Reproducibility package for The Elusive Impact of Corporate Tax Incentives

Despite the large fiscal footprint of corporate tax incentives, limited causal evidence exists on their impact on economic outcomes. This paper helps fill this gap by exploiting the phasing out of a large income tax exemption scheme for export oriented firms in Tunisia, which raised their tax rate from 0% to 10%. Using microdata on the universe of registered Tunisian firms, the analysis compares economic outcomes of those firms against the other firms before and after the rate hike. The results suggest that the reform led to a substantial decline in the entry of new firms in the sector previously benefiting from the incentives, which drove down the number of firms in that sector. However, the reduced entry did not translate into any meaningful economic effects in terms of employment, revenue or the wage bill. That is mainly because the reform did not impact the activities of incumbent firms, which account for the bulk of economic activity in Tunisia. The findings are robust to addressing various threats to the empirical identification and they confirm emerging evidence casting doubt on the importance of tax incentives to attract investments relative to other factors in an economy.