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The incidence of company tax in Australia

Author

Listed:
  • Xavier Rimmer

    (Treasury, Government of Australia)

  • Jazmine Smith

    (Treasury, Government of Australia)

  • Sebastian Wende

    (Treasury, Government of Australia)

Abstract

This paper uses a computable general equilibrium framework to provide estimates of where the costs of company tax are borne and to test the importance of certain assumptions. The welfare benefits of a small fall in the company tax rate are shared between company owners and workers. The paper finds that in the long-run around one-third of the benefit accrues to the owners of capital in the main scenario, with the remaining two-thirds flowing to households, primarily through rises in real wages. Results with alternative assumptions are also presented.

Suggested Citation

  • Xavier Rimmer & Jazmine Smith & Sebastian Wende, 2014. "The incidence of company tax in Australia," Economic Roundup, The Treasury, Australian Government, issue 1, pages 33-47, April.
    • Handle: RePEc:tsy:journl:journl_tsy_er_2014_1_3
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    File URL: http://www.treasury.gov.au/~/media/Treasury/Publications%20and%20Media/Publications/2014/Economic%20Roundup%20Issue%201/Downloads/PDF/03_Incidence_of_company_tax_in_Australia_v3.ashx
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    References listed on IDEAS

    as
    1. Grubert, Harry & Mutti, John, 1991. "Taxes, Tariffs and Transfer Pricing in Multinational Corporate Decision Making," The Review of Economics and Statistics, MIT Press, vol. 73(2), pages 285-293, May.
    2. Sandra Dandie & Joseph Mercante, 2007. "Australian labour supply elasticities: Comparison and critical review," Treasury Working Papers 2007-04, The Treasury, Australian Government, revised Oct 2007.
    3. Harberger, Arnold C., 2008. "The Incidence of the Corporation Income Tax Revisited," National Tax Journal, National Tax Association;National Tax Journal, vol. 61(2), pages 303-312, June.
    4. Hibiki Ichiue & Yuhei Shimizu, 2012. "Determinants of Long-term Yields: A Panel Data Analysis of Major Countries and Decomposition of Yields of Japan and the US," Bank of Japan Working Paper Series 12-E-7, Bank of Japan.
    Full references (including those not matched with items on IDEAS)

    Citations

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    as


    Cited by:

    1. Chris Murphy, 2016. "The effects on consumer welfare of a corporate tax cut," Departmental Working Papers 2016-10, The Australian National University, Arndt-Corden Department of Economics.
    2. Jason Nassios & John Madden & James Giesecke & Janine Dixon & Nhi Tran & Peter Dixon & Maureen Rimmer & Philip Adams & John Freebairn, 2019. "The economic impact and efficiency of state and federal taxes in Australia," Centre of Policy Studies/IMPACT Centre Working Papers g-289, Victoria University, Centre of Policy Studies/IMPACT Centre.
    3. J.M. Dixon & J. Nassios, 2016. "Modelling the Impacts of a Cut to Company Tax in Australia," Centre of Policy Studies/IMPACT Centre Working Papers g-260, Victoria University, Centre of Policy Studies/IMPACT Centre.
    4. Michael Kouparitsas & Dinar Prihardini & Alexander Beames, 2016. "Analysis of the long term effects of a company tax cut," Treasury Working Papers 2016-02, The Treasury, Australian Government, revised May 2016.

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    More about this item

    Keywords

    CGE; Computable General Equilibrium; company taxation; economic incidence; economic rents; capital mobility;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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