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Elasticity of taxable income. A case study for the Czech Republic

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  • Kateřina Gawthorpe

Abstract

Elasticity of taxable income has increasingly become an important subject matter for economists in recent times. This study provides an estimate for the Czech Republic by exploiting panel data for corporate income tax rates between 2004 and 2009. The severity of the tax evasion and avoidance issue in this country triggers a question about the existence of the elasticity itself. The uniqueness of this study also stems from its focus on proportional tax rates while other influential studies examine this subject for progressive taxation. The result of this research supports a hypothesis about indifference between taxable incme decision and the size of the tax rate; about fifty percent of the observations in the sample are not subject to taxation. The high level of tax avoidance could explain such an outcome intensifying the necessity to fight this fiscal policy phenomenon.

Suggested Citation

  • Kateřina Gawthorpe, 2015. "Elasticity of taxable income. A case study for the Czech Republic," Acta Oeconomica Pragensia, Prague University of Economics and Business, vol. 2015(3), pages 18-29.
    • Handle: RePEc:prg:jnlaop:v:2015:y:2015:i:3:id:473:p:18-29
    DOI: 10.18267/j.aop.473
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    References listed on IDEAS

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    More about this item

    Keywords

    taxable income; elasticity; corporate income tax; Czech Republic;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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