Evaluating regional cuts in the payroll tax from a firm perspective

With few exceptions, reduced payroll taxes are analysed with regard to employment and wage effects. Our study extends the impacts to cover several possible firm outcomes using a multilevel modelling approach. Between 20 and 55 % in the variation, the outcomes can be explained by municipality differences. On firm level, the result follows a clear business logic. In the short run, profits and turnover increased which later on transforms into increased wages. After 7 years, we find the indication of impacts on investments. Thus, the support has some short-term impacts that are reduced with time and the long-term effects are questionable.