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Corporate taxation and capital accumulation

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  • Stephen Bond

    ()
    (Nuffield College, Department of Economics, and Centre for Business Taxation, University of Oxford, UK, and Institute for Fiscal Studies)

  • Jing Xing

    ()
    (Nuffield College, Department of Economics, and Centre for Business Taxation, University of Oxford, UK)

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    Abstract

    We present new empirical evidence that aggregate capital accumulation is strongly influenced by the user cost of capital and, in particular, by corporate tax incentives summarised in the tax-adjusted user cost. We use sectoral panel data for the USA, Japan, Australia and ten EU countries over the period 1982-2007. Our panel combines data on capital stocks, value-added and relative prices from the EU KLEMS database with measures of effective corporate tax rates from the Oxford University Centre for Business Taxation. Given the tax-adjusted user cost, we find little additional information in statutory corporate tax rates or effective average tax rates.

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    Bibliographic Info

    Paper provided by Oxford University Centre for Business Taxation in its series Working Papers with number 1015.

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    Date of creation: 2010
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    Handle: RePEc:btx:wpaper:1015

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    Related research

    Keywords: capital accumulation; user cost of capital; corporate taxation;

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    References

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    1. Austan Goolsbee, 1998. "Taxes and the Quality of Capital," NBER Working Papers 6731, National Bureau of Economic Research, Inc.
    2. Cummins, Jason G. & Hassett, Kevin A. & Hubbard, R. Glenn, 1996. "Tax reforms and investment: A cross-country comparison," Journal of Public Economics, Elsevier, vol. 62(1-2), pages 237-273, October.
    3. Greenwood, J. & Hercowitz, Z. & Krusell, P., 1995. "Long-Run Implications of Investment-Specific Technological Change," UWO Department of Economics Working Papers 9510, University of Western Ontario, Department of Economics.
    4. Simon Loretz, 2008. "Corporate taxation in the OECD in a wider context," Working Papers 0821, Oxford University Centre for Business Taxation.
    5. Marcel P. Timmer & Mary O’Mahony & Bart van Ark, 2007. "EU KLEMS Growth and Productivity Accounts: An Overview," International Productivity Monitor, Centre for the Study of Living Standards, vol. 14, pages 71-85, Spring.
    6. Bond, Stephen & Van Reenen, John, 2007. "Microeconometric Models of Investment and Employment," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 6, chapter 65 Elsevier.
    7. Chirinko, Robert S. & Fazzari, Steven M. & Meyer, Andrew P., 1999. "How responsive is business capital formation to its user cost?: An exploration with micro data," Journal of Public Economics, Elsevier, vol. 74(1), pages 53-80, October.
    8. Chirinko, Robert S, 1993. "Business Fixed Investment Spending: Modeling Strategies, Empirical Results, and Policy Implications," Journal of Economic Literature, American Economic Association, vol. 31(4), pages 1875-1911, December.
    9. 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.
    10. Stefano Scarpetta & Thierry Tressel, 2002. "Productivity and Convergence in a Panel of OECD Industries: Do Regulations and Institutions Matter?," OECD Economics Department Working Papers 342, OECD Publishing.
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    Cited by:
    1. Bull, Nicholas & Dowd, Tim & Moomau, Pamela, 2011. "Corporate Tax Reform: A Macroeconomic Perspective," National Tax Journal, National Tax Association, vol. 64(4), pages 923-41, December.
    2. Mihir A. Desai & C. Fritz Foley & James R. Hines Jr., . "Trade Credit and Taxes," Working Papers 631, Research Seminar in International Economics, University of Michigan.
    3. Stefan Lutz, 2012. "Effects of taxation on European multi-nationals’ financing and profits," The School of Economics Discussion Paper Series 1214, Economics, The University of Manchester.
    4. Fabling, Richard & Gemmell, Norman & Kneller, Richard & Sanderson, Lynda, 2013. "Estimating Firm-Level Effective Tax Rates and the User Cost of Capital in New Zealand," Working Paper Series 2854, Victoria University of Wellington, Chair in Public Finance.
    5. Richard Fabling & Norman Gemmell & Richard Kneller & Lynda Sanderson, 2013. "Estimating Firm-Level Effective Marginal Tax Rates and the User Cost of Capital in New Zealand," Working Papers 13_14, Motu Economic and Public Policy Research.

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