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on Accounting and Auditing |
| By: | Dominika Langenmayr (University of Munich); Andreas Hau fler (University of Munich and CESifo); Christian J. Bauer (University of Munich and CESifo) |
| Abstract: | Heterogeneous firm productivity raises the question of whether governments should pursue `pick-the-winner' strategies by subsidizing highly productive firms more, or taxing them less, than their less productive counterparts. We study this issue in a setting where governments can set differentiated effective tax rates in an oligopolistic industry where firms with two productivity levels co-exist. We show that the optimal structure of tax differentiation depends critically on the feasible level of the corporate profit tax, which in turn depends on the degree of international tax competition. When tax competition is weak and optimal profit tax rates are high, favouring high-productivity firms is indeed the optimal policy. When tax competition is aggressive and profit taxes are low, however, the optimal tax policy reverses and favours low-productivity firms. |
| Keywords: | business taxation, firm heterogeneity, tax competition |
| JEL: | H25 H87 F15 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:btx:wpaper:1308&r=acc |
| By: | Christoph Ernst (ZEW Mannheim); Katharina Richter (University of Mannheim & ZEW Mannheim); Nadine Riedel (University of Hohenheim, Oxford University CBT & CESifo Munich) |
| Abstract: | This paper examines the impact of tax incentives on corporate research and development (R&D) activity. Traditionally, R&D tax incentives have been provided in the form of special tax allowances and tax credits. In recent years, several countries moreover reduced their income tax rates on R&D output. Previous papers have shown that all three tax instruments are effective in raising the quantity of R&D related activity. We provide evidence that, beyond this quantity effect, corporate taxation also distorts the quality of R&D projects, i.e. their innovativeness and revenue potential. Using rich data on corporate patent applications to the European patent office, we find that a low tax rate on patent income is instrumental in attracting innovative projects with a high earnings potentialand innovation level. The effect is statistically significant and economically relevant and prevails in a number of sensitivity checks. R&D tax credits and tax allowances are in turn not found to exert a statistically significant impact on project quality. |
| Keywords: | corporate taxation, research and development, micro data |
| JEL: | H3 H7 J5 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:btx:wpaper:1301&r=acc |
| By: | Estelle P. Dauchy (New Economic School) |
| Abstract: | This paper comprehensively calculates corporate intangible assets by industry from 1998 to 2009, and evaluates the impact of expensing intangible assets on the cost of capital, the METR, and the welfare cost of inter-asset taxation, under current law and alternative tax policy including recent policy proposals. It also estimates the welfare cost of `leveling the playing field’. I find that capitalizing intangible assets can reduce the METR by up to 28 percentage points in finance. The intangible-inclusive welfare cost of inter-asset taxation is twice as large as a conventional measure under current law, and can be much larger than the tax revenue loss of alternative policy. Leveling the playing field may reduce or increase the deadweight loss of inter-asset taxation. The results provide a valuable input for research estimating the impact of investment tax incentives. |
| Keywords: | Intangible Assets, Cost of Capital, Welfare Cost, Inter-asset Taxation, Bonus Depreciation |
| JEL: | H25 E01 E22 |
| Date: | 2013–03 |
| URL: | http://d.repec.org/n?u=RePEc:cfr:cefirw:w0199&r=acc |
| By: | Savina Princen; Gilles Mourre |
| Abstract: | The paper consists in the proceedings of the workshop organised by the Directorate General for Economic and Financial Affairs held in Brussels on 18 October 2012. Against the background of severe consolidation needs in many EU Member States, the workshop addressed the macroeconomic impact and redistributive effects of consolidation measures on the revenue side, two topics ranking high on the current taxation policy agenda. The proceedings gather together the views of academics, national policy-makers and international institutions expressed during the conference. The presentations and discussions in the first session touched upon the balance between current consolidation measures and their medium-term effects. It also provided insights from macroeconomic modelling to design tax consolidation policy and looked into ways to measure consolidation efforts on the tax side. The second session discussed the best tax bases to be used to safeguard social equity and considered income and capital tax options to make the richest contribute to meeting fiscal adjustment needs. Country-specific presentations showed how tax measures were used for consolidation purposes and looked into various experiences in distributing income through the tax system. |
| JEL: | E62 H24 H26 |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:euf:ecopap:0502&r=acc |
| By: | Estelle P. Dauchy (New Economic School); Christopher Balding (Peking University HSBC Business School) |
| Abstract: | To study the potentially distortionary impact of differing corporate income tax rates on international trade flows, we use an augmented empirical specification of the gravity model. Incorporating an asymmetric trade barrier measure into a modified gravity model, we capture the impact of corporate income tax rates via the price mechanism impact on trade. Holding other factors constant in a gravity model, one should theoretically expect asymmetric corporate income tax rates to impact bilateral trade flows. High (low) tax states have an implied price (dis)advantage relative to trade partners. However, gravity models have explicitly assumed that trade barriers are symmetric between countries. Using asymmetric trade barrier measures of corporate income tax rates differences between countries, we find that bilateral corporate income tax rates wedges do not impact bilateral international trade flows. Our empirical results are robust to alternative proxies for tax asymmetries and exclusion restrictions based on trade regions and time periods. |
| Keywords: | Gravity, Asymmetric Barriers, Corporate Income Tax |
| JEL: | F14 H25 H26 |
| Date: | 2013–04 |
| URL: | http://d.repec.org/n?u=RePEc:cfr:cefirw:w0200&r=acc |
| By: | Serena Fatica |
| Abstract: | The working paper investigates the impacts of corporate taxes on the accumulation of different types of capital assets. The paper analyses the effect of corporate taxes on new investment in different types of capital assets in the manufacturing industries of 11 advanced economies over the period 1991-2007. The magnitude of the asset substitution elasticities points to a significant inter-asset distortionary effect induced by differences in the tax-adjusted user cost of capital. Overall, differential taxation leads on average to under-investment in ICT capital and to over-investment in other machinery and equipment compared to a counterfactual benchmark where marginal tax rates are equalized across assets. Once cross-country heterogeneity in corporate taxation is accounted for, the results are more mixed, in terms of both the size and the direction of the distortions. On average, 4 percent of the aggregate capital stock appears misallocated. |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:euf:ecopap:0503&r=acc |
| By: | Michael Devereux (Oxford University Centre for Business Taxation); Clemens Fuest (Centre for European Economic Research (ZEW)); Ben Lockwood (Oxford University CBT, CEPR and Department of Economics, University of Warwick,) |
| Abstract: | This paper synthesizes and extends the literature on the taxation of foreign source income in a framework that covers both greenfield and acquisition investment, and a general constraint linking investment at home and abroad for the multinational by introducing a cost of adjustment for the mobile factor. Unless the cost of adjustment is zero, the domestic tax on foreign-source income should always be set to ensure the optimal allocation of the mobile factor between domestic and foreign assets and should follow the classical rules in the literature; national optimality requires the deduction rule, and global optimality requires the credit rule. Only in the zero-cost case does exemption become optimal. Allowances can be set so as to ensure that domestic and foreign asset purchases are undistorted by the tax system: this requires a cash-flow tax on domestic investment in the greenfield case, and a cross-border cash flow tax on foreign investment in both cases. These basic results extend to various extensions of the model. |
| Keywords: | Corporate Taxation, Multinational Firms, Repatriation |
| JEL: | H25 F23 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:btx:wpaper:1303&r=acc |
| By: | FitzGerald, John |
| Keywords: | qec |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:esr:resnot:rn2013/2/1&r=acc |
| By: | Carla Canelas (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne); François Gardes (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Silvia Salazar (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne) |
| Abstract: | In this article, we propose a new method to estimate price effects on micro cross-sectional data using full prices that take into account household domestic production. We use behavioral microsimulations by subpopulations to analyze the redistributive impact of changes on Value Added Tax (VAT) rates in Ecuador and Guatemala. Utility analysis is used to evaluate the consequences on households welfare caused by these tax reforms. The proposed model solves the crucial problem of price data availability in developing countries. The estimates of the full price elasticities highlight the importance of the substitution between time and monetary expenditures within the households domestic production function and show that traditional approaches only tell half of the story. In general, the utility estimates seem to be consistent as they have the expected sign and follow the same pattern of changes in consumption. |
| Keywords: | Consumer demand; full prices; microsimulation; taxes; time-use; welfare |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00881014&r=acc |