Jacob and Sureth-Sloane explore the consequences of the lack of regulatory transparency due to multiple layers of taxes and their complex interactions for investment decisions and compliance. With this, they contribute to understanding how tax regulation translates into business decisions. They extend the literature by examining a broad set of taxes, such as corporate, consumption, and environmental taxes. Moreover, they explore interactions of different taxes and their implications for the real economy through employment, firm productivity, or risk-taking, which is often heterogeneous across firms, stakeholders, and countries.
How do the multiple layers of taxes and their complex interactions affect investment decisions and compliance, and how does this effect vary across firms?
Motivation zur Forschung
During the first funding period, we established an advanced understanding of the effect of various complex and multi-layer taxes on business decisions theoretically and empirically. We particularly studied the impact of personal income taxes, withholding taxes, and dividend taxes and their impact and constraints for firms or investors. We further provided evidence for the impact of tax-specific country risk factors on loss offset provisions and the complex relation between taxes and corporate risk-taking. Moreover, we modeled and empirically tested the relation between tax incidence and tax avoidance decisions. We started to examine the impact of wage tax waivers on investment in high-skilled labor as well as new forms of taxation such as environmental taxes. While B01 has made substantial achievements in the first funding period, there are still important gaps in the literature.
In the second funding period, our vision is to further expand our understanding of the effects of tax regulation to form the basis for real effects studies within and beyond the CRC that account for multilayer taxation and taxpayer heterogeneity and inform society about real effects. We structure our project into three parts. Part I studies the impact of complex taxes on investment decisions. We will take a multi-stakeholder view and explore the impact of recent policy tools such as environmental taxes, antitax avoidance rules, tax loss rules on risk-taking, and taxes on R&D investment. Part II explores the heterogeneity in the tax effects, for example, by studying the role of market power in profit shifting and in the investment-tax sensitivity. Part III focuses on the role of fiscal administrations and tax sensitivity of business decisions by exploring internal and external tax enforcement mechanisms.
We contribute theoretically and empirically to the understanding of how and when complex
tax regulations affect different types of investment. We provide a theory- and evidence-based understanding of recent policy actions, such as emission taxes or crisis-induced tax incentives, and shed light on intended and unintended effects of tax policies. With this, B01 adds directly to recent policy debates and at the same time contributes to the overarching goal of the CRC.