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Effects of Corporate Tax Reforms on SMEs’ Investment Decisions under the Particular Consideration of Inflation

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Author Info
Chang Nam ()
Doina Radulescu

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Abstract

Corporate tax reforms carried out in EU countries since 1980 entail lower statutory tax rates and reductions in generous tax depreciation provisions. Several countries including the UK have reduced tax rates for small and medium sized enterprises (SMEs). This study compares incentive effects of such reforms on the SMEs’ investment decisions adopting a simple present value model. Ceteris paribus, tax rates and depreciation rules vary in the model simulation, while the application of historical cost accounting method in inflationary phases leads to fictitious increases in nominal net present value. Apart from the construction of international ranking, country-specific patterns of reform effects are also illustrated. Copyright Springer 2007

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File URL: http://hdl.handle.net/10.1007/s11187-006-0003-1
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Publisher Info
Article provided by Springer in its journal Small Business Economics.

Volume (Year): 29 (2007)
Issue (Month): 1 (June)
Pages: 101-118
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:kap:sbusec:v:29:y:2007:i:1:p:101-118

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Web page: http://www.springerlink.com/link.asp?id=100338

For technical questions regarding this item, or to correct its listing, contact: (Christopher F. Baum).

Related research
Keywords: corporate tax reform; EU countries; inflation; investment decision; SMEs; tax base determination; H25; H32;

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References listed on IDEAS
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  1. Haufler, Andreas & Schjelderup, Guttorm, 2000. "Corporate Tax Systems and Cross Country Profit Shifting," Oxford Economic Papers, Oxford University Press, vol. 52(2), pages 306-25, April.
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  2. Chang Nam & Doina Radulescu, 2004. "Do Corporate Tax Concessions Really Matter for the Success of Free Economic Zones?," Economic Change and Restructuring, Springer, vol. 37(2), pages 99-123, 06. [Downloadable!] (restricted)
  3. Devereux, Michael P & Griffith, Rachel, 2003. "Evaluating Tax Policy for Location Decisions," International Tax and Public Finance, Springer, vol. 10(2), pages 107-26, March. [Downloadable!] (restricted)
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  4. Darrel Cohen & Kevin A. Hassett, 1997. "Inflation, taxes, and the durability of capital," Finance and Economics Discussion Series 1997-53, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  5. Enrico Santarelli, 2002. "Is subsidizing entry an optimal policy?," Industrial and Corporate Change, Oxford University Press, vol. 11(1), pages 39-52, February.
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  6. Kay, J A, 1977. "Inflation Accounting-A Review Article," Economic Journal, Royal Economic Society, vol. 87(346), pages 300-11, June. [Downloadable!] (restricted)
  7. Rosanne Altshuler & Harry Grubert, 2002. "Repatriation Taxes, Repatriation Strategies and Multinational Financial Policy," Departmental Working Papers 200009, Rutgers University, Department of Economics. [Downloadable!]
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  8. Devereux, Michael P. & Griffith, Rachel, 2003. "The Impact of Corporate Taxation on the Location of Capital: A Review," Economic Analysis and Policy (EAP), Queensland University of Technology (QUT), School of Economics and Finance, vol. 33(2), pages 275-292, September. [Downloadable!]
  9. Chang Woon Nam & Doina Maria Radulescu, 2005. "The Role of Tax Depreciation for Investment Decisions: A Comparison of European Transition Countries," Eastern European Economics, M.E. Sharpe, Inc., vol. 43(5), pages 5-24, October. [Downloadable!] (restricted)
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  10. Roger Gordon & Laura Kalambokidis & Joel Slemrod, 2003. "A New Summary Measure of the Effective Tax Rate on Investment," NBER Working Papers 9535, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  11. Michael Devereux & Rachel Griffith & Alexander Klemm, 2004. "Why has the UK corporation tax raised so much revenue?," Fiscal Studies, Institute for Fiscal Studies, vol. 25(4), pages 367-388, December.
  12. European Commission, 2001. "Company Taxation in the Internal Market," Taxation Studies 0005, Directorate General Taxation and Customs Union, European Commission. [Downloadable!]
  13. Michael P. Devereux & Rachel Griffith & Alexander Klemm, 2002. "Corporate income tax reforms and international tax competition," Economic Policy, CEPR, CES, MSH, vol. 17(35), pages 449-495, October. [Downloadable!] (restricted)
  14. Desai, Mihir A. & Foley, C. Fritz & Hines, James Jr., 2004. "Foreign direct investment in a world of multiple taxes," Journal of Public Economics, Elsevier, vol. 88(12), pages 2727-2744, December. [Downloadable!] (restricted)
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  15. Devereux, Michael P. & Griffith, Rachel, 1998. "Taxes and the location of production: evidence from a panel of US multinationals," Journal of Public Economics, Elsevier, vol. 68(3), pages 335-367, June. [Downloadable!] (restricted)
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  16. Mendoza, Enrique G. & Razin, Assaf & Tesar, Linda L., 1994. "Effective tax rates in macroeconomics: Cross-country estimates of tax rates on factor incomes and consumption," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 297-323, December. [Downloadable!] (restricted)
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  17. Rachel Griffith & Alexander Klemm, 2004. "What has been the tax competition experience of the past 20 years?," IFS Working Papers W04/05, Institute for Fiscal Studies. [Downloadable!]
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