Abstract
: The latest German tax reform addresses the reduction of the corporate tax burden as well as the issue of tax shifting activities by multinationals. With the aid of ifoMOD, a dynamic computable general equilibrium model, we quantify the outcome of this reform. Our results show that the reform induces a significant decline in corporate sector investments since those firms suffer a cumulative double taxation. As a consequence, GDP decreases by 0.6% in the long-run and overall welfare declines by 0.7% in terms of GDP. The economic activity could, however, be enhanced, if one would abstract from taxing capital gains.
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