Corporation Tax Asymmetries and Firm-Level Investment in Canada
AbstractAn empirical model is developed to estimate the probability of a given tax status based on firm characteristics. A structural switching regression model of the firm’s demand for capital goods is next specified and incorporates expressions for the user cost of capital which account for tax asymmetries. The switching model, which incorporates the estimated tax status probabilities, is used to investigate the potential endogeneity of the cost of capital using a balanced panel of Canadian companies over the period 1976-94. Empirical results suggest that tax status affects capital acquisition behaviour.
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Bibliographic InfoPaper provided by International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto in its series International Tax Program Papers with number 0303.
Length: 54 Pages
Date of creation: Oct 2003
Date of revision:
Corporation Tax; Losses; Investment; Regime Switching;
Find related papers by JEL classification:
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-12-12 (All new papers)
- NEP-MAC-2004-12-12 (Macroeconomics)
- NEP-PBE-2004-12-12 (Public Economics)
- NEP-PUB-2004-12-12 (Public Finance)
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