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Measuring Taxes on Income from Capital: Evidence from the UK

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  • Michael P. Devereux
  • Alexander Klemm

Abstract

This paper explores the empirical properties of alternative measures of the taxation of income from capital, using UK data over the last thirty years. We analyse measures of effective marginal and average tax rates, based on applying the legal parameters of the tax system to a hypothetical investment; and also measures based on observed tax payments or liabilities, scaled by various measures of income. There is a significant difference between these measures, both in their level and in how they move over time. The implicit assumption in some empirical work that these measures are broadly comparable to each other is not justified.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 968.

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Date of creation: 2003
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Handle: RePEc:ces:ceswps:_968

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References

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  1. 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.
  2. Nicodeme, Gaetan, 2001. "Computing effective corporate tax rates: comparisons and results," MPRA Paper 3808, University Library of Munich, Germany.
  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.
  4. Michael P. Devereux & Rachel Griffith & Alexander Klemm, 2002. "Corporate income tax reforms and international tax competition," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 17(35), pages 449-495, October.
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Cited by:
  1. Haufler, Andreas & Klemm, Alexander & Schjelderup, Guttorm, 2006. "Globalisation and the mix of wage and profit taxes," Discussion Papers in Economics 885, University of Munich, Department of Economics.
  2. Andreas Haufler & Alexander Klemm & Guttorm Schjelderup, 2008. "Economic integration and the relationship between profit and wage taxes," Working Papers, Oxford University Centre for Business Taxation 0810, Oxford University Centre for Business Taxation.
  3. John Creedy & Norman Gemmell, 2007. "Corporation Tax Buoyancy and Revenue Elasticity in the UK," Department of Economics - Working Papers Series, The University of Melbourne 985, The University of Melbourne.
  4. 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.
  5. John Creedy & Norman Gemmell, 2008. "Behavioural Responses to Corporate Profit Taxation," Department of Economics - Working Papers Series, The University of Melbourne 1029, The University of Melbourne.
  6. Fernando Ruiz, 2006. "Convergence de l'impôt sur les sociétés dans l’Union européenne," Économie et Prévision, Programme National Persée, vol. 173(2), pages 79-96.
  7. Michael P Devereux, 2007. "Taxes in the EU New Member States and the Location of Capital and Profit," Working Papers, Oxford University Centre for Business Taxation 0703, Oxford University Centre for Business Taxation.
  8. Michael P. Devereux, 2003. "Measuring Taxes on Income from Capital," CESifo Working Paper Series 962, CESifo Group Munich.
  9. John Creedy & Norman Gemmell, 2007. "Modelling Behavioural Responses to Profit Taxation: The Case of the UK Corporation Tax," Department of Economics - Working Papers Series, The University of Melbourne 998, The University of Melbourne.
  10. Koffie Ben Nassar, 2008. "Corporate Income Tax Competition in the Caribbean," IMF Working Papers 08/77, International Monetary Fund.
  11. Marcin Piatkowski & Mariusz Jarmuzek, 2008. "Zero Corporate Income Tax in Moldova," IMF Working Papers 08/203, International Monetary Fund.
  12. Johannes Becker & Clemens Fuest, 2006. "Observable Depreciation Deductions and the Effective Marginal Tax Burden on Investment," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 226(4), pages 346-360, July.
  13. Budryte, Alge, 2005. "Corporate income taxation in Lithuania in the context of the EU," Research in International Business and Finance, Elsevier, Elsevier, vol. 19(2), pages 200-228, June.
  14. Michael Devereux & Rachel Griffith & Alexander Klemm, 2004. "How has the UK corporation tax raised so much revenue?," IFS Working Papers, Institute for Fiscal Studies W04/04, Institute for Fiscal Studies.
  15. Rachel Griffith & Alexander Klemm, 2004. "What has been the tax competition experience of the past 20 years?," IFS Working Papers, Institute for Fiscal Studies W04/05, Institute for Fiscal Studies.
  16. Michael P Devereux, 2007. "Developments in the Taxation of Corporate Profit in the OECD since 1965: Rates, Bases and Revenues," Working Papers, Oxford University Centre for Business Taxation 0704, Oxford University Centre for Business Taxation.

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