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Estimating Firm-Level Effective Marginal Tax Rates and the User Cost of Capital in New Zealand

Author

Listed:
  • Fabling, Richard
  • Gemmell, Norman
  • Kneller, Richard
  • Sanderson, Lynda

Abstract

Effective marginal tax rates (EMTRs) can be very different from the statutory rate and vary across firms, reflecting such factors as the extent and nature of taxable deductions (losses, depreciation), asset and ownership structures, and debt/equity financing. We estimate firm-specific EMTRs and related user cost of capital (UCC) measures allowing for shareholder-level taxation using data for 1999/00-2009/10 from the Longitudinal Business Database. Examining distributions of various UCC measures we find substantial firm-level heterogeneity, systematic changes as a result of tax reforms between 2004 and 2012, and systematic differences between foreign-owned and domestically-owned firms. Choices among alternative UCC measures make a difference to interpretations.

Suggested Citation

  • Fabling, Richard & Gemmell, Norman & Kneller, Richard & Sanderson, Lynda, 2013. "Estimating Firm-Level Effective Marginal Tax Rates and the User Cost of Capital in New Zealand," Motu Working Papers 291379, Motu Economic and Public Policy Research.
    • Handle: RePEc:ags:motuwp:291379
    DOI: 10.22004/ag.econ.291379
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    Cited by:

    1. is not listed on IDEAS
    2. Fabling, Richard & Mare, David C, 2015. "Production function estimation using New Zealand’s Longitudinal Business Database," Motu Working Papers 290585, Motu Economic and Public Policy Research.
    3. Creedy, John & Gemmell, Norman, 2015. "Taxation and the User Cost of Capital : An Introduction," Working Paper Series 19269, Victoria University of Wellington, Chair in Public Finance.
    4. Lynda Sanderson, 2013. "Sources of international investment data in the Longitudinal Business Database," Treasury Working Paper Series 13/31, New Zealand Treasury.
    5. Elias Steinmüller & Georg U. Thunecke & Georg Wamser, 2019. "Corporate income taxes around the world: a survey on forward-looking tax measures and two applications," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(2), pages 418-456, April.
    6. Richard Fabling & Richard Kneller & Lynda Sanderson, 2015. "The Impact of Tax Changes on the Short-run Investment Behaviour of New Zealand Firms," Treasury Working Paper Series 15/05, New Zealand Treasury.
    7. John Creedy & Norman Gemmell, 2015. "Taxation and the User Cost of Capital: An Introduction," Treasury Working Paper Series 15/02, New Zealand Treasury.

    More about this item

    Keywords

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    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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