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Taxation, Growth and Welfare: Dynamic Effects of Estonia´s 2000 Income Tax Act

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Author Info
Michael Funke ()
Holger Strulik ()

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Abstract

This paper analyses the long-run effects of Estonia’s 2000 Income Tax Act with a dynamic general equilibrium model. Specifically, we consider the impact of the shift from an imputation system to one where companies only pay taxes on distributed profits. Balanced growth paths, transitional dynamics and welfare costs are computed. Our results indicate that the 2000 Income Tax Act leads to higher per capita income and investment, but lower welfare. A sensitivity analysis shows that the results are rather robust.

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Paper provided by Hamburg University, Department of Economics in its series Quantitative Macroeconomics Working Papers with number 20611.

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Date of creation: Nov 2006
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Handle: RePEc:ham:qmwops:20611

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Find related papers by JEL classification:
H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
O52 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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  4. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management. [Downloadable!]
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  14. Marit Hinnosaar, 2001. "Potential output estimates for Central and East European countries using production function method," Bank of Estonia Working Papers 2001-2, Bank of Estonia, revised 13 Oct 2001. [Downloadable!]
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  19. Sergio T. Rebelo, 1992. "Long Run Policy Analysis and Long Run Growth," NBER Working Papers 3325, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  24. Chang Woon Nam & Doina Maria Radulescu, 2003. "The Role of Tax Depreciation for Investment Decisions: A Comparison of European Transition Countries," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  25. Liam P. Ebrill, 1999. "Tax Reform in the Baltics, Russia, and Other Countries of the Former Soviet Union," IMF Occasional Papers 182, International Monetary Fund.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Aaro Hazak, 2007. "Companies’ Financial Decisions under the Distributed Profit Taxation Regime of Estonia," Working Papers 155, School of Economics and Business Administration, Tallinn University of Technology. [Downloadable!]
  2. Aaro Hazak, 2006. "Dividend Decision under Distributed Profit Taxation: Investor’s Perspective," Working Papers 145, School of Economics and Business Administration, Tallinn University of Technology. [Downloadable!]
  3. Eduard Hochreiter & Þorvaldur Gylfason, 2008. "Growing Apart? A Tale of Two Republics: Estonia and Georgia," IMF Working Papers 08/235, International Monetary Fund. [Downloadable!]
    Other versions:
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