Economic Growth and Corporate Taxation: A Panel Data Analysis for OECD Countries

The aim of this paper is to investigate empirically the theoretical relationship among corporate taxation and GDP growth. This is attempted with the estimation of panel data models within both a linear and a non-linear framework. The study is applied on a set of 12 OECD countries for the period 1982-2005. The empirical findings though conclude on a no explicit GDP growth-Effective Average Tax Rates relationship, they illustrate a statistical significant static-linear GDP growth and Corporate Tax Revenues relationship. The study empirically calibrates the corporate taxes relationship with economi growth accounting for the individual countries' characteristics. In the view also that effective average tax rates-in the Laffer curve empirical context-could account for a corporate tax revenue proxy, the study offers evidence for the non-linear long-run theoretical relationship between economic growth and corporate tax rates. In the present study the effective average tax rate and the corporate tax revenues are both selected as public income variables that could determine GDP as income, opposing to the mainstream field studies where GDP is being determined as expenditures, and the tax rates are considered to be public spending proxies.