nep-pub New Economics Papers
on Public Finance
Issue of 2005‒04‒09
two papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. The Progressivity of Income Taxation:<BR>A Comparison between Quebec and Ontario / La progressivité de l’imposition du revenu :<BR>une comparaison Québec-Ontario By Luc Godbout; Suzie St-Cerny
  2. Corporate Tax Avoidance and Firm Values By Mihir A. Desai; Dhammika Dharmapala

  1. By: Luc Godbout; Suzie St-Cerny
    Abstract: This study compares the progressivity of the income tax of Quebec and Ontario. After observing the predominance of income taxation in Quebec and Ontario, by way of international and interprovincial comparisons and illustrating the presence of progressivity in both provinces, progressivity indicators are described. Using these indicators, we measured the progressivity of the Quebec and Ontario tax systems for four different family situations and six levels of income. The results show that in certain situations, Quebec’s tax system is more progressive while in others, the reverse is true. More specifically, Quebec’s tax system is more progressive for changes in income at the lower end of the income scale while in general Ontario’s system is more progressive for higher incomes. These results confirm the greater concentration of Ontario’s income tax on high-income taxpayers that we have previously illustrated in the study. <P>L’étude compare la progressivité des impôts sur le revenu du Québec et de l’Ontario. Après avoir constaté l’importance de l’imposition du revenu au Québec et en Ontario, par des comparaisons internationales et interprovinciales, et avoir illustré la présence de progressivité dans les deux cas, nous présentons des indicateurs de progressivité. À l’aide de ces indicateurs, nous avons mesuré la progressivité des régimes d’imposition québécois et ontarien pour quatre situations familiales différentes et pour six niveaux de revenus. Les résultats montrent que, dans certaines situations, la progressivité est plus grande au Québec alors que, dans d’autres cas, la progressivité est supérieure en Ontario. Plus précisément, la progressivité est plus grande au Québec pour les variations de revenus au bas de l’échelle des revenus tandis qu’elle est en général plus élevée en Ontario pour les revenus supérieurs. Ces résultats confirment la plus grande concentration de l’impôt ontarien sur le revenu auprès des contribuables à revenu élevé que nous avions précédemment illustrée dans l’étude
    Keywords: Quebec, Ontario, progressivity, income tax, tax policy, indicator, Québec, Ontario, progressivité, impôt sur le revenu, politique fiscale, indicateur
    JEL: H24
    Date: 2005–03–01
  2. By: Mihir A. Desai; Dhammika Dharmapala
    Abstract: How do investors value managerial actions designed solely to minimize corporate tax obligations? Using a framework in which managers' tax sheltering decisions are related to their ability to divert value, this paper predicts that the effect of tax avoidance on firm value should vary systematically with the strength of firm governance institutions. The empirical results indicate that the average effect of tax avoidance on firm value is not significantly different from zero; however, the effect is positive for well-governed firms as predicted. Coefficient estimates are consistent with an expected life of five years for the devices that generate these tax savings for well-governed firms. Alternative explanations for the dependence of the valuation of the tax avoidance measure on firm governance do not appear to be consistent with the empirical results. The findings indicate that the simple view of corporate tax avoidance as a transfer of resources from the state to shareholders is incomplete, given the agency problems characterizing shareholder-manager relations.
    JEL: G32 H25 H26 K34
    Date: 2005–04

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