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This paper extends the effective average tax rate (EATR) developed in Devereux and Griffith (2003) by relaxing the assumption of a one-period perturbation in the capital stock. Instead it allows a permanent investment. While this may appear a small change, it has important implications. First, it allows the EATR to be calculated in the presence of tax holidays, which are an important part of tax systems, especially in developing countries. Second, it reveals an interesting feature of the original EATR: despite the assumption of a one-period investment, the original measure is informative about long-term investments, thanks to the assumption of pooled depreciation. Without this assumption-which is justifiable in a few countries only- the EATR based on one-period perturbation in the capital stock would be less useful for analyzing medium and long-term investments.
Investments --- Taxation --- Tax rates --- Tax tables --- Investing --- Investment management --- Portfolio --- Finance --- Disinvestment --- Loans --- Saving and investment --- Speculation --- Econometric models. --- Rates and tables. --- Investments: General --- Taxation, Subsidies, and Revenue: General --- Investment --- Capital --- Intangible Capital --- Capacity --- Public finance & taxation --- Macroeconomics --- Depreciation --- Effective tax rate --- Tax holidays --- Average effective tax rate --- Marginal effective tax rate --- Tax administration and procedure --- Tax incentives --- Canada
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This paper describes, and where possible tentatively quantifies, likely tax spillovers from the U.S. corporate income tax reform that was part of the broader 2017 tax reform. It calculates effective tax rates under various assumptions, showing among other findings, how the interest limitation and the Foreign Derived Intangible Income provision can raise or reduce rates. It tentatively estimates that under constant policies elsewhere, the rate cut will reduce tax revenue from multinationals in other countries by on average 1.6 to 5.2 percent. If other countries react in line with historical reaction functions, the revenue loss from multinationals rises to an average of 4.5 to 13.5 percent. The paper also discusses profit-shifting, real location, and policy reactions from the more complex features of the reform.
Public Finance --- Taxation --- Corporate Taxation --- Business Taxes and Subsidies --- International Fiscal Issues --- International Public Goods --- Taxation, Subsidies, and Revenue: General --- Public finance & taxation --- Corporate & business tax --- Corporate income tax --- Effective tax rate --- Average effective tax rate --- Revenue administration --- Marginal effective tax rate --- Taxes --- Tax policy --- Tax administration and procedure --- Corporations --- Revenue --- United States
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The structure of Japan's corporate income tax system is broadly in line with those of other G7 countries. However, relatively high marginal and average effective tax rates prompt the question of whether adjustments should be considered to meet the objectives of promoting growth, investment and competitiveness in a revenue neutral manner. This paper discusses key issues and trade-off's related to changes in the corporate income tax system. It does not provide recommendations, but raises issues that could hopefully serve as useful inputs to the ongoing discussion and tax debate in Japan.
Corporations --- Taxation --- Investments: General --- Public Finance --- Corporate Taxation --- Business Taxes and Subsidies --- Taxation, Subsidies, and Revenue: General --- Investment --- Capital --- Intangible Capital --- Capacity --- Corporate & business tax --- Public finance & taxation --- Macroeconomics --- Corporate income tax --- Corporate taxes --- Average effective tax rate --- Depreciation --- Revenue administration --- Taxes --- Marginal effective tax rate --- Tax policy --- National accounts --- Tax administration and procedure --- Saving and investment --- Revenue --- Income tax --- Japan
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This paper explores the revenue-raising aspect of progressive taxation and derives, on the basis of a simple model, the optimal degree of tax progressivity where the tax revenue is used exclusively to finance (perfectly) targeted transfers to the poor. The paper shows that not only would it be optimal to finance the targeted transfers with progressive taxation, but that the optimal progressivity increases unambiguously with growing income inequality. This conclusion holds up under different assumptions about the efficiency cost of taxation and society’s aversion to inequality.
Macroeconomics --- Taxation --- Efficiency --- Optimal Taxation --- National Government Expenditures and Welfare Programs --- Aggregate Factor Income Distribution --- Personal Income, Wealth, and Their Distributions --- Taxation, Subsidies, and Revenue: General --- Public finance & taxation --- Income inequality --- Personal income --- Average effective tax rate --- Progressive taxation --- Marginal effective tax rate --- Income distribution --- Income --- Tax administration and procedure
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Although the empirical literature has long struggled to identify the impact of taxes on corporate financial structure, a recent boom in studies offers ample support for the debt bias of taxation. Yet, studies differ considerably in effect size and reveal an equally large variety in methodologies and specifications. This paper sheds light on this variation and assesses the systematic impact on the size of the effects. We find that, typically, a one percentage point higher tax rate increases the debt-asset ratio by between 0.17 and 0.28. Responses are increasing over time, which suggests that debt bias distortions have become more important.
Corporate debt --- Corporations --- Debt --- Debt financing (Corporations) --- Econometric models. --- Finance --- Taxation --- Corporate Taxation --- Taxation, Subsidies, and Revenue: General --- Business Taxes and Subsidies --- Tax Evasion and Avoidance --- Public finance & taxation --- Corporate & business tax --- Corporate income tax --- Tax elasticity --- Tax arrears management --- Marginal effective tax rate --- Average effective tax rate --- Tax administration and procedure --- United States
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The paper provides a critical review of the literature on the concept of progressivity in the taxation of petroleum and mineral resources and offers a fresh perspective on its purpose and measurement. Regressive taxes, such as royalties, exist to satisfy policy objectives other than revenue maximization, such as achieving early revenues, while rent-based or profit-sensitive fiscal instruments must be designed with progressive marginal rates to maximize government revenues. Hence, the emphasis should be placed on tax rate progression of the direct taxation of profit or rent, rather than progressivity in the overall government take. However, as regressive taxes, by their very nature, tend to be distortionary, the optimal degree of progression in the rent- or profit-tax rates must take these distortions into account. The central ideas are illustrated with a simple analytical model in which a second-best optimal tax rate schedule on profit is characterized in the presence of the tax distortions caused by the regressive taxes. Some practical implications of the analysis are discussed.
Public Finance --- Taxation --- Efficiency --- Optimal Taxation --- Business Taxes and Subsidies --- Hydrocarbon Resources --- Taxation, Subsidies, and Revenue: General --- Personal Income and Other Nonbusiness Taxes and Subsidies --- Public finance & taxation --- Progressive taxation --- Revenue administration --- Rent tax --- Average effective tax rate --- Marginal effective tax rate --- Tax policy --- Taxes --- Tax administration and procedure --- Revenue --- Income tax --- Norway
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This paper assembles a new dataset on corporate income tax regimes in 50 emerging and developing economies over 1996-2007 and analyzes their impact on corporate tax revenues and domestic and foreign investment. It computes effective tax rates to take account of complicated special regimes, such as partial tax holidays, temporarily reduced rates and increased investment allowances. There is evidence of a partial race to the bottom: countries have been under pressure to lower tax rates in order to lure and boost investment. In the case of standard tax systems (i.e. tax rules applying under normal circumstances), the effective tax rate reductions have not been larger than those witnessed in advanced economies, and revenues have held up well over the sample period. However, a race to the bottom is evident among special regimes, most notably in the case of Africa, creating effectively a parallel tax system where rates have fallen to almost zero. Regression analysis reveals higher tax rates adversely affect domestic investment and FDI, but do raise revenues in the short-run.
Corporations --- Business corporations --- C corporations --- Corporations, Business --- Corporations, Public --- Limited companies --- Publicly held corporations --- Publicly traded corporations --- Public limited companies --- Stock corporations --- Subchapter C corporations --- Business enterprises --- Corporate power --- Disincorporation --- Stocks --- Trusts, Industrial --- Corporate income tax --- Corporate taxes --- Corporation income tax --- Corporation tax --- Federal corporation tax --- Franchises, Taxation of --- Taxation of franchises --- Taxation --- Taxation. --- Finance --- Valuation --- Public Finance --- Corporate Taxation --- Fiscal Policy --- Business Taxes and Subsidies --- Taxation, Subsidies, and Revenue: General --- Public finance & taxation --- Corporate & business tax --- Revenue administration --- Effective tax rate --- Average effective tax rate --- Marginal effective tax rate --- Taxes --- Tax policy --- Tax administration and procedure --- Revenue --- Hong Kong Special Administrative Region, People's Republic of China
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This paper uses U.S. panel data to estimate the effect of expected effective corporate tax rates on firm’s leverage. The paper directly estimates expected corporate tax rates using rational expectations. The estimated measures of the expected effective tax rates of firms are related to a continuous measure of incremental debt financing. The paper finds that expected effective tax rates are significantly and positively related to a higher level of debt financing. Simulations suggest that debt issues would double if firms were unable to shield profits and actually faced the statutory tax rate.
Labor --- Personal Finance -Taxation --- Taxation --- Corporate Taxation --- Business Taxes and Subsidies --- Fiscal Policies and Behavior of Economic Agents: Firm --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- Taxation, Subsidies, and Revenue: General --- Personal Income and Other Nonbusiness Taxes and Subsidies --- Wages, Compensation, and Labor Costs: General --- Public finance & taxation --- Corporate & business tax --- Labour --- income economics --- Effective tax rate --- Tax allowances --- Corporate income tax --- Average effective tax rate --- Wages --- Tax policy --- Taxes --- Tax administration and procedure --- Income tax --- Corporations --- United States
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This Selected Economic Issues paper examines economic developments in South Africa during 1993–94. After a cumulative fall of 3.5 percent between 1989 and 1992, GDP at market prices grew by 1.1 percent in 1993. The major contribution to growth came from the turnaround in the inventory cycle, with positive investment in inventories recorded for the first time since 1989. Private consumption expenditure remained subdued in 1993, rising by only 0.5 percent; by contrast, public consumption grew by 1.8 percent in 1993.
Labor --- Macroeconomics --- Money and Monetary Policy --- Taxation --- Industries: Financial Services --- Public Finance --- Taxation, Subsidies, and Revenue: General --- Wages, Compensation, and Labor Costs: General --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Personal Income and Other Nonbusiness Taxes and Subsidies --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Social Security and Public Pensions --- Public finance & taxation --- Labour --- income economics --- Pensions --- Finance --- Average effective tax rate --- Marginal effective tax rate --- Wages --- Credit --- Labor taxes --- Tax policy --- Money --- Taxes --- Tax administration and procedure --- Income tax --- South Africa
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This paper examines tax policy and tax reforms in Uganda. Using household survey evidence, the paper identifies which taxes are progressive and investigates whether tax reforms have made the poor better or worse off. Household survey analysis reveals that some of the tax reforms implemented in the 1990s were generally pro-poor. The paper also examines business taxation and the actual tax burden on firms’ capital investment. The analysis demonstrates that, even when the country’s level of public revenue is low at the macroeconomic level, rapidly increasing taxation may pose a constraint to private investment at the microeconomic level.
Taxation --- Corporate Taxation --- Taxation and Subsidies: Incidence --- Taxation and Subsidies: Externalities --- Redistributive Effects --- Environmental Taxes and Subsidies --- Business Taxes and Subsidies --- Taxation, Subsidies, and Revenue: General --- Public finance & taxation --- Corporate & business tax --- Marginal effective tax rate --- Tax incidence --- Value-added tax --- Corporate income tax --- Tax holidays --- Tax policy --- Taxes --- Tax administration and procedure --- Spendings tax --- Corporations --- Tax incentives --- Uganda
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