The relationship between economic policy uncertainty and corporate tax rates

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Authors

Clance, M.W. (Matthew)
Gozgor, Giray
Gupta, Rangan
Lau, Chi Keung Marco

Journal Title

Journal ISSN

Volume Title

Publisher

World Scientific Publishing

Abstract

This paper investigates the relationship between economic policy uncertainty and corporate tax rates in a panel dataset of 126 countries throughout 2003–2018. We use the so-called “World Uncertainty Index” to measure the level of economic policy uncertainty. We utilize various estimation techniques and find a one-way causality from economic policy uncertainty to corporate tax rates. Specifically, a rise in economic policy uncertainty leads to higher corporate tax rates. We also discuss potential implications.

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Keywords

Corporate taxation, Economic policy uncertainty (EPU), Uncertainty shocks, Business cycles, Panel data estimation techniques

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Citation

Clance, M., Gozgor, G., Gupta, R. et al. 2021, 'The relationship between economic policy uncertainty and corporate tax rates', Annals of Financial Economics, vol. 16, no. 1, art. 2150002.