The 2007 Peggy and Richard Musgrave Prize Laureates

The 2007 Peggy and Richard Musgrave Prize has been awarded to Ruud A. de Mooij (CPB Netherlands and Erasmus University Rotterdam) and Gaëtan Nicodème (European Commission and Université Libre de Bruxelles) for their paper "Corporate Tax Policy and Incorporation in the EU".

The paper explores to what extent income shifting from the personal to the corporate tax base can explain the fact that declining corporate tax rates have come along with rising tax-to-GDP ratios. The authors exploit a panel of European data on firm creation and legal form of business to analyze income shifting via increased entrepreneurship and incorporation. Their simulations suggest that between 10% and 17% of corporate tax revenue can be attributed to income shifting. The latter is found to have raised the corporate tax-to-GDP ratio by some 0.2% since the early 1990s.