Working Paper: NBER ID: w29819
Authors: Pierre Bachas; Matthew H. Fisherpost; Anders Jensen; Gabriel Zucman
Abstract: This paper builds and analyzes a new global macro-historical database of effective tax rates on capital and labor in 154 countries. We establish a new stylized fact: while effective capital tax rates fell in developed countries between 1965 and 2018, they rose in developing countries since 1990. Multiple research designs at the country, sector and firm-level suggest that trade openness contributed to this rise, by increasing the share of output produced in corporations and larger firms, where effective capital taxation is higher. In contrast to a common view, globalization appears in many countries to have supported governments’ ability to tax capital.
Keywords: globalization; factor income taxation; trade liberalization; effective tax rates
JEL Codes: F14; F62; H20; O24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| effective capital tax rates (F38) | capacity to raise effective capital tax rates (F38) |
| trade integration (F15) | capital taxation in high-income countries (H24) |
| formal corporate sector growth (O16) | capacity to raise effective capital tax rates (F38) |
| trade liberalization (F13) | concentration of economic activity in formal corporate structures (L22) |
| concentration of economic activity in formal corporate structures (L22) | easier taxation of capital (F38) |
| trade liberalization (F13) | effective capital tax rates (F38) |