International Tax and Public Finance

, Volume 24, Issue 6, pp 962–996 | Cite as

Corporate flat tax reforms and businesses’ investment decisions: evidence from Switzerland



This paper focuses on the effects of a corporate income flat tax reform on businesses’ investment decisions. Since 1990, several Swiss states (cantons) have been switching from a graduated to a flat tax rate scheme on profits. The paper assesses the effects of such a reform both on the number of establishments (i.e. extensive margin of investment) and on the number of employees (i.e. intensive margin) in a given jurisdiction by computing a difference-in-differences estimation. Our results suggest that the introduction of a flat tax reform on corporate income taxes has a negative and statistically significant impact on both margins of investment. Moreover, the effect is considerably larger for riskier firms, suggesting that progressive taxation acts as an insurance effect for risk-averse entrepreneurs.


Corporate taxes Flat tax Tax reform Progressive taxation 

JEL Classification

H25 H32 H71 R3 



We are grateful to Johannes Abeler, Marius Brülhart, Sascha O. Becker, Katherine Cuff, Michael Devereux, Mario Jametti, Marcelin Joanis, Michael Keen and Patrick Lenain for valuable comments and suggestions as well as conference and workshop participants at CBT (Oxford), IIPF (Lugano), SMYE (Vienna) and ZEW PFC (Mannheim). We would also like to thank Raphaël Parchet for very helpful comments and the provision of useful data. Finally, we acknowledge financial support from Sinergia Project Grants No. 130648 and 147668, grants Early Postdoc. Mobility No. 15860 and Advanced Postdoc. Mobility No. 167635.


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Copyright information

© Springer Science+Business Media New York 2017

Authors and Affiliations

  1. 1.Institute of Economics (IdEP)University of LuganoLuganoSwitzerland
  2. 2.Council on Economic Policies (CEP)ZurichSwitzerland
  3. 3.Barcelona Institute of Economics (IEB)University of BarcelonaBarcelonaSpain

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