Our study tests if corporate income taxation is neutral to firm efficiency. Corporate income taxation is not believed to have a direct effect on firm efficiency, e.g. total factor productivity. Indeed, it appears that the majority of the interest in the literature has focused on the effects of corporate income taxation on investment and dividend decision, with little attention devoted to efficiency per se. Our study contributes to fill this gap. We received great comments from (in pretty random order) Marcin Kolasa, Jan Werner, Michal Gradzewicz, Michal Brzoza-Brzezina, Marcin Bielecki, Borys Grochulski and many others. Great thanks!

As always, transfer pricing attracted a lot of attention. It seems like transfer pricing is the mysterious villain, cancer eating up all tax revenues. Is transfer pricing indeed so prevalent? First, only multinationals can do that and multinationals are a minority in every economy. Second, even if it exists, it responds more to tax rate changes than to levels per se. Moreover, the elasticity with respect to taxation is quite low, which implies that the amount of taxes lost due to transfer pricing is indeed small (actually, it is the case even for really high corporate income taxation countries). Given that this topic raises so much interest, perhaps we should eventually add a paragraph (and at least 10 slides) on that ... :). In any case, our point in this paper is clear: if the mismatch between tax rules and accounting rules raises your tax base, you are going to grow slower than the others. If anything, our estimates are understated in the presence of transfer pricing.