Working Paper: CEPR ID: DP9481
Authors: Vincent Daxbék; Antonio Estache
Abstract: The main purpose of this paper is to provide an assessment of the impact of the introduction of an alternative minimum tax (AMT) in Belgium with a focus on the impact on various distortions margins. In the process, we provide an up-to date account of the state of effective corporate taxation in the country. The current ETR is 15.7%. For a 1% of GDP increase in revenue, the ETR of an income based AMT would increase to 24.3% illustrating the potential payoff of a significant simplification of the current system. For a politically viable asset based AMT, it would roughly double the ETR. An income based AMT would somewhat reduce the distortions across sectors and firms sizes while an asset based AMT would increase it. As expected, an asset based AMT would penalize more large firms since they are more capital intensive. Small firms could actually be better off under an asset based AMT than under an income based AMT. But any decision on the AMT in Belgium is likely to be polarizing. Small firms currently represent 84% of the number of businesses, 35% of the jobs and 22.4% of the tax revenue. Large and very large firms represent less than 4% of the number of business but almost 50% of the jobs and over 60% of the tax revenue.
Keywords: alternative minimum taxes; Belgium; corporate taxes; effective tax rates; presumptive taxation; tax avoidance
JEL Codes: H20; H25; H26; H32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| introduction of an income-based AMT (H26) | increase in effective corporate tax rate (ETR) (H26) |
| introduction of an asset-based AMT (Y20) | doubling of effective corporate tax rate (ETR) (H32) |
| introduction of an asset-based AMT (Y20) | more significant impact on large firms (L25) |
| introduction of an asset-based AMT (Y20) | benefits for small firms compared to income-based AMT (H32) |
| protecting firms with zero profits under current system (L21) | higher required rate for AMT (H26) |
| higher required rate for AMT (H26) | disadvantage for firms currently paying taxes (H32) |
| higher required rate for AMT (H26) | failure to capture firms exploiting tax loopholes (H26) |