Corporation Tax Asymmetries:Effective Tax Rates and Profit Shifting
AbstractThis paper examines the way in which the asymmetric treatment of losses within corporate tax codes can be expected to affect behavioural responses to changes in tax rates. The paper introduces the concept of an equivalent tax function, raising the same present value of tax payments as the actual function, in which the effective rate on losses in any period, and thus the degree of asymmetry, is explicit. The influence on the elasticity of tax revenue with respect to the tax rate of this effective rate is then examined, where ‘loss-shifting’ occurs. Results suggest that estimates of the behavioural effect of changes in tax rates on tax revenues can be expected in general to be smaller in regimes that involve greater asymmetries in the tax treatement of losses. As losses vary over the economic cycle, asymmetric treatment also generates effects on tax revenues that are asymmetric (non-linear) between above-trend and below-trend parts of the cycle.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 1028.
Length: 26 pages
Date of creation: 2008
Date of revision:
Contact details of provider:
Postal: Department of Economics, The University of Melbourne, 5th Floor, Economics and Commerce Building, Victoria, 3010, Australia
Phone: +61 3 8344 5289
Fax: +61 3 8344 6899
Web page: http://www.economics.unimelb.edu.au
More information through EDIRC
Other versions of this item:
- John Creedy & Norman Gemmell, 2011. "Corporation tax asymmetries: effective tax rates and profit shifting," International Tax and Public Finance, Springer, vol. 18(4), pages 422-435, August.
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
This paper has been announced in the following NEP Reports:
- NEP-ACC-2008-11-25 (Accounting & Auditing)
- NEP-ALL-2008-11-25 (All new papers)
- NEP-PBE-2008-11-25 (Public Economics)
- NEP-PUB-2008-11-25 (Public Finance)
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.:
- Devereux, Michael P & Hubbard, R Glenn, 2003.
International Tax and Public Finance,
Springer, vol. 10(4), pages 469-87, August.
- Dischinger, Matthias, 2007. "Profit Shifting by Multinationals: Indirect Evidence from European Micro Data," Discussion Papers in Economics 2029, University of Munich, Department of Economics.
- Rosanne Altshuler & Alan J. Auerbach, 1990.
"The Significance of Tax Law Asymmetries: An Empirical Investigation,"
NBER Working Papers
2279, National Bureau of Economic Research, Inc.
- Altshuler, Rosanne & Auerbach, Alan J, 1990. "The Significance of Tax Law Asymmetries: An Empirical Investigation," The Quarterly Journal of Economics, MIT Press, vol. 105(1), pages 61-86, February.
- Eric J. Bartelsman & Roel Beetsma, 2000.
"Why Pay More? Corporate Tax Avoidance through Transfer Pricing in OECD Countries,"
CESifo Working Paper Series
324, CESifo Group Munich.
- Bartelsman, Eric J. & Beetsma, Roel M. W. J., 2003. "Why pay more? Corporate tax avoidance through transfer pricing in OECD countries," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 2225-2252, September.
- Eric J. Bartelsman & Roel Beetsma, 2000. "Why pay more? Corporate Tax Avoidance through Transfer Pricing in OECD Countries," Tinbergen Institute Discussion Papers 00-054/2, Tinbergen Institute.
- Bartelsman, Eric J & Beetsma, Roel, 2000. "Why Pay More? Corporate Tax Avoidance Through Transfer Pricing in OECD Countries," CEPR Discussion Papers 2543, C.E.P.R. Discussion Papers.
- Alan J. Auerbach, 1986.
"The Dynamic Effects of Tax Law Asymmetries,"
NBER Working Papers
1152, National Bureau of Economic Research, Inc.
- John R. Graham, 2000. "How Big Are the Tax Benefits of Debt?," Journal of Finance, American Finance Association, vol. 55(5), pages 1901-1941, October.
- John Creedy & Norman Gemmell, 2007.
"Corporation Tax Buoyancy and Revenue Elasticity in the UK,"
0712, Oxford University Centre for Business Taxation.
- Creedy, John & Gemmell, Norman, 2008. "Corporation tax buoyancy and revenue elasticity in the UK," Economic Modelling, Elsevier, vol. 25(1), pages 24-37, January.
- John Creedy & Norman Gemmell, 2007. "Corporation Tax Buoyancy and Revenue Elasticity in the UK," Department of Economics - Working Papers Series 985, The University of Melbourne.
- Saman Majd & Stewart C. Myers, 1986. "Tax Asymmetries and Corporate Income Tax Reform," NBER Working Papers 1924, National Bureau of Economic Research, Inc.
- Myers, Stewart C. & Majd, Saman., 1986. "Tax asymmetries and corporate income tax reform," Working papers 1779-86., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Feldstein, Martin, 1995.
"The Effect of Marginal Tax Rates on Taxable Income: A Panel Study of the 1986 Tax Reform Act,"
Journal of Political Economy,
University of Chicago Press, vol. 103(3), pages 551-72, June.
- Martin Feldstein, 1997. "The Effect of Marginal Tax Rates on Taxable Income: A Panel Study of the1986 Tax Reform Act," NBER Working Papers 4496, National Bureau of Economic Research, Inc.
- Huizinga, Harry & Laeven, Luc, 2007. "International Profit Shifting within European Multinationals," CEPR Discussion Papers 6048, C.E.P.R. Discussion Papers.
- Devereux, Michael P, 1989. "Tax Asymmetries, the Cost of Capital and Investment: Some Evidence from United Kingdom Panel Data," Economic Journal, Royal Economic Society, vol. 99(395), pages 103-12, Supplemen.
- Demirgüç-Kunt, Asli & Huizinga, Harry, 2001. "The taxation of domestic and foreign banking," Journal of Public Economics, Elsevier, vol. 79(3), pages 429-453, March.
- Cooper, Michael & Knittel, Matthew, 2006. "Partial Loss Refundability: How Are Corporate Tax Losses Used?," National Tax Journal, National Tax Association, vol. 59(3), pages 651-63, September.
- John Creedy & Norman Gemmell, 2007. "Modelling Behavioural Responses to Profit Taxation: The Case of the UK Corporation Tax," Department of Economics - Working Papers Series 998, The University of Melbourne.
- Feldstein, Martin, 1995. "Effect of Marginal Tax Rates on Taxable Income: A Panel Study of the 1986 Tax Reform Act," Scholarly Articles 2766676, Harvard University Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marisa Cerantola).
If references are entirely missing, you can add them using this form.