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How has the UK corporation tax raised so much revenue?

Author

Listed:
  • Michael Devereux

    (Institute for Fiscal Studies and University of Oxford)

  • Rachel Griffith

    (Institute for Fiscal Studies and University of Manchester)

  • Alexander Klemm

    (Institute for Fiscal Studies)

Abstract
We analyse a puzzle in the UK corporation tax: by both historic and international standards corporation tax revenues have been high while the statutory rate has been low. Possible explanations include the following: changes in tax law that may have increased effective tax rates; other factors such as higher profitability or different macro-economic conditions may have led to higher effective tax rates; and finally the size of the corporate sector may have increased. We find evidence for all three explanations, although none would be sufficient in itself. To the extent that higher profits, particularly financial sector profits may have led to high revenues, there are doubts as to whether revenues will continue to be so strong.

Suggested Citation

  • Michael Devereux & Rachel Griffith & Alexander Klemm, 2004. "How has the UK corporation tax raised so much revenue?," IFS Working Papers W04/04, Institute for Fiscal Studies.
  • Handle: RePEc:ifs:ifsewp:04/04
    as

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    File URL: http://www.ifs.org.uk/wps/wp0404.pdf
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    References listed on IDEAS

    as
    1. Michael Devereux & Alexander Klemm, 2003. "Measuring taxes on income from capital: evidence from the UK," IFS Working Papers W03/03, Institute for Fiscal Studies.
    2. Mendoza, Enrique G. & Razin, Assaf & Tesar, Linda L., 1994. "Effective tax rates in macroeconomics: Cross-country estimates of tax rates on factor incomes and consumption," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 297-323, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Corporation tax; revenue;

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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