses micro-data based on Dutch Corporate Income Tax Returns between 2000 and 2009 to study the effect of changes in the Corporate Income Tax Code on the investment and financing decisions of Small and Medium-Sized Enterprises. The tax returns are filled in by all Small and Medium-Sized Enterprises liable for corporate tax, which yields a total of almost two million observations. In light of a variety of changes in the Corporate Income Tax System between 2004 and 2009, both tax rates and brackets have been adjusted, this data set provides an excellent opportunity to identify the effect of the Corporate Tax System on the choices by Small and Medium-Sized Enterprises. Besides identifying the effect of changes in the tax by using both difference-in-difference analyses around bracket-ends and standard panel data methods, the paper studies whether bunching can be observed around the bracket-ends. With respect to the marginal tax rate, I find an average investment elasticity of 0.4 and an average elasticity of the debt-asset-ratio of 0.38. Furthermore, I find significant bunching only at the highest bracket-end of 200k.

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