Impact Of Corporate Taxation Research Articles

Investigating the Relationships between Corporate Taxation and Unemployment Rate: An Empirical Research for Bangladesh

This paper investigates how changes in the corporate income tax affect unemployment in Bangladesh. The impact of corporate taxation on unemployment has been analyzed in this paper by applying an Autoregressive Distributed Lag Model (ARDL) bound testing approach covering a period from 1991 to 2021. The results show that the corporate tax rate has no significant effect on unemployment levels both in the short run and the long run. In contrast, the economic growth of the country, together with the global economic growth, has a favorable impact on the employment situation of Bangladesh. But this relationship holds only in the short run.

Heterogeneous tax sensitivity of firm-level investments

This paper introduces a stylized theoretical framework to identify five different firm types depending on their financial situation and their ownership structure. The model explains the heterogeneous tax sensitivity of firm-level investments. The empirical analysis uses a large firm database for 24 countries allowing for a quantification of the regime-specific investment responses to taxation and identifies the partly latent firm types using a threshold estimation approach. We find important differences in the tax sensitivity of investment across firm-types for dividend as well as for corporate taxation. The impact of corporate taxation is substantially higher for entrepreneurial firms than for managerial firms. In contrast, dividend taxation has a comparable negative effect for cash-constrained managerial firms and entrepreneurial firms but no significant impact on their unconstrained counterparts.

Impact of Corporate Taxation on Profitability of Selected Companies – An Empirical Investigation

Impact of Corporate Taxation on Profitability of Selected Companies – An Empirical Investigation

Withholding Tax Effects on the Investment Decision of Multinational Firms

Using a large international firm-level panel data set, we investigate the impact of corporate taxation on foreign direct investment. In this paper, we also theoretically and empirically analyse foreign corporate taxation. In particular, we examine non-resident withholding taxes. The impact of foreign country taxation is estimated to be sizable, as is consistent with the findings from the existing literature. Moreover, our results provide evidence which shows that withholding taxes have a remarkable additional effect on the investment decision. We find that a ten percentage point increase in the foreign corporate tax rate is associated with a 15.8% decrease in the affiliate’s fixed assets. Furthermore, we show that a ten percentage point increase in the withholding tax rate reduces the affiliate’s fixed assets by 4.4%.

Capital Structure, Corporate Taxation and Firm Age*

AbstractThis paper analyses the relationship between corporate taxation, firm age and debt. We adapt a standard model of capital structure choice under corporate taxation, focusing on the financing and investment decisions typically faced by a firm. Our model suggests that the debt ratio is associated positively with the corporate tax rate and negatively with firm age. Further, we predict that the tax‐induced advantage of debt is more important for older firms than for younger ones. To test these hypotheses empirically, we use a cross‐section of around 405,000 firms from 35 European countries and 127 NACE three‐digit industries. In line with previous research, we find that a firm's debt ratio increases with the corporate tax rate. Further, we observe that older firms exhibit smaller debt ratios than their younger counterparts. Finally, consistent with our theoretical model, we find a positive interaction between corporate taxation and firm age, indicating that the impact of corporate taxation on debt increases over a firm's lifetime.

SVAR ANALYSIS OF THE IMPACTS OF CORPORATE TAXATION ON THE MACRO ECONOMY OF LITHUANIA

Abstract. This study aims to investigate the effects of tax policy on the macroeconomic variables of Lithuania. Special attention is devoted to conclusions concerning the impact of corporate taxation. The methodological framework is structural vector autoregression models identified using the Cholesky and Blanchard–Perotti approaches. Investigations of the impact of fiscal policy have been scarce in the empirical literature of Lithuania. The authors of this article use the methodology of assessing the impacts of fiscal policy that has not been used in Lithuania so for.JEL classification: E62, H25, F21.Key words: SVAR model, impulse response functions, fiscal policy, capital tax, investment

Corporate taxes and the demand for labor and capital in developing countries

This article provides evidence about the impact of corporate taxation on both labor and capital demand by private companies in a developing economy, using firm level data from Chile. Our results show that higher corporate tax rates reduce not only the demand for capital, but also the demand for labor due to complementarities between both inputs. An interesting element of the results presented in this article is the asymmetry between the effects of taxation according to company size. The impact on labor demand is significantly higher in large corporations than in small enterprises, while the demand for capital is more responsive to corporate tax changes in small firms. We can explain these results based on differences in credit constraints according to firm size.

International competition in corporate taxation: evidence from the OECD time series

Despite numerous studies, controversy remains about the impact of economic globalization on corporate taxation. Theoretical models of tax competition generate different predictions about trends in the level of tax burdens and the degree of convergence in tax burdens across countries. In this paper we present a purely empirical analysis of the evolution of tax burdens across OECD countries since the 1950s. Issues of measurement and methodology have contributed to the inconclusive character of studies to date, so we begin with an assessment of alternative measures of the burden. Problems with some commonly used measures of the tax burden are considered and the most plausible measures identified. Descriptive analysis of these time series reveals no evidence of a competitive ‘race to the bottom’ in corporate taxation and little evidence of even a harmonization of the tax burden. Many inferential studies of corporate taxation base their conclusions on cross-sectional analysis; in contrast, we adopt an explicitly time-series method to what are essentially time-series questions. Cointegration methodology originally developed to study issues of convergence of living standards is applied, and fails to reveal evidence of convergence of tax burdens for the OECD and Europe as a whole. It does, however, indicate that there has been some harmonization within smaller groups of countries, mainly in northern Europe. Important questions remain about the effectiveness and impact of corporate taxation in an increasingly open and integrated global economy, but we find little evidence to support fears that the burden of taxation is being lifted from corporations. — Kenneth Stewart and Michael Webb

The Impact of Corporate Taxation on the Location of Capital: A Review

This paper surveys the empirical literature on the impact of corporate income taxes on the location of capital. We identify the main issues which arise in such empirical work, and link different studies in a general framework. We concentrate specifically on issues which arise in the formulation of economic policy. We conclude that the existing literature provides little by way of policy-relevant insights.

Post-Tax Capital Investment Appraisal: Plant and Machinery

Abstract Tax considerations are important for companies which are no longer tax exhausted. Taxation has a major impact upon project yield and net present value (NPV) for capital investment in plant and machinery. This paper uses the weighted average cost of capital model to demonstrate that the impact of corporate taxation upon NPV need not be in the same direction as the impact upon yield. The NPV is reduced by the nominal 35% rate of corporation tax only when the pre-tax yield is very high; for low yielding projects the post-tax NPV can range from less than zero per cent to over 100% of the pre-tax NPV depending upon the gearing. The tax deductibility of the costs of the debt finance component of capital expenditure has a major and subtle interaction with other parameters which always favours high gearing.