Responsiveness of corporation tax revenues to taxable income: a firm-level approach

Revenues from the taxation of corporate profits are a large and rapidly growing source of total government funding in Ireland. This report is the first to use firm-level administrative data to estimate how corporation tax revenues respond to changes in taxable income. The paper uses a newly constructed data source on all firms filing corporation tax returns over time from 2009 to 2018. We use an analytical approach to estimate the relationship between a firm’s corporation tax liabilities and their taxable income. Our baseline estimate for the aggregate tax revenue elasticity is 1.3 with this figure displaying a slight upward trend over time.