Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/48699 
Year of Publication: 
2011
Series/Report no.: 
Beiträge zur Jahrestagung des Vereins für Socialpolitik 2011: Die Ordnung der Weltwirtschaft: Lektionen aus der Krise - Session: Fiscal Policy No. G11-V4
Publisher: 
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft
Abstract: 
The elasticity of business capital to changes in its user cost is central to the economic analysis of fiscal policies. As a major component, the user cost of capital includes a firm's marginal tax rate. Due to the asymmetric treatment of tax losses and profits, the marginal tax rate can depart strongly from the statutory tax rate; it thus differs across firms. Previous studies have mis-measured the firm-specific marginal tax rate because of data limitations. This leads to a systematic mis-representation of the user cost of capital and neglects an important source of variation. We use a novel firm-level panel data set including official corporate income tax returns to overcome these problems. Our results show that accounting for tax losses reduces the estimated user cost elasticity of investment. Small and medium sized enterprises seem to be more responsive to tax incentives than larger firms.
Subjects: 
Taxation
Business investment
Tax loss
Asymmetric treatment of profits and losses
User cost of capital
JEL: 
G31
H25
H32
D22
Document Type: 
Conference Paper

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