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


DOI: 10.1007/s10797-017-9446-3

Cite this article as:
Galletta, S. & Redonda, A. Int Tax Public Finance (2017). doi:10.1007/s10797-017-9446-3


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 

Funding information

Funder NameGrant NumberFunding Note
Swiss National Science Foundation
  • Sinergia Project grant No. 130648
Swiss National Foundation
  • Sinergia Project grants No. 147668
  • Early Postdoc Mobility No. 15860
Swiss National Foundation
  • Advanced Postdoc Mobility No. 167635

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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