TTPI Working Paper 5/2018:

Who bears the corporate tax incidence? Empirical evidence from India


Samiksha Agarwal, National Institute of Public Finance and Policy & Lekha Chakraborty, National Institute of Public Finance and Policy & Research Associate, Levy Economics Institute of Bard College, New York


Against the backdrop of corporate tax policy changes in India, the paper attempts to measure the incidence of corporate income tax in India under a general equilibrium setting. Using seemingly unrelated regression coefficients and dynamic panel estimates, we tried to analyze both the relative burden of corporate tax borne by capital and labor and the efficiency effects of corporate income tax. The data for the study is compiled from corporate firms listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange of India (NSE) for the period 2000–15. Our empirical estimates suggest that in India capital bears more of the burden of corporate taxes than labor. However, the results vary with different proxies of capital used in the models. Though it is contrary to the Harberger (1962) hypothesis that the burden of corporate tax is shifted to labor rather than capital, it confirms the existing empirical results in the context of India.

The working paper is available here.


Further Reading

Business Taxation and Wages: Redistribution and Asymmetric Effects by Thomas Bauer, Tanja Kasten and Lars Siemers

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