Business Taxation in an Emerging Economy: Analysing Corporate Tax Incidence

This paper estimates the incidence of corporate taxes in an emerging economy –India- using the data from 5,666 business firms listed in the Bombay Stock Exchange (BSE) and the National Stock Exchange of India (NSE) for the period 2000-15. Using the dynamic panel models, we find that capital bear the burden of corporate taxation relatively more than the labour. Our findings highlight that the effective tax rate is higher for the small corporate firms than the gigantic firms. The tax policy implications for strengthening the wage bargaining frameworks is insignificant as we found the wage determination in India is mostly outside the purview of fiscal policy practices. Further research is required to understand whether less incidence of corporate taxation on wages in India is due to base erosion and profit shifting.