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Measuring Taxes on Income from Capital

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  • Michael P. Devereux

Abstract

This paper provides a conceptual review of how the impact of taxes on the incentive to invest in the corporate sector can be measured. The focus is on measures derived from economic theory. Two measures are derived – effective marginal and average tax rates – which reflect different forms of investment decisions. A number of extensions to the basic model are examined, including the role of personal taxes, the source of finance and risk. These measures are compared to empirical measures based on observed tax revenues or tax liabilities.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 962.

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Date of creation: 2003
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Handle: RePEc:ces:ceswps:_962

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  1. Devereux, Michael P, 2003. "Taxing Risky Investment," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4053, C.E.P.R. Discussion Papers.
  2. Michael Devereux & Alexander Klemm, 2003. "Measuring taxes on income from capital: evidence from the UK," IFS Working Papers, Institute for Fiscal Studies W03/03, Institute for Fiscal Studies.
  3. 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.
  4. R. Glenn Hubbard, 1998. "Capital-Market Imperfections and Investment," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 193-225, March.
  5. Miller, Merton H, 1977. "Debt and Taxes," Journal of Finance, American Finance Association, American Finance Association, vol. 32(2), pages 261-75, May.
  6. Poterba, James M. & Summers, Lawrence H., 1983. "Dividend taxes, corporate investment, and `Q'," Journal of Public Economics, Elsevier, Elsevier, vol. 22(2), pages 135-167, November.
  7. Jeremy I. Bulow & Lawrence H. Summers, 1982. "The Taxation of Risky Assets," NBER Working Papers 0897, National Bureau of Economic Research, Inc.
  8. Devereux, Michael, 1987. "Taxation and the Cost of Capital: The UK Experience," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 3(4), pages xvii-xxxii, Winter.
  9. Kenneth McKenzie & Jack Mintz & Kimberly Scharf, 1997. "Measuring Effective Tax Rates in the Presence of Multiple Inputs: A Production Based Approach," International Tax and Public Finance, Springer, Springer, vol. 4(3), pages 337-359, July.
  10. Motta, Massimo, 1992. "Multinational firms and the tariff-jumping argument : A game theoretic analysis with some unconventional conclusions," European Economic Review, Elsevier, Elsevier, vol. 36(8), pages 1557-1571, December.
  11. Robin Boadway & Neil Bruce & Jack Mintz, 1984. "Taxation, Inflation, and the Effective Marginal Tax Rate on Capital in Canada," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 17(1), pages 62-79, February.
  12. Edwards, J S S & Keen, M J, 1984. "Wealth Maximization and the Cost of Capital: A Comment," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 99(1), pages 211-14, February.
  13. Robson, Mark H., 1989. "Measuring the cost of capital when taxes are changing with foresight," Journal of Public Economics, Elsevier, Elsevier, vol. 40(3), pages 261-292, December.
  14. Mintz, Jack M, 1990. "Corporate Tax Holidays and Investment," World Bank Economic Review, World Bank Group, World Bank Group, vol. 4(1), pages 81-102, January.
  15. Grubert, Harry & Mutti, John, 2000. "Do Taxes Influence Where U.S. Corporations Invest?," National Tax Journal, National Tax Association, vol. 53(n. 4), pages 825-40, December.
  16. Devereux, Michael P, 1989. "Tax Asymmetries, the Cost of Capital and Investment: Some Evidence from United Kingdom Panel Data," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 99(395), pages 103-12, Supplemen.
  17. Roger H. Gordon & Joel Slemrod, 1988. "Do We Collect Any Revenue from Taxing Capital Income?," NBER Chapters, in: Tax Policy and the Economy: Volume 2, pages 89-130 National Bureau of Economic Research, Inc.
  18. Hines, James R, Jr & Rice, Eric M, 1994. "Fiscal Paradise: Foreign Tax Havens and American Business," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 109(1), pages 149-82, February.
  19. Harris, Milton & Raviv, Artur, 1991. " The Theory of Capital Structure," Journal of Finance, American Finance Association, American Finance Association, vol. 46(1), pages 297-355, March.
  20. Rosanne Altshuler & Harry Grubert & T. Scott Newlon, 1998. "Has U.S. Investment Abroad Become More Sensitive to Tax Rates?," NBER Working Papers 6383, National Bureau of Economic Research, Inc.
  21. Enrique G. Mendoza & Assaf Razin & Linda L. Tesar, 1994. "Effective Tax Rates in Macroeconomics: Cross-Country Estimates of Tax Rates on Factor Incomes and Consumption," NBER Working Papers 4864, National Bureau of Economic Research, Inc.
  22. Grubert, Harry & Mutti, John, 1991. "Taxes, Tariffs and Transfer Pricing in Multinational Corporate Decision Making," The Review of Economics and Statistics, MIT Press, vol. 73(2), pages 285-93, May.
  23. Michael Devereux & Rachel Griffith, 1996. "Taxes and the location of production: evidence from a panel of US multinationals," IFS Working Papers, Institute for Fiscal Studies W96/14, Institute for Fiscal Studies.
  24. Gordon, Roger & Kalambokidis, Laura & Slemrod, Joel, 2004. "Do we now collect any revenue from taxing capital income?," Journal of Public Economics, Elsevier, Elsevier, vol. 88(5), pages 981-1009, April.
  25. Horstmann, Ignatius J. & Markusen, James R., 1992. "Endogenous market structures in international trade (natura facit saltum)," Journal of International Economics, Elsevier, Elsevier, vol. 32(1-2), pages 109-129, February.
  26. Devereux, Michael P & Griffith, Rachel, 2003. "Evaluating Tax Policy for Location Decisions," International Tax and Public Finance, Springer, Springer, vol. 10(2), pages 107-26, March.
  27. Gordon, Roger H, 1985. "Taxation of Corporate Capital Income: Tax Revenues versus Tax Distortions," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 100(1), pages 1-27, February.
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Citations

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Cited by:
  1. Fernando Ruiz, 2006. "Convergence de l'impôt sur les sociétés dans l’Union européenne," Économie et Prévision, Programme National Persée, Programme National Persée, vol. 173(2), pages 79-96.
  2. Amina Lahrèche-Révil, 2006. "Who’s Afraid of Tax Competition? Harmless Tax Competition from the New European Member States," Working Papers 2006-11, CEPII research center.
  3. Dwenger, Nadja & Steiner, Viktor, 2008. "Effective profit taxation and the elasticity of the corporate income tax base: Evidence from German corporate tax return data," arqus Discussion Papers in Quantitative Tax Research 57, arqus - Arbeitskreis Quantitative Steuerlehre.
  4. repec:ebl:ecbull:v:8:y:2003:i:15:p:1-7 is not listed on IDEAS
  5. Francesco Menoncin & Paolo M. Panteghini, 2008. "The Johansson-Samuelson Theorem in General Equilibrium: A Rebuttal," Working Papers, University of Brescia, Department of Economics 0806, University of Brescia, Department of Economics.
  6. Paolo M. Panteghini, 2012. "Corporate Debt, Hybrid Securities, and the Effective Tax Rate," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 14(1), pages 161-186, 02.
  7. Félix Domínguez Barrero & Julio López Laborda & Fernando Rodrigo Sauco, 2005. "Do Corporate and Personal Income Taxes Affect Incorporation?," Hacienda Pública Española, IEF, IEF, vol. 174(3), pages 55-86, September.

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