IDEAS home Printed from https://ideas.repec.org/p/pui/dpaper/126.html
   My bibliography  Save this paper

Tax Rate Cut and Firm Investment: Evidence from Thailand

Author

Listed:
  • Athiphat Muthitacharoen

Abstract

How do firms' investment respond to a large corporate tax rate cut in developing countries? This study uses a matched difference-in-difference approach to estimate the investment responses of Thailand's 2012–13 corporate income tax cut. It finds that the tax cut has significantly boosted investment. The findings also underline the heterogeneity of the investment responses between local and foreign firms as well as the potential roles of policy uncertainty and market competition on investment response.

Suggested Citation

  • Athiphat Muthitacharoen, 2020. "Tax Rate Cut and Firm Investment: Evidence from Thailand," PIER Discussion Papers 126, Puey Ungphakorn Institute for Economic Research.
    • Handle: RePEc:pui:dpaper:126
    as

    Download full text from publisher

    File URL: https://www.pier.or.th/files/dp/pier_dp_126.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Laura Dobbins & Martin Jacob, 2016. "Do corporate tax cuts increase investments?," Accounting and Business Research, Taylor & Francis Journals, vol. 46(7), pages 731-759, November.
    2. Niels Johannesen & Thomas Tørsløv & Ludvig Wier, 0. "Are Less Developed Countries More Exposed to Multinational Tax Avoidance? Method and Evidence from Micro-Data," The World Bank Economic Review, World Bank, vol. 34(3), pages 790-809.
    3. Simeon Djankov & Tim Ganser & Caralee McLiesh & Rita Ramalho & Andrei Shleifer, 2010. "The Effect of Corporate Taxes on Investment and Entrepreneurship," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(3), pages 31-64, July.
    4. Scott R. Baker & Nicholas Bloom & Steven J. Davis, 2016. "Measuring Economic Policy Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(4), pages 1593-1636.
    5. Lei Zhang & Yuyu Chen & Zongyan He, 2018. "The effect of investment tax incentives: evidence from China’s value-added tax reform," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 25(4), pages 913-945, August.
    6. Ben S. Bernanke, 1983. "Irreversibility, Uncertainty, and Cyclical Investment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(1), pages 85-106.
    7. Emanuel Kopp & Mr. Daniel Leigh & Susanna Mursula & Suchanan Tambunlertchai, 2019. "U.S. Investment Since the Tax Cuts and Jobs Act of 2017," IMF Working Papers 2019/120, International Monetary Fund.
    8. Athiphat Muthitacharoen & Krislert Samphantharak, 2022. "Multinational Tax Avoidance And Anti-Avoidance Enforcement: Firm-Level Evidence From Developing Asean Countries," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 67(06), pages 2049-2065, December.
    9. Rajeev H. Dehejia & Sadek Wahba, 2002. "Propensity Score-Matching Methods For Nonexperimental Causal Studies," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 151-161, February.
    10. Mutti, John & Grubert, Harry, 2004. "Empirical asymmetries in foreign direct investment and taxation," Journal of International Economics, Elsevier, vol. 62(2), pages 337-358, March.
    11. Eric Zwick & James Mahon, 2017. "Tax Policy and Heterogeneous Investment Behavior," American Economic Review, American Economic Association, vol. 107(1), pages 217-248, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kai Chang & Ning Lu & Ze Sheng Li & Yi Ran Wang, 2021. "The combined impacts of fiscal and credit policies on green firm's investment opportunity: Evidences from Chinese firm‐level analysis," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(7), pages 1822-1835, October.
    2. Hussain, Adam, 2023. "Effect of Tax Cut on Investment: Evidence from Indian Manufacturing firms," Working Papers 23/390, National Institute of Public Finance and Policy.
    3. Umar Farooq & Suhaib Anagreh & Mohammad Ahmad Al-Omari & Mosab I. Tabash, 2022. "Corporate Tax Rate, Financing Policy and Investment Decisions: Evidence from 8 Asian Economies," Hacienda Pública Española / Review of Public Economics, IEF, vol. 242(3), pages 29-51, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cezar, Rafael & Gigout, Timothée & Tripier, Fabien, 2020. "Cross-border investments and uncertainty: Firm-level evidence," Journal of International Money and Finance, Elsevier, vol. 108(C).
    2. Ruhollah Eskandari & Morteza Zamanian, 2023. "Heterogeneous responses to corporate marginal tax rates: Evidence from small and large firms," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 38(7), pages 1018-1047, November.
    3. Osswald, Benjamin & Sureth, Caren, 2018. "Do country risk factors attenuate the effect of taxes on corporate risk-taking?," arqus Discussion Papers in Quantitative Tax Research 235, arqus - Arbeitskreis Quantitative Steuerlehre.
    4. Yamazaki, Akio, 2022. "Environmental taxes and productivity: Lessons from Canadian manufacturing," Journal of Public Economics, Elsevier, vol. 205(C).
    5. Athiphat Muthitacharoen, 2020. "Assessing Tax Burden Differential Between Foreign Multinationals and Local Firms: Implications for FDI Tax Incentives," PIER Discussion Papers 127, Puey Ungphakorn Institute for Economic Research.
    6. Gigout, Timothee, 2019. "Firm dynamics in an global and uncertain economy," MPRA Paper 96569, University Library of Munich, Germany, revised 16 Oct 2019.
    7. Jacob, Martin & Vossebürger, Robert, 2022. "The role of personal income taxes in corporate investment decisions," Journal of Corporate Finance, Elsevier, vol. 77(C).
    8. Umar Farooq & Suhaib Anagreh & Mohammad Ahmad Al-Omari & Mosab I. Tabash, 2022. "Corporate Tax Rate, Financing Policy and Investment Decisions: Evidence from 8 Asian Economies," Hacienda Pública Española / Review of Public Economics, IEF, vol. 242(3), pages 29-51, September.
    9. Hussain, Adam, 2023. "Effect of Tax Cut on Investment: Evidence from Indian Manufacturing firms," Working Papers 23/390, National Institute of Public Finance and Policy.
    10. Idriss Fontaine, 2021. "Uncertainty and Labour Force Participation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 83(2), pages 437-471, April.
    11. Bermperoglou, Dimitrios & Deli, Yota & Kalyvitis, Sarantis, 2019. "Investment tax incentives and their big time-to-build fiscal multiplier," Kiel Working Papers 2143, Kiel Institute for the World Economy (IfW Kiel).
    12. Azzimonti, Marina, 2019. "Does partisan conflict deter FDI inflows to the US?," Journal of International Economics, Elsevier, vol. 120(C), pages 162-178.
    13. Tung Nguyen & Dimitris Petmezas & Nikolaos Karampatsas, 2023. "Does Terrorism Affect Acquisitions?," Management Science, INFORMS, vol. 69(7), pages 4134-4168, July.
    14. Fatica, Serena, 2009. "Taxation and the quality of institutions: asymmetric effects on FDI," MPRA Paper 24179, University Library of Munich, Germany, revised Jun 2010.
    15. Magnus Reif, 2020. "Macroeconomics, Nonlinearities, and the Business Cycle," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 87.
    16. Himounet, Nicolas, 2022. "Searching the nature of uncertainty: Macroeconomic and financial risks VS geopolitical and pandemic risks," International Economics, Elsevier, vol. 170(C), pages 1-31.
    17. Das, Debojyoti & Kannadhasan, M. & Bhattacharyya, Malay, 2019. "Do the emerging stock markets react to international economic policy uncertainty, geopolitical risk and financial stress alike?," The North American Journal of Economics and Finance, Elsevier, vol. 48(C), pages 1-19.
    18. Altig, Dave & Baker, Scott & Barrero, Jose Maria & Bloom, Nicholas & Bunn, Philip & Chen, Scarlet & Davis, Steven J. & Leather, Julia & Meyer, Brent & Mihaylov, Emil & Mizen, Paul & Parker, Nicholas &, 2020. "Economic uncertainty before and during the COVID-19 pandemic," Journal of Public Economics, Elsevier, vol. 191(C).
    19. Wadhwa, Kavita & Syamala, Sudhakara Reddy, 2023. "Are business groups different from other family firms? Evidence from corporate investments during political uncertainty," Emerging Markets Review, Elsevier, vol. 54(C).

    More about this item

    Keywords

    Investment; Taxation;

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pui:dpaper:126. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/pierbth.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.