Wednesday, December 20th, 2017 9:31 am

Corporate Tax-Rate Harmonization

Question A:

Holding other policies fixed, the average European would be better off if every European country taxed corporate profits at a rate of 20% (based as closely as possible on a common definition of profits).

Responses
 

Source: European IGM Economic Experts Panel
www.igmchicago.org/european-economic-experts-panel

Responses weighted by each expert's confidence

Source: European IGM Economic Experts Panel
www.igmchicago.org/european-economic-experts-panel

Question B: If other policies were held fixed and every European country taxed corporate profits at a common rate of 20%, then reducing that common rate substantially below 20% would make the average European better off.

Responses
 

Source: European IGM Economic Experts Panel
www.igmchicago.org/european-economic-experts-panel

Responses weighted by each expert's confidence

Source: European IGM Economic Experts Panel
www.igmchicago.org/european-economic-experts-panel

Question A Participant Responses

Participant University Vote Confidence Comment Bio/Vote History
Aghion Philippe Aghion Harvard Did Not Answer
Bio/Vote History
         
Allen Franklin Allen Imperial College London Did Not Answer
Bio/Vote History
         
Antras Pol Antras Harvard Did Not Answer
Bio/Vote History
         
Besley Timothy J. Besley LSE Did Not Answer
Bio/Vote History
         
Blanchard Olivier Blanchard Peterson Institute Agree 7
sure of the answer if ``at a common rate''. Not sure about the 20%, if different from current mean
Bio/Vote History
         
Bloom Nicholas Bloom Stanford Agree 7
Bio/Vote History
         
Blundell Richard William Blundell University College London Did Not Answer
Bio/Vote History
         
Bénassy-Quéré Agnès Bénassy-Quéré Paris School of Economics Disagree 8
Economic geography would argue for some rate diversity, possibly with a floor.
Bio/Vote History
         
Carletti Elena Carletti Bocconi Did Not Answer
Bio/Vote History
         
Danthine Jean-Pierre Danthine Paris School of Economics Agree 3
Bio/Vote History
         
De Grauwe Paul De Grauwe LSE Uncertain 5
My uncertainty stems from the fact that the question does not make clear how the tax cut will be financed (higher deficit, less spending)?
Bio/Vote History
         
Eeckhout Jan Eeckhout University College London Agree 7
What is important is the common rate across countries. It is not clear to me that 20% is the correct level.
Bio/Vote History
         
Fehr Ernst Fehr Universität Zurich Did Not Answer
Bio/Vote History
         
Freixas Xavier Freixas Universitat Pompeu Fabra Did Not Answer
Bio/Vote History
         
Fuchs-Schündeln Nicola Fuchs-Schündeln Goethe-Universität Frankfurt Did Not Answer
Bio/Vote History
         
Galí Jordi Galí Universitat Pompeu Fabra Did Not Answer
Bio/Vote History
         
Garicano Luis Garicano LSE Agree 7
Base harmonization is key. Current chaos is inefficient (encourages tax arbitrage) and unfair (profit shifting leads to absurdly low rates)
Bio/Vote History
         
Giavazzi Francesco Giavazzi Bocconi Did Not Answer
Bio/Vote History
         
Griffith Rachel Griffith University of Manchester Strongly Agree 10
Lack of coordination of corporate taxes leads to inefficient distortion of corporate real and financial activities.
-see background information here
Bio/Vote History
         
Guerrieri Veronica Guerrieri Chicago Booth Did Not Answer
Bio/Vote History
         
Guiso Luigi Guiso Einaudi Institute for Economics and Finance Agree 7
Bio/Vote History
         
Hellwig Martin Hellwig Max Planck Institute for Research on Collective Goods Disagree 10
The "average European" does not exist. The counterpart of the tax cut in the budget is undefined. Any affirmative statement is unfounded.
Bio/Vote History
         
Honohan Patrick Honohan Trinity College Dublin Uncertain 6
Probably needs to be accompanied by coordinated anti-avoidance work to limit tax avoidance practices of MNCs simply shifting to non-EU.
Bio/Vote History
         
Kleven Henrik Kleven Princeton Did Not Answer
Bio/Vote History
         
Krahnen Jan Pieter Krahnen Goethe University Frankfurt Disagree 6
The effect of lower tax rate on average income is probably stronger than that of lower taxable income (given concurrent US-tax reduction).
Bio/Vote History
         
Krusell Per Krusell Stockholm University Agree 6
Harmonization eliminates unnecessary wedges.
Bio/Vote History
         
Kőszegi Botond Kőszegi Central European University Agree 4
Bio/Vote History
         
La Ferrara Eliana La Ferrara Bocconi Did Not Answer
Bio/Vote History
         
Leuz Christian Leuz Chicago Booth Agree 3
Weakly agree but case in EU not clear cut (see link). Only effective if base harmonized too. Tricky Q as ctries like IRE need big adjustment
-see background information here
Bio/Vote History
         
Meghir Costas Meghir Yale Did Not Answer
Bio/Vote History
         
Neary Peter Neary Oxford Did Not Answer
Bio/Vote History
         
O'Rourke Kevin O'Rourke Oxford Did Not Answer
Bio/Vote History
         
Pagano Marco Pagano Università di Napoli Federico II Agree 6
Bio/Vote History
         
Pastor Lubos Pastor Chicago Booth Disagree 5
Not until Europe adopts common fiscal policy. Corporate tax is more harmful to growth than other taxes. Tax competition helps keep it low.
Bio/Vote History
         
Persson Torsten Persson Stockholm University Did Not Answer
Bio/Vote History
         
Pissarides Christopher Pissarides LSE Did Not Answer
Bio/Vote History
         
Portes Richard Portes London Business School Agree 5
Effective rates already in range 20-30 (Ireland lower). Good to minimize incentives for tax avoidance.
Bio/Vote History
         
Prendergast Canice Prendergast Chicago Booth Uncertain 8
Bio/Vote History
         
Reichlin Lucrezia Reichlin London Business School Did Not Answer
Bio/Vote History
         
Repullo Rafael Repullo CEMFI Agree 6
Bio/Vote History
         
Rey Hélène Rey London Business School Did Not Answer
Bio/Vote History
         
Schoar Antoinette Schoar MIT Agree 8
Tax harmonization across countries would be beneficial to reduce regulatory arbitrage. I am less sure that 20% is indeed the right number.
Bio/Vote History
         
Van Reenen John Van Reenen MIT Agree 6
Reduce harmful tax competition
Bio/Vote History
         
Vickers John Vickers Oxford Agree 5
Bio/Vote History
         
Voth Hans-Joachim Voth University of Zurich Strongly Agree 7
Bio/Vote History
         
Weder di Mauro Beatrice Weder di Mauro Gutenberg University Mainz and INSEAD Did Not Answer
Bio/Vote History
         
Whelan Karl Whelan University College Dublin Did Not Answer
Bio/Vote History
         
Wyplosz Charles Wyplosz The Graduate Institute Geneva Agree 1
Yes but the implied loss of tax revenue should be compensated by either less distortionary taxes or by inefficient spending cuts.
Bio/Vote History
         
Zilibotti Fabrizio Zilibotti Universität Zurich Agree 8
Bio/Vote History
         

Question B Participant Responses

Participant University Vote Confidence Comment Bio/Vote History
Aghion Philippe Aghion Harvard Did Not Answer
Bio/Vote History
         
Allen Franklin Allen Imperial College London Did Not Answer
Bio/Vote History
         
Antras Pol Antras Harvard Did Not Answer
Bio/Vote History
         
Besley Timothy J. Besley LSE Did Not Answer
Bio/Vote History
         
Blanchard Olivier Blanchard Peterson Institute Agree 7
if by average, we mean ``mean''. Distribution effects between capital and labor income might have adverse implications.
Bio/Vote History
         
Bloom Nicholas Bloom Stanford Uncertain 4
Bio/Vote History
         
Blundell Richard William Blundell University College London Did Not Answer
Bio/Vote History
         
Bénassy-Quéré Agnès Bénassy-Quéré Paris School of Economics Disagree 8
Bio/Vote History
         
Carletti Elena Carletti Bocconi Did Not Answer
Bio/Vote History
         
Danthine Jean-Pierre Danthine Paris School of Economics Disagree 3
Bio/Vote History
         
De Grauwe Paul De Grauwe LSE Disagree 7
Bio/Vote History
         
Eeckhout Jan Eeckhout University College London Disagree 8
Bio/Vote History
         
Fehr Ernst Fehr Universität Zurich Did Not Answer
Bio/Vote History
         
Freixas Xavier Freixas Universitat Pompeu Fabra Did Not Answer
Bio/Vote History
         
Fuchs-Schündeln Nicola Fuchs-Schündeln Goethe-Universität Frankfurt Did Not Answer
Bio/Vote History
         
Galí Jordi Galí Universitat Pompeu Fabra Did Not Answer
Bio/Vote History
         
Garicano Luis Garicano LSE Disagree 6
Bio/Vote History
         
Giavazzi Francesco Giavazzi Bocconi Did Not Answer
Bio/Vote History
         
Griffith Rachel Griffith University of Manchester Uncertain 10
It depends crucially on factors we do not measure well, e.g. is incidence of corporate tax, and income shifting from labour income
-see background information here
-see background information here
Bio/Vote History
         
Guerrieri Veronica Guerrieri Chicago Booth Did Not Answer
Bio/Vote History
         
Guiso Luigi Guiso Einaudi Institute for Economics and Finance Disagree 5
Bio/Vote History
         
Hellwig Martin Hellwig Max Planck Institute for Research on Collective Goods Disagree 10
The "average European" does not exist. The counterpart of the tax cut in the budget is undefined. Any affirmative statement is unfounded.
Bio/Vote History
         
Honohan Patrick Honohan Trinity College Dublin Disagree 6
Despite theoretical propositions arguing strongly against corporation tax, a nonzero rate is surely needed in a second-best world.
Bio/Vote History
         
Kleven Henrik Kleven Princeton Did Not Answer
Bio/Vote History
         
Krahnen Jan Pieter Krahnen Goethe University Frankfurt Strongly Disagree 1
Same as before.
Bio/Vote History
         
Krusell Per Krusell Stockholm University Uncertain 6
It depends on how the resulting debt will be financed.
Bio/Vote History
         
Kőszegi Botond Kőszegi Central European University Disagree 6
Bio/Vote History
         
La Ferrara Eliana La Ferrara Bocconi Did Not Answer
Bio/Vote History
         
Leuz Christian Leuz Chicago Booth Disagree 3
Benefits are uncertain & concerns about effect on inequality, esp if policies are fixed & govnmts cannot compensate for inequality effects
-see background information here
-see background information here
Bio/Vote History
         
Meghir Costas Meghir Yale Did Not Answer
Bio/Vote History
         
Neary Peter Neary Oxford Did Not Answer
Bio/Vote History
         
O'Rourke Kevin O'Rourke Oxford Did Not Answer
Bio/Vote History
         
Pagano Marco Pagano Università di Napoli Federico II Uncertain 3
Bio/Vote History
         
Pastor Lubos Pastor Chicago Booth Agree 5
Corporate tax should be low as it is harmful to growth. Rules must prevent personal income from avoiding tax by becoming corporate income.
Bio/Vote History
         
Persson Torsten Persson Stockholm University Did Not Answer
Bio/Vote History
         
Pissarides Christopher Pissarides LSE Did Not Answer
Bio/Vote History
         
Portes Richard Portes London Business School Disagree 4
Bio/Vote History
         
Prendergast Canice Prendergast Chicago Booth Uncertain 8
Bio/Vote History
         
Reichlin Lucrezia Reichlin London Business School Did Not Answer
Bio/Vote History
         
Repullo Rafael Repullo CEMFI Disagree 6
Bio/Vote History
         
Rey Hélène Rey London Business School Did Not Answer
Bio/Vote History
         
Schoar Antoinette Schoar MIT Uncertain 7
Bio/Vote History
         
Van Reenen John Van Reenen MIT Strongly Disagree 8
Bio/Vote History
         
Vickers John Vickers Oxford Disagree 5
Answer might be different if other policies not held fixed
Bio/Vote History
         
Voth Hans-Joachim Voth University of Zurich Uncertain 5
Bio/Vote History
         
Weder di Mauro Beatrice Weder di Mauro Gutenberg University Mainz and INSEAD Did Not Answer
Bio/Vote History
         
Whelan Karl Whelan University College Dublin Did Not Answer
Bio/Vote History
         
Wyplosz Charles Wyplosz The Graduate Institute Geneva Uncertain 4
It may be difficult to make up for too large revenue losses.
Bio/Vote History
         
Zilibotti Fabrizio Zilibotti Universität Zurich Disagree 8
Bio/Vote History
         

About the European IGM Economic Experts Panel

This panel explores the views of European economists on vital public policy issues. It does this by polling them on important policy questions, by including a way for them to explain their answers briefly if they wish, and by disseminating these responses directly to the public in a simple format.

To that end, our panel was chosen to include distinguished experts with a keen interest in public policy from the main areas of economics, to be geographically diverse, and to include older and younger scholars. As with the IGM’s US panel, the experts are all outstanding researchers in their fields. The panel includes recipients of top national and international prizes in economics, fellows of the Econometric society and the European Economic Association, members of distinguished national and international policymaking bodies in Europe, recipients of significant grants for economic research, highly accomplished affiliates and program directors of the Centre for Economic Policy Research and the National Bureau of Economic Research, and past and current editors of leading academic journals in the profession. This approach not only provides a set of panelists whose names will be familiar to other economists and the media, but also delivers a group with impeccable qualifications to speak on public policy matters in Europe and beyond.

Questions for the European IGM Economic Experts Panel are emailed individually to all members of the panel. They are phrased as statements with which one can agree or disagree. The experts are also asked how confident they are in their knowledge of the issue associated with the question (10 being highest). Each panelist responds electronically at his or her convenience. Panelists may consult whatever resources they like before answering. They may also include brief comments with their responses, or provide links to relevant sources.

It is important to explain one aspect of our voting process. In some instances a panelist may neither agree nor disagree with a statement, and there can be two very different reasons for this. One case occurs when an economist knows a lot about a topic and yet sees the evidence on the exact claim at hand as ambiguous. In such cases our panelists vote "uncertain". A second case relates to statements on topics so far removed from the economist's knowledge that he or she does not feel well placed to judge. In this case, our panelists vote "no opinion".

Panelists suggest many of the questions themselves. Members of the public are also welcome to suggest questions (see link below). Although IGM faculty members are responsible for deciding the final version of each question, we send a draft of the question to the panel in advance and invite them to point out problems with the wording if they see any. This process helps us to reduce vagueness or problems of interpretation.

The panel data are copyrighted by the Initiative on Global Markets and will be analyzed for an article to appear in a peer-reviewed journal.

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