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Taxation, growth and welfare: Dynamic effects of Estonia’s 2000 income tax act

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Author Info
Funke, Michael () (BOFIT)
Strulik, Holger () (BOFIT)

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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 the results are rather robust.

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Publisher Info
Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 10/2003.

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Length: 26 pages
Date of creation: 26 Aug 2003
Date of revision:
Handle: RePEc:hhs:bofitp:2003_010

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Related research
Keywords: growth; welfare; taxation; tax reform; Estonia;

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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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References listed on IDEAS
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.:
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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. Helmuts Azacis & Max Gillman, 2008. "Flat Tax Reform.The Baltics 2000 – 2007," IEHAS Discussion Papers 0825, Institute of Economics, Hungarian Academy of Sciences. [Downloadable!]
  2. 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!]
  3. 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!]
  4. 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:
  5. Luigi , Bernardi & Mar, Chandler, 2004. "Main tax policy issues in the new members of Eu," MPRA Paper 18195, University Library of Munich, Germany. [Downloadable!]
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