Reproducibility package for Corporate Taxation under Weak Enforcement
Overview
How should developing countries tax corporate income? We study this question in Costa Rica, where firms face higher average tax rates on profits when revenues marginally increase. We combine discontinuity and bunching designs to estimate the elasticity of taxable profit and separate it into revenue and cost elasticities. We find that firms faced with a higher tax rate slightly reduce revenues but considerably increase costs, thus producing a large elasticity of taxable profit of 3–5. In this context, the revenue-maximizing rate for a corporate tax on profit is below 25 percent, and we show that a tax policy that broadens the base while lowering the rate can almost double the tax revenue collected from these firms.
Reproducibility Package
| Name | URL |
|---|---|
| Creative Commons Attribution 4.0 International (CC BY 4.0) License | https://creativecommons.org/licenses/by/4.0/ |
| Repository name | URI |
|---|---|
| AEA Data and Code Repository | https://www.openicpsr.org/openicpsr/aea |
Reproducibility
A readme file with detailed instructions is part of the (external) reproducibility package.
Data
The main data used in the analysis is Costa Rican administrative firm level tax returns, accessed through the Ministry of Finance (MoF). The data are physically stored on computers at the Ministerio de Hancienda, in San Jose, Costa Rica, and due to security reasons the data may not be transferred to computers outside the Finance Ministry. Researchers interested in obtaining access to the data employed in this paper can contact the Ministerio de Hancienda, Departamento de Estadisticas Fiscales, Division de Politica Fiscal. These data are not meant to become public and will remain restricted-access. However, aggregated/tabulated data which was provided to us by the MoF and which groups firms by bins of revenue is provided, which enables the replication of most figures and tables in the paper. These tabulated data are directly provided to us, upon description of the bins of revenue and thus do not have a source file. The Ministry of Finance does not keep archival snapshots of its database.
The other information used in the appendix includes administrative register data from the Central bank of Costa Rica. The dataset is titled “Registro de variables economicas del Banco Central de CostaRica (Revec)” and contains firm-level tax return data, combined with information on employment from social security, and data on economic affiliates. The data are physically stored on computers at the Banco Central, in San Jose, Costa Rica, and due to security reasons the data may not be transferred to computers outside the Central Bank. Researchers interested in obtaining access to the data
employed in this paper can contact the Banco Central de Costa Rica, Division Economica, Departamento de Investigacion Economica. These data are not meant to become public and will remain restricted-access. Aggregated/tabulated data which was provided to us by the MoF and
which groups firms by bins of revenue is provided, which enables the replication of most figures and tables in the paper.
Further data is public and described in the readme file.
Yes, please refer to the data statement and the readme file.
Description
| Author | Affiliation | |
|---|---|---|
| Pierre Bachas | World Bank | pbachas@worldbank.org |
| Mauricio Soto | Superintendency of Pensions of Costa Rica | mausot84@gmail.com |
2021-11
Scope and coverage
| Location | Code |
|---|---|
| Costa Rica | CRI |
Disclaimer
The materials in the reproducibility packages are distributed as they were prepared by the staff of the International Bank for Reconstruction and Development/the World Bank. The findings, interpretations, and conclusions expressed in this event do not necessarily reflect the views of the World Bank, the Executive Directors of the World Bank, or the governments they represent. The World Bank does not guarantee the accuracy of the materials included in the reproducibility package.
Access and rights
| Name | URI |
|---|---|
| Creative Commons Attribution 4.0 International (CC BY 4.0) License | https://creativecommons.org/licenses/by/4.0/ |
Information on metadata
| Name | Abbreviation | Affiliation |
|---|---|---|
| Krestel | CK | World Bank |
2023-07-25
1