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

Author

Listed:
  • Richard Fabling

    (Motu Economic and Public Policy Research)

  • Norman Gemmell

    (Victoria University of Wellington)

  • Richard Kneller

    (University of Nottingham)

  • Lynda Sanderson

    (The Treasury)

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 2000-2010 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 2011, and systematic differences between foreign-owned and domestically-owned firms. Choices among alternative UCC measures make a difference to interpretations.

Suggested Citation

  • Richard Fabling & Norman Gemmell & Richard Kneller & Lynda Sanderson, 2013. "Estimating Firm-Level Effective Marginal Tax Rates and the User Cost of Capital in New Zealand," Working Papers 13_14, Motu Economic and Public Policy Research.
    • Handle: RePEc:mtu:wpaper:13_14
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. John Creedy & Norman Gemmell, 2015. "Taxation and the User Cost of Capital: An Introduction," Treasury Working Paper Series 15/02, New Zealand Treasury.
    3. Richard Fabling & David C Maré, 2015. "Production function estimation using New Zealand’s Longitudinal Business Database," Working Papers 15_15, Motu Economic and Public Policy Research.
    4. Lynda Sanderson, 2013. "Sources of international investment data in the Longitudinal Business Database," Working Papers 13_15, Motu Economic and Public Policy Research.
    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. John Creedy & Norman Gemmell, 2015. "Taxation and the User Cost of Capital: An Introduction," Treasury Working Paper Series 15/02, New Zealand Treasury.

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    More about this item

    Keywords

    User cost of capital; tax reform; EMTR; New Zealand;
    All these keywords.

    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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