Global corporate tax policy space

Abstract

This study investigates the economic growth implications of ongoing and prospective rises in corporate tax rates following G20 countries’ minimum corporation tax agreement. We use a panel data estimation approach to examine economic growth rates and associated macro-economic variables of 42 nations from 1990 to 2017. To elicit more comprehensive insights, we make a distinction between advanced countries (ACs) and emerging market economies (EMEs) and different levels of growth using a quantile estimation approach. The results reveal that corporate tax rate rises depress growth, with a relatively sizeable impact for EMEs, whereas it is not statistically significant for ACs. At high quantiles of growth rates, the impact of the corporate tax policy on growth increases. These findings suggest a dual effect for EMEs with relatively high growth rates and symmetric growth effects of corporate tax changes, necessitating innovative policy prescriptions to address the negative growth impact of prospective higher corporate tax rates.