Cuts In Tax Rates Research Articles

The Tax Attractiveness of EU Locations for Corporate Investments: A Stocktaking of Past Developments and Recent Reforms

Abstract In this paper, we illustrate the tax attractiveness of EU countries as investment locations over time in terms of effective average tax rates and evaluate potential tax reform options. Our quantitative assessment of recent tax policies suggests that corporate tax rate cuts, notional interest deductions and R&D incentives significantly reduce the effective average tax rate. When government budgets are constrained, however, tax incentives with a direct link to investment activities, such as accelerated depreciation and R&D incentives, are most suitable to stimulate private investment. Even after the introduction of the global minimum tax, these measures remain a viable tool to stimulate investments.

Effect of Tax Rate Cut on Financial Performance of Electronic Firms

This study assesses the effect of tax rate cut on the financial performance of Taiwanese-listed firms using data from 2009 to 2012. This study hypothesizes that income tax rate cuts affect financial performance using selected financial ratios as indicators. This study finds that the hypotheses on the Debt-Equity Ratio, Return on Equity, and Return on Invested Capital are supported. However, there is no support for the hypothesis on the Current Ratio, Price-Earnings Ratio, Equity Ratio, and Operating Profit Margin. Using a pooled sample, the capital structure tends to adjust resulting in lower debt and, accordingly, higher equity. In particular, the electronic group reacts differently with a significant and negative relationship between debt-equity ratio and tax, moreover, it finds lower production and wages relevant.

Marginal tax rates and income in the long run: Evidence from a structural estimation

We estimate a life-cycle model of savings, labor productivity and entrepreneurs to measure the long-run response of income to marginal tax rate cuts in the US. Long-run tax elasticities of income are largest for the richest 1% but are also positive and substantial for other income groups. In equilibrium, entrepreneurs obtain higher returns on wealth. This increases the investment response of rich, high-return entrepreneurs, amplifying their income elasticity to tax cuts. This leads to a reallocation of capital which increases TFP, and generates a boost in wages that magnifies the estimated income response of the bottom 90% as well.

Ставки бюджетоутворюючих податків в Україні: чи доцільне радикальне зниження?

In the context of Russian Federation's full-scale war against Ukraine, the idea of conducting a radical tax reform in our country, which would provide for the establishment of corporate income tax, personal income tax and VAT rates at the same level of 10%, has become widespread, and later transformed into the idea of an "anti-corruption" tax reform. According to the reform’s supporters, lowering the rates of the main taxes will ensure the de-shadowing of the economy, destroy the grounds for corruption, and on this basis will lead to an increase in tax revenues, if not in the first year of the reform, then at least in the short term. Optimistic forecasts regarding the fiscal consequences of a radical reduction in the rates of main taxes in Ukraine are based on simplified ideas about the impact of the size of tax rates on the scale of the shadow economy and tax revenues. The purpose of the article is to refute these ideas by revealing, using the results of theoretical and empirical studies, the ambiguous nature of the relationship between tax rates and the size of the shadow economy and tax revenues. A comparative analysis of the rates of VAT, personal income tax, corporative income tax and social security contributions in Ukraine and the EU countries has been carried out, which allows to establish that none of the EU countries has ever introduced low rates for all major taxes and social security contributions, reduced the VAT rate to the level of minimum EU requirements (15%), or refused to finance pension payments through social security contributions, distributing their burden between employers and employees. The author analyzes the impact of tax rates, tax burden and other factors on the level of the shadow economy and establishes why lower tax rates do not guarantee a reduction in the scale of informal activities. The absence of a direct link between the size of tax rates and corruption is substantiated. Based on the analysis of the arithmetic and economic effects of tax rate cuts, the author determines their ambiguous impact on tax revenues. A comparative analysis has been made of the fiscal efficiency of the taxes whose rates are proposed to be reduced and of the compensating taxes, and the impossibility of compensating budget losses by increasing these taxes is substantiated. The author concludes about the high fiscal risks of a radical reduction in the rates of budget-forming taxes in general and the impossibility of such a reduction during the war.

Tax policies for high-tech companies and tax avoidance in China

The New Enterprise Income Tax Act was passed by the Chinese government in 2008, which reduced the tax rate from 33% to 25% and applied a tax rate of 15% to high-tech businesses as a preferential tax policy. This shows that high-tech businesses are taxed differently from other businesses. The study aims to analyse how the Chinese government's ownership affects the tax avoidance of high-tech enterprises. The analysis's findings are listed below. First off, high-tech corporations engaged in more tax avoidance than other businesses did before to the 2008 tax rate cut. This means that high-tech companies, with large effect of the tax rate cut, have more incentives to minimize their tax burden in the year immediately preceding the tax rate cut compared to general companies. Second, the higher the Chinese government's ownership ratio, the lower the level of tax avoidance. Third, the higher the ownership is, the higher the tax avoidance behaviour becomes in the year just before the tax rate cut. This study provides policy implications pertaining to the tax avoidance behaviour of companies in the case of tax rate cuts and experimental situations in which a differential tax exists.

Nonlinear Employment Effects of Tax Policy

AbstractWe study the nonlinear propagation mechanism of tax policy in a heterogeneous‐agent equilibrium business cycle model with search frictions in the labor market and an extensive margin of employment adjustment. The model exhibits endogenous job destruction and endogenous hiring standards in the form of occasionally‐binding zero‐surplus constraints. After parameterizing the model using U.S. data, we find that the dynamic response of employment to a temporary change in the labor income tax is highly nonlinear, displaying sizable asymmetries and state dependence. Notably, the response to a tax rate cut is at least twice as large in a recession as in an expansion.

Corporate Tax Rate Cut on the Cost Behavior of High−tech Companies: The Case of China

ABSTRACT This study aims to analyse whether there is a cost stickiness phenomenon in which Chinese companies recognize costs early in the years immediately preceding the tax rate cut (hereinafter TRC) in order to minimize tax burden, and to investigate whether high-tech companies with large TRCs have a higher level than general companies. The analysis results can be summarized as follows: First, there is a phenomenon of cost stickiness in Chinese companies in the year immediately before the TRC. Second, before the 2008 TRC in China, the level of cost stickiness of high-tech companies was not statistically higher than that of general companies. The results of this study provide the following implications that Chinese companies use cost as an incentive to minimize their tax burden. Companies can use appropriate surplus resources as a buffer against environmental changes and actively utilize inefficient resource allocation to promote innovative R&D and improve corporate performance.

The effects of corporate taxes on small firms

We study the impact of corporate taxes on firm-level investments and business activity by exploiting a 6 percentage-point reduction in the corporate tax rate in 2012–2014 in Finland. We use detailed administrative data and a difference-in-differences method comparing small corporations (tax rate cuts) to similar partnerships (no change in taxes). We find no significant average investment responses but do observe an average increase in annual sales (1.6%) and variable costs (2%) when comparing years before (2008–2011) and after (2014–2016) the tax rate cuts. These effects are driven by more cash-constrained firms and firms where the main owner actively works in the firm.

The Effect of the Securities Transaction Tax Rate Cut on the Liquidity in KRX

This study evaluated the impact of the securities transaction tax rate cut implemented in 2019 on the liquidity of the stock market. The empirical results are summarized as follows. First, cutting the transaction tax rate affects trading volume rather than spread or price. Additionally, this liquidity improvement more strongly affects low liquid stocks in the period before the transaction tax rate cut. Second, in low liquid stocks that showed effects in trading volume, individuals and foreigners took the leadership in overall trading. Third, liquidity improvement persisted not only in the short term immediately after the transaction tax rate cut, but also until the second half of the sample period. These empirical results show the differing effect of the transaction tax on improving liquidity by liquidity level and a limited effect in low-liquidity stocks. As investors trading low-liquidity stocks with high tax elasticity were sensitive to the burden of transaction costs, the effect of transaction tax cuts was strong, while such effects could not be found in stocks with high liquidity. These empirical results provide practical implications for the level of transaction costs and the method of setting as a means to revitalize market liquidity.

Non-Linear Employment Effects of Tax Policy

<ns3:p>We study the non-linear propagation mechanism of tax policy in a heterogeneous agent equilibrium business cycle model with search frictions in the labor market and an extensive margin of employment adjustment. The model exhibits endogenous job destruction and endogenous hiring standards in the form of occasionally-binding zero-surplus constraints. After parameterizing the model using U.S. data, we find that the dynamic response of employment to a temporary change in the labor income tax is highly non-linear, displaying sizable asymmetries and state-dependence. Notably, the response to a tax rate cut is at least twice as large in a recession as in an expansion.</ns3:p>

The effects of state ownership and tax rate cuts on accounting conservatism: evidence from Vietnam

PurposeThe purpose of this paper is to examine the joint effects of state ownership and tax rate cuts on accounting conservatism, considering the different levels of foreign ownership in the context of Vietnam.Design/methodology/approachThe paper uses ordinary least squares regressions and a data set of 405 firms covering the period 2007 to 2019. The manuscript uses three measures of accounting conservatism: Basu’s 1997 timeliness of earnings, Basu’s 1997 earnings persistence and the book-to-market ratio.FindingsState-owned enterprises (SOEs) adopt less accounting conservatism than non-SOEs; however, the result is only robust in firms with foreign ownership being lower than the foreign ownership median. Firms increase accounting conservatism in the year immediately prior to the year that the tax rate cuts become effective. An SOE possesses an unusual conflict both as a taxpayer and in having its controlling interest held by the government, which is both a tax creator and a tax collector. Interestingly, the increase in accounting conservatism prior to the year of the tax rate cuts is more pronounced for non-SOEs than SOEs.Practical implicationsThis research is beneficial to investors and policymakers where the government is both the taxpayer and tax collector and in emerging markets where foreign investment is local firms’ important financing.Originality/valueTo the best knowledge, this study is the first in examining the joint effects of state control and tax rate cuts on accounting conservatism.

Is carbon pricing regressive? Insights from a recursive-dynamic CGE analysis with heterogeneous households for Austria

We explore the macroeconomic and distributional impacts of unilateral carbon pricing in Austrian economic sectors, which are not covered by the EU emission trading scheme ETS, under various assumptions of revenue usage. We use a recursive-dynamic computable general equilibrium model with twelve groups of private households, differentiated by income quartile and location of residence. Pricing of non-ETS CO2 emissions without any targeted compensation of households turns out to be progressive (when measured in equivalent variation, or welfare) with households living in the periphery being affected the most. This outcome is explained by the dominating progressive factor income effect, which works against regressive consumer price impacts. Considering the positive contribution to welfare from increased public goods provision, low-income households are even better off than without carbon pricing. We compare the revenue usage options ‘no targeted compensation’ with either unconditional or revenue-neutral ‘eco-bonus per capita payments’ as well as revenue-neutral cuts in either ‘labor tax rates’ or ‘value added tax rates.’ We discuss our results from a Utilitarian, Rawlsian and polarization-averse equity perspective. Applying equal weights to the criteria ‘environmental effectiveness’, ‘cost effectiveness’, ‘public budget’ and ‘welfare’, Rawlsian decision makers would prefer the no targeted compensation option. Otherwise, the revenue usage option of revenue-neutral cuts in labor tax rates balance best investigated multiple criteria.

Innovation dynamics and fiscal policy: Implications for growth, asset prices, and welfare

We study the equilibrium implications of different fiscal policies on macroeconomic quantities and welfare by utilizing an endogenous growth model that matches asset pricing data well. The fiscal instruments of interest are (i) subsidies to R&D expenditure, consumption and capital investment, and (ii) cuts in labor and corporate tax rates. Our equilibrium analysis provides new insights on the interplay of innovation dynamics and fiscal policy. Importantly, we find growth and welfare to be inversely related when changing R&D subsidies. However, this depends on how well the model reproduces asset pricing dynamics. Moreover, only subsidies to capital investments and cuts in the corporate tax rate have the potential to increase both growth and welfare.

Tax Rates Variations And Its Effect On Individual Tax Payers A Research Focussed On Salaried Class People In India

The structure and financing of a tax rate variations are grave to achieving economic growth. Tax rate cuts may encourage individuals to figure, save, and invest, but if the tax cuts aren't financed by immediate spending cuts they're going to likely also end in an increased federal deficit, which within the long-term will reduce national saving and lift interest rates. Even though, they reallocate resources diagonally toward their highest-value economic use, resulting in improved efficiency and potentially raising the overall size of the economy. The sample for the study happens to be 384 number of taxpayers. The cogent way of statistical analysis is made via ANOVA and T-test. This paper makes an attempt to explore the tax rate changes and its effect on individual tax payers.

Robust stimulus of private investment: Tax rate cut or investment subsidy?

Robust stimulus of private investment: Tax rate cut or investment subsidy?

Non-Linear Employment Effects of Tax Policy

We study the non-linear propagation mechanism of tax policy in the context of a heterogeneous-agent equilibrium business cycle model with search frictions in the labor market and an extensive margin of employment adjustment. The model exhibits endogenous job destruction and endogenous hiring standards in the form of occasionally-binding zero-surplus constraints. We parametrize the model using U.S. data, including narratively-identified impulse response functions from proxy-SVARs. We find that the dynamic response of the employment rate to a temporary change in the flat-rate tax on labor income is highly non-linear, displaying sizable asymmetries and state-dependence. Notably, the response to a tax rate cut is at least twice as large in a recession than in an expansion.

자오수리(趙樹理) 소설에 나타난 소리의 성향 분석

Chinese contemporary writer Zhao Shuli(趙樹理, 1906-1970) was born in a poor farm in Shanxisheng and Qinshui province, and has liked fork literature and art since from a young age. This has served as a foundation in future and that’s why he was called as ‘new fork literature novelist’. He has written new typed poems and novels studying at Changzhi teachers college. He made his name by <Xiao Erhei’s Wedding (小二黑的結婚)> in 1943. Therefore this essay will consider as analysis targets, from <Xiao Erhei’s Wedding> to novels published in 1949 New China was established. Zhao Shuli mastered arts, in particular music and theater arts, and joined the Eight Association(Ba yin hui) by peasants and was good at playing most instruments including gongs, drums, reed instruments, flutes and so on. He also had good taste in telling stories and used to perform as an actor. Through this, it is known that Zhao Shuli was interested in ‘sound’ arts, and this kind of arts directly was reflected in his novels. Since national crisis happened, Zhao Shuli’s novels contained not a pleasant sound from a city, mechanical reproduction sound, various sound media, but a sound of enlightenment, a sound of lecture about policy support, shout and slogan for anti-Japanese national salvation, a real-estate tax and interest rate cut, land reform ᠊ a sound of war participation campaign, a sound of performing arts, daily life noise and an opposition sound against reform with a peculiar sound of local color, and a satire sound about it and so on. Therefore, this essay will categorize these sounds into a sound of daily life, a sound of mechanical medium, rumors, resistant sound, a sound of anti-Japanese national salvation, local traditional sound, a sound of song[kuaiban] and so on, analyze characteristics of sounds in Zhao Shuli’s novels, and redefine position that this comprises Zhao Shuli literature.

How Do Reductions in Foreign Country Corporate Tax Rates Affect U.S. Domestic Manufacturing Firms?

ABSTRACT We examine the effects of increased competition stemming from corporate tax rate cuts in foreign competitors' home countries on U.S. domestic manufacturing firms. We develop a measure of U.S. domestic firms' exposure to changes in foreign country tax rates and validate that the measure captures increased competition in the U.S. We find that, on average, U.S. domestic firms lose market power following declines in foreign country tax rates. We also find that, on average, U.S. domestic firms respond by increasing investment in research and development and capital expenditures and by improving total factor productivity. In cross-sectional analyses, we find the impact of foreign tax cuts is concentrated among U.S. domestic firms with low ex ante product differentiation. Taken together, these findings suggest that foreign country tax cuts escalate the competitive threat faced by U.S. domestic firms, and in response, U.S. domestic firms alter their investment strategies and/or become more productive. JEL Classifications: H2; H22; H25.

Corporate Tax Cuts and Fiscal Slippage

The Union Finance Minister on 20 September 2019 announced the highest corporate tax rate cuts in the last 28 years as a level-playing field for both the existing and green-field firms for turning around the sluggish economy. The stimulus package, notwithstanding, has likely to accelerate the demand in the short run, but to increase the fiscal deficit inasmuch, the government would increase its spending through borrowings, which could lead to fiscal slippage. Instead of excessive dependence on the fiscal measures, the government should initiate economic and judicial reforms for accelerating the growth and improving doing business in the country.

Macroeconomic Effects of Capital Tax Rate Changes

We study aggregate, distributional and welfare effects of a permanent reduction in the capital tax rate in a quantitative equilibrium model with capital-skill complementarity. Such a tax reform leads to expansionary long-run aggregate effects, but is coupled with an increase in wage and income inequality. Moreover, the expansionary aggregate effects are smaller when distortionary labor or consumption tax rates have to increase to finance the capital tax rate cut, driven by effects on labor supply decisions. An extension to a model with heterogeneous households shows that consumption inequality also increases in the long run, which leads to a further rise in wage inequality. We study transition dynamics and show that joint modeling of monetary and fiscal policy response is important for analyzing short-run effects. Finally, we contrast the long-term aggregate welfare gains with short-term losses, regardless of how the tax cut is financed. In the model with heterogeneous households, we additionally show that welfare gains for the skilled go together with welfare losses for the unskilled.