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Shocking Capital: Firm-level Responses to a Large Business Tax Reform in France
1 : Institut des politiques publiques
(IPP)
Institut des politiques publiques (PSE)
48 boulevard Jourdan, 75014 Paris -
France
2 : Université de Cergy Pontoise
(UCP)
ThéMA
33 Boulevard du Port, 95011 Cergy-Pontoise Cedex -
France
3 : Centre de recherche de la Banque de France
DEMS BDF
31 rue Croix des petits champs 75001 PARIS - France -
France
The present paper aims at assessing how firms adjust to changes in the marginal and average tax rate levied on their investment. We exploit administrative data newly made available to researchers and a large French reform in 2010 generating exogenous and heterogeneous shock on firms local taxation. We build a measure of ex-ante exposure to the reform and confirm, in a simple difference-in-differences setting, that its predicts the evolution of firm-level tax burden. Preliminary results suggest an increase in investment in response to the decrease in the tax burden of capital taxation, suggesting that investment, even in troubled economic times, is sensitive to its user cost. Profitability and sales are also positively affected.
