A recent study commissioned by the European Economic and Social Committee (EESC) has found that a lower corporation tax rate increases investments, employment and in turn taxes collected.
According to the research and contrary to public perception, there has been no reduction in corporation tax revenues in relation to GDP in the last 40 years notwithstanding decreasing corporation tax rates. The report found that a high corporation tax rate can hamper businesses by making some investment projects unprofitable. This can reduce the tax base and, consequently, revenue collection from corporation taxes.
On the other hand, the report found that a lower corporation tax rate could increase investments undertaken by both domestic and foreign investors. According to the report, when investments increase, employment increases and more taxes will also be collected on incomes and consumption.
Source: Chartered Accountants