The Deadweight Costs of Capital Taxation in Australia
AbstractTaxes distort the incentives to work, save and invest and the pattern of input use and production in the economy. The excess burden or deadweight cost of taxation is a measure of the efficiency costs of taxation - the value of the opportunities that are effectively lost when taxation diverts labour, land and capital from their best uses. The excess burden of taxing capital is likely to be particularly high given capital's increasing international mobility. However, the important issue of capital taxation has been virtually ignored in Australia's current public discussion of tax reform. In this paper we report the results of calculating dynamic deadweight losses for capital taxes in Australia based on an econometric model of the production sector. Changes to the Australian tax system since the mid-1980s have fallen relatively heavily on capital and we find that the excess burden of capital taxation has increased markedly in recent years.
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Bibliographic InfoPaper provided by UBC Department of Economics in its series UBC Departmental Archives with number 98-01.
Length: 29 pages
Date of creation: 1998
Date of revision:
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CAPITAL MARKET ; TAX POLICY;
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- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
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