Corporate Tax Cuts: examining the record in advanced economies

Publication Date
Financial Markets Group Discussion Papers DP 764
Publication Authors

This discussion paper examines evidence from 39 economies where cuts in the corporate income tax rate have been implemented since 1986. The paper also summarizes the findings of nearly two dozen studies on the fiscal effects of corporate tax rate cuts. The main conclusion from these analyses is that radical tax rate cuts, of 15 or more percentage points, are rare and usually happen only after major fiscal disruptions that weaken the political influence of business sectors that oppose reductions in the tax preferences from which they have benefited. In contrast, more modest corporate tax cuts of about 10 percentage points are typically effected in normal economic conditions and are practical to implement as they do not trigger large fiscal imbalances.