Death and Taxes: Does Taxation Matter for Firm Survival?

April 19, 2019

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Format: Chicago

Serhan Cevik, and Fedor Miryugin. Death and Taxes: Does Taxation Matter for Firm Survival?, (USA: International Monetary Fund, 2019) accessed September 20, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper investigates the impact of taxation on firm survival, using hazard models and a large-scale panel dataset on over 4 million nonfinancial firms from 21 countries over the period 1995–2015. We find ample evidence that a lower level of effective marginal tax rate improves firms’ survival chances. This result is not only statistically but also economically important and remains robust when we partition the sample into country subgroups. The effect of taxation on firms’ survival probability is found to exhibit a non-linear pattern and be stronger in developing countries than advanced economies. These findings have important policy implications for the design of corporate tax systems. The challenge is not simply reducing the statutory tax rate, but to level the playing field for all firms by rationalizing differentiated tax treatments across sectors, asset types and sources of financing.

Subject: Capital productivity, Corporate income tax, Marginal effective tax rate, Production, Tax incidence, Tax policy, Taxes, Total factor productivity

Keywords: Appendix table, Capital productivity, Corporate income tax, Europe, Firm, Firm survival, Marginal effective tax rate, Nonfinancial firm, Summary statistics, Survival prospects, Tax incidence, Total factor productivity, WP

Publication Details

Pages:

21
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2019/078
Stock No:

WPIEA2019078
ISBN:

9781498305433
ISSN:

1018-5941

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