Corporate Income Taxation and Investment: A Review of Empirical Findings and Policy Issues in the EU Context

This Economic Brief discusses how tax reforms in EU Member States, particularly in the area of business taxation, can help spur investment while maintaining public revenue in a context of high debt and significant fiscal need.

Highlights

• Recent studies suggest that cuts to statutory tax rates represent a costly way of spurring investment.
• Targeted incentives for investment may be more cost-effective, but their stimulative effects are not sufficient to counterbalance the static fiscal costs.
• Business taxation based on tax bases other than profits (e.g. on real estate or turnover) has also been found to be more distortive and harmful to investment than profit-based taxes.
• Specific aspects of the tax code may open the way for aggressive tax planning (ATP) whereby taxpayers reduce their corporate tax liability through arrangements that may be legal but are in contradiction with the intent of the law.
• Through the European Semester and reforms in national Recovery and Resilience Plans, the EU has achieved some success in fighting ATP in a number of countries, although some issues remain.

Information and identifiers

Economic Brief 89. March 2026. Brussels. PDF. 32pp. Tab. Graph. Bibliogr. Free.

KC-01-26-028-EN-N (online)
ISBN 978-92-68-36428-4 (online)  
ISSN 2443-8030  (online)
doi:10.2765/5202588 (online) 

JEL classification: H25; H26.

Disclaimer

European Economy Economic Briefs are written by the staff of the European Commission’s Directorate-General for Economic and Financial Affairs to inform discussion on economic policy and to stimulate debate. The views expressed in this document are solely those of the author(s) and do not necessarily represent the official views of the European Commission.