Do corporate taxes reduce investments? Evidence from Italian firm-level panel data

Figures & data

Figure 1. Statutory corporate tax rates, effective average (EATR), and marginal (EMTR) corporate tax rates (Years 1994–2006).

Source: Authors’ calculations.

Table 1. Number of companies present in the data-set by Pavitt sector and firm size

	Number	Percentage
Sector
Traditional sectors	436	49.5
Scale sectors	151	17.2
Special sectors	266	30.2
High-tech sectors	27	3.1
Size (number of employees)
Up to 10	18	2.0
11–20	99	11.3
21–50	177	20.1
50–100	276	31.4
100–500	250	28.4
More than 500	60	6.8
Total	880	100.0

Notes: Years 1994–2006. Absolute and percentage values.

Source: Survey on the Manufacturing Firms (Unicredit) and company accounts (CERVED).

Table 2. Summary statistics (mean values, standard deviation in italics) for investment on capital stock, cash flow on total assets, debt-to-equity ratio, sales on total assets

	Mean	Standard deviation	Minimum	Maximum
It/Kt − 1	0.16	0.24	0.00	0.99
CFt/At − 1	0.08	0.06	0.00	2.34
SDt/At − 1	0.22	0.17	0.00	0.97
LDt/At − 1	0.12	0.09	0.00	0.85
St/At − 1	0.12	0.58	0.00	9.67

Note: Years 1994–2006.

Source: Survey on the manufacturing firms (Unicredit) and company accounts (CERVED).

Table 3. Effects of corporate taxes (EATR, EMTR) on investments. Dynamic panel-data estimation (GMM)

EATR	−11.172^** (3.626)
EMTR		−1.663^** (0.839)
Lagged investments	1.710^*** (0.085)	1.736^*** (0.078)
Square lagged investments	−0.002^*** (0.000)	−0.002^*** (0.000)
Cash flow	1.404^* (0.837)	0.962 (0.0671)
Short-term debts	−0.559^** (0.277)	−0.705^** (0.222)
Long-term debts	−1.92^*** (0.304)	−1.759^*** (0.243)
Sales	0.40^*** (0.075)	0.44^*** (0.060)
N	1468	1468
Sargan test	χ^2(6) = 3.08	χ^2(6) = 3.35
Prob > χ^2	0.79	0.76
Hansen test	χ^2(6) = 8.93	χ^2(6) = 5.09
Prob > χ^2	0.18	0.53

^* p < 0.10.

^** p < 0.05.

^*** p < 0.001.

Notes: Years 1994–2006; Robust standard errors in parenthesis; Constant and firm dummies are not reported.

Source: Authors’ estimates.